Big Tech and Housing Sustainability
I love Amazon. I’m a Prime member. I shop from them several times a week. I buy most of my groceries from them. I buy books and bulbs and beauty supplies from them. Amazon Music makes life easier for at my job.
Amazon is a pioneer in electronic commerce. They make products accessible to people who otherwise may not be able to find truffles or socks for plantar fascitis or DVDs or magazines or make-up from South Korea. The breadth of their inventory is stunning.
Amazon is also an advertising, technology business conglomerate. They are not only an e-commerce business, but also offer a dizzying amount of services through Amazon Web Services (AWS) especially cloud storage. “Amazon controls more than a third of the Cloud market, almost twice its next closest competitor.” (Page, 2021).
Just taking a cursory look at the AWS website, you will find services as diverse as Robotics; Game Tech; Security, Identity and Compliance; Blockchain; Analytics; and VR and AR. Needless to say Amazon is a powerful entity. One of the most controversial services they provide includes Facial Recognition AI software to police departments allowing users to make critical decisions about the lives of others. (Hao 2021)
When you take a look at Amazon’s SEC filings their mission states:
“We are guided by four principles: customer obsession rather than competitor focus, passion for invention, commitment to operational excellence, and long-term thinking. In each of our segments, we serve our primary customer sets, consisting of consumers, sellers, developers, enterprises, and content creators. In addition, we provide services, such as advertising to sellers, vendors, publishers, authors, and others, through programs such as sponsored ads, display, and video advertising.”
The public is important to them, they aim to please the customer with their “obsession rather than competitor focus...” And, like other big technology companies, Amazon provides services the public wants, otherwise, they would not have flourished as much as they have in our capitalist society.
With all of this money, power and influence how does the presence of Amazon and other Big Tech companies affect changes in housing and housing costs? Has Big Tech had a more damaging effect on the public, especially on housing and standards of living than have past industrial revolutions?
Who is Big Tech? When we say Big Tech Companies who are we talking about? In the process of writing this paper, I was surprised to learn what companies scholars considered to be Big Tech – Facebook (now MetaVerse) Pinterest, Symantec, AirBnB, Apple, Alphabet (Google), Dropbox – names most of us may know. But there are also companies we may have never heard of like ServiceNow, NetApp, Western Digital or Palo Alto Networks. These are companies that have caused most of the sales of home to increase once they relocate or expand. (Chapple and Jeon, 2021) These companies also make a lot of money. NetApp for example, in 2019 had revenue of $5,412,000,000. As of September 2021, Western Digital’s revenue was over $5,000,000,000.
Chapple and Jeon focus on the effects of Big Tech’s presence in the San Francisco Bay Area (2021). Chapple and Jeon acknowledge that housing prices increase when Big Tech companies come to town, however, they are cautious about blaming or assigning responsibility to these companies completely. They assert that city governments are not doing enough about housing - “…cities have typically failed to enact policies to preserve housing affordability when tech firms relocate or expand.” But even they find “…a few (towns/regions) result in a premium twice as high or more.”
Using a variety of tools including the ZTRAX database from Zillow (what Chapple and Jeon describe as a “data set” used to analyze real estate sales transactions), the U.S. Census Bureau, DID models (Difference in Difference “typically analyze the impact of a new housing investment or new infrastructure…using concentric rings to compare impacts within an inner ring with those in an outer ring.” (355)) and studies of several other scholars they conclude:
“Due in part to its boom-bust nature, the tech industry has a notable impact on local housing markets. This study confirms that, even when controlling for local amenities, density and existing tech concentrations, the arrival of a tech company increases housing prices disproportionately in its immediate vicinity, with a small but significant price premium of 7.1% over a two year period.” (364)
They also find that the higher the number of employees the companies plan to hire, the more disruptive to housing the effect is.
Chapple and Jeon also cite a study by Kemeny and Osman (2018) regarding the effects of Big Tech on non-tech related jobs. While this is not a study specifically about housing costs, obviously employment and housing are linked. Kemeny and Osman find “…stable and consistent evidence that growth in local tech employment augments the real wages earned by workers in nontradable sectors. However, the influence of tech is minor” – nontradables being lower paid, less skilled jobs and employees. (p. 1730). They ultimately find that although wages in towns with a strong Big Tech presence are higher by 0.1% and 0.7%, these rates are not substantive enough to make any real difference to the non-tech employees.
Also, the so called nontradable jobs are in services such as fine dining, dry cleaning, health care and other rich amenities. Kemeny and Osman also agree that the housing security of nontradable employees is tenuous. Although they find that Big Tech companies moving into a town is positive for job growth, per se, the jobs themselves do not pay as well as cities and governments believe or advertise them to be. Snagging a high tech firm to your city will not increase wages for your citizens in any real way.
Amazon is based in Seattle, Washington where nearby Redmond is home to Microsoft. Randy Shaw’s book, Generation Priced Out includes a chapter that focuses mostly on Seattle and how the housing crisis manifested itself there. He considers if building affordable housing is the answer to the housing crisis caused by the increased growth of Amazon. He explores how the housing market has changed Seattle, even after the presence of other big companies in the area including Microsoft and Starbucks:
“The despair expressed by residents over the pricing out of the City’s working and middle class and small businesses was new for Seattle. Longtime residents of San Francisco and New York City have talked this way since the 1980s. But Seattle was different. It was a more laid-back big city.” (106)
Shaw too cites the physical growth of Amazon in Seattle as one of the main causes of housing problems. In 2017 before his book was published, Shaw states that Amazon grew from 5,000 employees in 2010 to 40,000 in in 2017. Today, in fact, that number is 75,000 (Geekwire)
Even though Shaw does not believe Seattle will ever get as expensive as New York or San Francisco, $2000 for rent in 2017 in a city that was never as competitive for housing had to have a negative effect. Housing costs doubled in just a few years according to the National Mortgage News. "…Seattle home values have almost doubled and rents have increased by half, straining affordability," said Terrazas in a press release. "Of course, Seattle's tremendous growth and some of the tensions it has created can't all be laid at Amazon's doors alone." (2018)
Big Tech companies have integrated quietly in many cities including New York (Google), Naples (Apple, but via a school, not production or moving thousands of employees for engineering positions), Las Vegas, and Nashville to name but a few. Stefano De Falco in his article, From Silicon Valley to Vesuvius Valley: Dismantled industrial farms to a knowledge-and creativity hub in Naples, Italy, insists that the kind of city where tech companies operate is the actual problem. Housing, public transit, and good schools are not necessary. In fact a hard scrabble city in decline, constantly struggling to survive, like Naples, is better. This is where Apple chose to initiate its latest venture Apple Univerity, to teach a new generation of developers. This has been a positive move for Naples even though much of its intellectual talent is still migrating elsewhere. This goes along with the research of Chapple, Kemeny, et. al., who also believe in-migration from other parts of the country to cities where tech companies are located also influence the kinds of jobs that will come to a city, as well as the kinds of workers it can afford.
However, some cities have loudly protested the presence of Big Tech including Berlin and Toronto, and they won. Ahmed (2019) documented how Alphabet, owner of Google, tried for several years to woo Toronto through a project they call Sidewalk Labs. This would have created a “city within a city” in an isolated area of Toronto’s waterfront, ostensibly increasing income inequality as well as segregating sectors of the city.
Sidewalk Labs also promotes “Smart Cities” (another nebulous, futuristic term) that promotes the use of electronic surveillance to ostensibly improve cities, or improve the monitoring of its citizens. In fact, Sidewalk developed “an app called CommonSpace, which collected data on people who visited R.V. Burgess Park in the Thorncliffe Park neighbourhood, where most residents tend to be Black and brown new immigrants.” This example demonstrates the kind of power a company like Alphabet wields in local communities. They also secretly expanded the size of their footprint on the city. Thorben Wiedtz, one of the Torontonians who was part of the group #BlockSidewalk is quoted, “We’re not engaging people anymore, we’re sitting on a computer and calculating sidewalk use…You’re not dealing with a rational opponent—they can lose millions of dollars if they want to.”
Ahmed, Chapple and Jeon, and Kemeny and Osman all cite the extraordinarily publicized results of Amazon’s search for a second headquarters. In 2017 Amazon put out a call to the world to help them choose a city for its so called HQ2. Amazon reported they needed space for 25,000 employees and required cities to bid for the prize of the company locating its business in one of these cities. 238 cities ultimately bid and 20 finalists were chosen. (Chen, Wilkoff, Yoshida 2021) The process was highly contentious and reportedly one city bid up to $7B for the honor.
Amazon chose New York and Arlington, VA as its two choices. New York City was prepared to give Amazon up to $3 billion in incentives. (McCartney, 2019) There was much debate about what would happen if Amazon came to NYC, specifically could Long Island City, the neighborhood in Queens, handle such a huge influx of employees. Could the subway system handle all of the traffic? What about the schools in the area with all the new pupils? But mostly, why were we paying Amazon, one of the most profitable businesses in the history of the United States, to come to our city?
Chen et. al. believe that just the announcements in drips and drabs from Amazon about the potential move to New York and Arlington were enough to cause real estate prices to rise, in New York by 17.5% and in Arlington, by 7.5%, but not in any other city being considered other than Jersey City in New Jersey. They state, “The result for other finalist cities implies that the effect we find for housing prices in VA and NY is due to information rather than speculation.”
McCartney in his article for the Washington Post after Amazon chose to abandon
New York City and go exclusively with Arlington, wrote “…business and political
leaders need to focus as well on solving problems of gentrification that the
new jobs will exacerbate, including housing costs, overcrowded schools and
displacement of longtime residents.” He
also points out that Arlington had been searching for a tenant for space that
was abandoned by the Pentagon ten years prior.
Virginia only bid $750 million, but “Labor unions are more powerful in
New York than in Virginia, a right-to-work state.” (McCartney)
Amazon did not choose these cities because they were the best places for them to operate. It wasn’t like they went to Arlington and looked at their hard infrastructure – roads, bridges, railways and soft infrastructure – economic, health and social standards, laws and financial system – and decided “you know what? We think this is the best fit for our company.” Instead, the 20 finalist cities were asked to prepare proposals requiring incentives from each city – what each city was willing to give in return for Amazon opening shop in their town. It was all transactional.
McCartney is up front about gentrification, or basically, discrimination, and the exacerbation of income inequality as one of the reasons why Amazon failed to snag New York City. Chapple and Jeon, and Chapple in other writings (Chapple, Thomas, et. al. 2004) mentions almost dismissively the importance of race in price appreciation, in the latter as it concerns housing in the Twin Cities and technology companies relocating there. In Chapple and Jeon’s article, race is mentioned as a factor almost as an afterthought (p.360).
McCartney is almost militant by comparison: “Companies could be asked to accept smaller subsidies, or none at all, and to agree to do more to support affordable housing and local infrastructure” two aspects of infrastructure that help lower income citizens, unfortunately many of them, people of color.
In fact, Amazon is doing this, as are a few other companies. Amazon Attacks Housing Crisis Via $2B Loan Fund shouts one headline. (Post, 2021) Amazon to Help Fund Affordable housing Near D.C. Mass Transit touts another. (Amus and George, 2021) And another, Amazon to Donate Undeveloped Crystal City Land to Arlington for Affordable Housing. (Amus, 2021)
Microsoft pledged $500 million in loans for developers to build low and middle income housing. (Coleman and Rosenberg, 2019) Google also pledged $1 billion to ease the housing crisis in the Bay Area where they used to pay $1,750 a month to rent space for their company in San Francisco in 1998. (Wakabayashi and Dougherty, 2019) Why are they doing this? What has changed? What have they realized?
Change and technology go hand in hand. New technologies have always been disruptive to every day life. Television disrupted Radio. Automobiles disrupted horse-drawn carriages. Airplanes disrupted train travel. When a company like Amazon comes to town, there will be disruptions. As Ahmed says “This disruption looks like a deeper form of quantified technocratic governance, enabled by Big Data.” Similarly to railroads, automobiles, gasoline, and film, Big Tech has been disruptive to other industries. They have also changed American society and global societies, changing how we live our lives, and what we expect regarding services.
But, is Big Tech more invasive and destructive than earlier industries on a more intimate level? In one specific area of life, I say it is. The effects of Big Tech on communities where they are located can devastate housing availability, housing costs and can even increase homelessness. This is obvious in Seattle Washington, the original home of Amazon, and especially in the San Francisco Bay Area where many companies are located in Silicon Valley.
In their mission statement, one of the first things Amazon is adamant about is “long term thinking.” Is it the responsibility of business to think of the long-term needs of the public, a public that most likely will be their customers who fuel and maintain their growth and existence? Housing is one of those needs. Are housing and homelessness a government problem? Is housing a necessity, a right or a privilege?
Cities where tech companies plan to relocate or expand should take the initiative as Chapple and Jeon suggest and create affordable housing or expand their housing stock prior to any move so that their towns can absorb the newcomers without pricing out its original citizens. This will reduce the homelessness that is now plaguing the Bay area and Seattle.
Santa Clara County, California, in 2013 had a homeless population of 7000, at that time the fifth largest per capita in the country. (Potts, 2016) Santa Clara County is home to ServiceNow, Apple, PaloAlto Networks and Seagate Technologies, all of the areas where these companies have had over 30% increase in housing after they opened (Chapple and Jeon) We all know rising rents and homelessness is a national problem, but doubling home prices in a 5 year period cannot be helpful.
Salvatore Settis poses a sobering question in his book If Venice Dies: What if we all knew that after we died, the entire world would be completely destroyed within a month? (2014) Would we change our behavior? His purpose in asking this question involves the tremendous growth of cities in the last 100 years. A city in China like Chongqing in 2014 had 32 million inhabitants from six hundred thousand in 1930! He reminds us the word megalopolis really belongs to the present not just futuristic sci-fi movies. Could we make different choices if we knew the end date of this planet and humanity as it stands? Settis reminds us of the importance of a sociable city, a manageable city.
“Designed to accommodate a social way of life and built to last, the city is the appointed optimal place for the planning of the future. Thus, the dissolution of the historic city, and the one track thinking of the megalopolis, and the abolition of the diversity of urban models have affected the behavior of men and women, imposed new ways of practicing one’s citizenship, and profoundly transformed not just cities themselves, but also all kinds of public discourse on subjects like democracy, economics, and inequality.” (p. 112)
Venice has a problem. It is not Big Tech companies who go there to start factories or decamp there with thousands of software engineers that are problematic. But like all of these cities in the U.S. that are now hosts to companies like Amazon, Tourists and Tourism is an entity that is made up of many but behaves as one and has great power, influence and money.
Settis complains vociferously at the mayor of Venice who allows huge cruise ships to enter the Grand Canal on a routine basis. Why does the Venetian Government allow these ships to get dangerously close to the coast and therefore to some of the World’s finest treasures in the floating city? Money and power are the root of it all. The Venetian problem is a different one from the problems of housing and Big Tech, but money and power are inexorably linked in our ever more intimate, yet paradoxically larger world.
Are Big Tech companies to blame for the housing crisis in the cities where they are located? Not completely, but their presence has exacerbated housing costs in several areas where affordable housing is already in short supply. Some of these companies are now either realizing they have a moral duty to the cities they descend upon, or they are being shamed into helping cities retain its current citizens. Whatever the reasons, the help is needed.
Can there be such a thing as too much money, or making and spending money responsibly? These companies wield much influence in local and national politics. No politician, other than possibly Alexandria Ocasio Cortez, wants to be accused of not being friendly to business. Commercials on television routinely accuse American politicians (sometimes by other politicians) of “shipping our jobs to China”, and preventing technology companies from expanding by charging too much in taxes.
Big Tech has benefitted from the tax cuts implemented a few years ago by the U.S. They are some of the wealthiest most profitable and successful companies in the U.S, if not on Earth, paying very low corporate taxes. They should reinvest their savings in housing and services for the communities where they are located. Sometimes even the well paid employees of their own companies cannot afford to live in these cities.
Businesses such as these need customers to use and purchase their products a) to make more money, and b) to continue to use their products so that they can mine, study and sell that same customer information. It is in the best interests of the same Big Technology companies to preserve and protect their customers . If we are cynical about it, they need us so that they will be able to continue to make a profit off of us. Is it not in their own best interests to promote a benevolent image? One that exudes care and compassion for their customers regarding everyday life. A happy, thriving, well paid customer is one who will spend more at your businesses.
I have a hard time understanding what this topic genuinely has to do with information and libraries, other than the business side of it. However, if we take an expansive view of library and information science then it is possible to believe that more areas of study are part of information studies than not. And library and information studies is an interdisciplinary field that has to do not only with computers and literature, but also psychology, film, journalism, feminism, architecture, race and data science to name but a few. It was not until I read their 2018 annual report to the Securities and Exchange Commission that I realized how involved Amazon is in the information industry. I really had to see it on paper.
I take an existential view of life, meaning we are all in the world together, we have a responsibility to each other, but we as individuals have to choose to be responsible to others. I believe the government should create and maintain housing for everyone like they do in Socialist countries, but I also appreciate and enjoy Capitalism and some minor luxuries. Companies like Amazon and all the other Big Tech companies may see themselves divorced from the government and the public, married instead to their systems, computers, software, source codes, and computer languages - but they need us.
Big Tech companies do not have to behave like mini kingdoms in medieval Europe living in their own self-made bubbles (literally in the case of Amazon in Seattle) and campuses, separate from all of Us out here, somewhere. We coexist, and for them to be profitable they may need to invest in the actual humans who work for them and whose information they use to improve their algorithms, and who shop from them. There is no Big Tech without the people, or any business. They need us as much as we need them.
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