Google Set to Invest $1B in Affordable Housing

Local tech giant Google has announced that it plans to invest $1 billion in the Bay Area to address the housing shortage that has caused home prices to explode and put mortgages and rent out of reach for area residents with modest incomes. Many critics say that the Silicon Valley tech giants have been directly responsible for this shortage due to their voracious appetite for real estate and the resultant population explosion stemming from their growth. Regardless of the reason, most would agree that relief is much needed.

In a recent blog post, Sundar Pichai, Google’s CEO, provided a summary of Google’s plans. “Across the region, one issue stands out as particularly urgent and complex: housing,” Pichai posted. “The lack of new supply, combined with the rising cost of living, has resulted in a severe shortage of affordable housing and options for long-time middle- and low-income residents.”

Drawing from it’s considerable real estate holdings in the Bay Area, Google’s first step will be to repurpose $750M worth of land that is zoned for commercial or office space, and convert it to residential housing. At least 15,000 new homes could be created, supporting a variety of income levels, including middle and lower-income households.

In addition, Google is committing $250M to an investment fund that will provide incentives to developers, in an effort to encourage the creation of an additional 5,000 designated affordable housing units in the Bay Area. Additional funding through Google’s philanthropic organization, Google.org, will be made available, to the tune of $50M, targeting organizations that provide services and assistance to the homeless and displaced. This is above and beyond the $18M that has been donated over the course of the last five years.

Tech companies are often the target of critics, due to their increasingly rapid growth and high wages. These are not bad things, by themselves. High wages and growing companies are a boon to any community. The challenges comes when housing shortages increase the cost of housing – the highly compensated tech employees can often manage the higher rents and mortgages, while the more modestly paid employees in other industries can’t compete.

Major metropolitan areas where tech companies have major presences, including Seattle, Denver, New York, and now Northern Virginia, which scored the Amazon HQ2, are struggling with similar issues. Cost of living increases in these areas, and Silicon Valley, is outpacing the rest of the country, making it difficult to find affordable housing in these cities and surrounding suburbs.

In the Bay Area in particular, when you pair cost of living with an ever-tightening housing market, the reality becomes pretty bleak for those workers who do not have the advantage of a high-paying tech job. Many have no choice but to move further away from their jobs to find affordable housing, which stresses roads and mass transit, causes more pollution, and causes additional stress on the family life and health of commuters.

Rent has increased an astounding 50% in the major Bay Area locals since 2010, according to CoStar. Average rent is tops $3,100/mo in San Francisco, with San Jose not far behind, at an average of nearly $2,800. For all of Silicon Valley, the average rent is over $2,900.

Google is not the first major tech player to commit funds to alleviate housing shortages and provide affordable housing in major metropolitan areas. Microsoft recently announced it’s own $300M initiative, impacting areas near the company’s Bellevue, Washington, headquarters. The gauntlet has been thrown down. It will be interesting to see which of the other major tech players will pick up the challenge. The biggest winners, if the plans come to fruition, will be those most in need of affordable housing options.

Let my team at Keystone Realtors® meet all your real estate needs. We can help you find the perfect investment property to get started, and provide advice on your investing journey. Paul Phangureh has over 16 years of experience in buying and selling in the Santa Clara and San Mateo County areas, specializing in the high-end, luxury market, as well as commercial and multi-use real estate. We can help you navigate the process of getting started with real estate investment. Visit our website at Keystonesv.com for listings and information. You can contact Paul at 650-924-2544, or email at paul@keystonesv.com.

 

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