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Amazon's Arrival Could Deepen Inequality in Washington, D.C. Region, Some Fear

Amazon's Arrival Could Deepen Inequality in Washington, D.C. Region, Some Fear

By Tracy Jan, Kathy Orton, The Washington Post | Updated: 14 November 2018 18:07 IST

Some fear Amazon's arrival could deepen inequality in Washington, D.C., region

A Crystal City, Virginia, condo that had sat on the market suddenly shot up in price by $20,000 (roughly Rs. 14.5 lakh). Realtors are fielding cold calls from out-of-state investors eager to snap up properties. "But only if Amazon comes to the area," one Midwestern woman said.

Anticipation that the online retail giant will open its new headquarters in this northern Virginia neighbourhood of hotels, high-rise condominiums and office buildings set off a flurry of real estate speculation - even before the official announcement from Amazon Tuesday morning.

But the coming influx of tens of thousands of highly paid tech workers could exacerbate inequality in the Washington region, making it more difficult for renters and first-time home buyers, warn housing advocates and others.

"It's becoming a much less economically and racially diverse county, and a huge employer like Amazon coming in is only going to increase that pressure," said Philip Tegeler, executive director of the Poverty & Race Research Action Council. "We can't just keep pushing lower-wage workers farther and farther out into northern Virginia with longer commute times and develop these monoculture bedroom suburbs."

Shortly after Tuesday's announcement, a first-time home buyer placed a panicked call to Realtor Jenn Smira. The woman was eager to find a home right away - before Amazon arrives and she is priced out of the market.

"Take a deep breath," Smira told the woman, even as she fielded calls from three potential investors.

Despite Amazon.com's pledge to make $5 billion (roughly Rs. 36,120 crores) in capital investments and create 50,000 jobs at two new headquarters, the company's expansion plans have also drawn opposition in New York, where another campus is also opening in Long Island City in Queens.

City and state officials, touting an economic boon, have tripped over themselves wooing Amazon's HQ2, as the new headquarters are known. Some experts argue that the Washington region, with its extensive transit network, is well positioned to absorb the infusion of workers, especially younger tech employees who would be more likely to rent - at least initially.

Rental search site HotPads found that rents in the Washington, D.C., region would increase only slightly, rising just 0.6 percentage points, lifting the median monthly rent to $2,170 (roughly Rs. 1,56,800) from $2,146 (roughly Rs. 1,55,000).

An analysis released Tuesday by Stephen Fuller, an economist at George Mason University who heads an institute focused on the region's economic future, said that while Amazon would generate additional housing demand, the effects would be gradual and dispersed through the Washington area.

Arlington County, Virginia, alone would need between 8,000 and 9,000 additional housing units - with about 70 percent being rentals - to house newcomers associated with HQ2, according to another report Tuesday from Fuller's institute.

Other researchers and advocates assert that the benefits of tech campuses - whether in Seattle or the San Francisco Bay area - have largely filtered to the wealthy, while often displacing working-class black and Latino communities.

In Seattle, where Amazon is headquartered, city officials in 2015 declared a state of emergency over homelessness as rents skyrocketed and some landlords advertised that they would prioritize Amazon, Microsoft and Google employees over other prospective tenants.

In Oakland's predominantly black and Latino neighbourhoods, where home prices averaged $350,000 (roughly Rs. 2.53 crores) not long ago, Google employees were plunking down more than $700,000 (roughly Rs. 5.05 crores) in areas rebranded as "South Berkeley," according to Lisa Rice, chief executive of the National Fair Housing Alliance.

"One of the big lessons in Seattle is that while yes, Amazon created a positive tech boom in the city, it also led to a rise in homelessness, housing unaffordability and such stark inequality that created a lot of political and community distrust," said Amy Liu, director of the Metropolitan Policy Program at the Brookings Institution.

Michael Spotts, president of Neighborhood Fundamentals, an Arlington-based housing affordability research firm, said Tuesday that the new campus could widen racial and class chasms.

"To the extent that wealth creation is tied to homeownership, Amazon is going to make the barriers to homeownership that much more difficult now, particularly for low-income African American and Latino households," Spotts said.

The anxiety comes as Google plans a major expansion in New York City and Apple explores opening another campus in northern Virginia.

In Arlington County, Virginia, community activists worry that without adequate attention and planning to increase the stock of affordable housing, market forces will favour the wealthy once Amazon arrives. Rents will rise. Bidding wars over single-family homes will ensue. Sellers fetching higher home prices will come out ahead, while lower-income families will get pushed out, they predict.

"Those are the kinds of fights that will be exacerbated with 25,000 additional people with salaries of $100,000 (roughly Rs. 72,24,500) or more," said Walter Tejada, a Latino community leader and former chairman of the Arlington County Board. "They are the ones with economic power."

Among the winners: real estate agents, landlords, home sellers and investors. Realtors have compared the anticipation of an Amazon arrival to the Super Bowl, with amateur investors caught in the excitement gambling on home prices rising.

A two-bedroom condo on Crystal Drive, listed more than a month ago at $559,900 (roughly Rs. 4.05 crores), generated little interest until news broke this month that Amazon was seriously considering expanding in Crystal City. The seller, without waiting for the official announcement, raised the price by $20,000.

"It's a direct result of Amazon," said listing agent Jordan Stuart of Keller Williams Capital Properties. "Crystal City has never been known as a real estate buying opportunity."

Since the Great Recession, new home development in the region has slowed because of rising construction and labor costs. An Urban Institute analysis in October found that an Amazon arrival would increase pressure on the Washington housing market. From 2010 to 2016, the number of new housing units lagged significantly behind population growth in the Washington region. The population grew 7 percent but housing units grew by only 2.7 percent.

Already, Arlington's market-rate affordable-housing stock has plunged by nearly 90 percent over the past two decades - from 20,000 units in 2000 to about 2,400 units in 2017, according to a county report, because of redevelopment and rising rents.

"I want to make sure we think about who this is a win for," said Roshan Abraham, a community organizer in Arlington, "because there really are two Arlingtons."

North Arlington boasts some of the most expensive communities in the Washington area, with home values averaging upward of $1 million. But neighborhoods in the southern half of the county have some of the heaviest concentrations of low- and moderate-income families. More than half of the households in those areas rent rather than own, putting them at high risk of eventually being priced out, said Jesse Van Tol, chief executive of the National Community Reinvestment Coalition.

"Gentrification is a huge concern for us if Amazon comes, because Crystal City is close to some of the last places where it's affordable to live, with public transportation and access to jobs," said Kimberly Armradit, a 27-year-old who works in construction and lives in the working-class immigrant neighborhood of Arlington Mill. "Where do the day laborers, the bar backs, the janitors go?"

A 2017 Urban Institute report on racial inequities noted that in Arlington, nearly 60 percent of black and Hispanic families had annual incomes below $75,000 (roughly Rs. 54,18,400), compared with 12 percent of white families. More than half of whites in Arlington were homeowners, compared with a quarter to a third of black and Hispanic families.

Furthermore, black and Hispanic workers in the Washington region are significantly underrepresented in higher-paying tech jobs, according to a 2018 Brookings analysis.

A coalition of regional housing leaders in September outlined major initiatives to increase housing affordability. JBG Smith, Crystal City's top real estate developer and the company that would oversee the properties Amazon will occupy, is trying to raise $150 million (roughly Rs. 1,083 crores) to preserve or build 2,000 to 3,000 affordable units.

Amazon leaders have expressed concern about housing affordability broadly, although the company blocked a Seattle corporate tax plan to raise nearly $50 million (roughly Rs. 361 crores) a year to alleviate homelessness and increase affordable housing. The Seattle City Council repealed the tax in June following Amazon's objections and a threat to cancel some of its expansion plans.

A company spokesman noted recently that Amazon has donated more than $40 million (roughly Rs. 289 crores) to organizations fighting homelessness in Seattle and provided an additional $40 million to affordable housing projects in the city.

The company did not respond to a Washington Post inquiry about how it would address similar concerns in the Washington region. (Amazon chief executive Jeff Bezos owns The Post.)

Amid the warnings, some analysts predict that Amazon's arrival - bringing with it the equivalent of up to two Pentagons' worth of employees - could help jump-start the production of new housing to meet increased demand.

"A massive increase in jobs to the region is going to bolster investor and developer confidence," said Clint Mann, president of Urban Pace, a company that provides sales, leasing and advisory services for builders and developers.

Many developers with stalled construction sites have had a tough time convincing investors that there is growth in the region - until recently.

"Seattle was honestly caught off guard by the amount of development around Amazon's headquarters and all the economic spillovers it had on rents and home prices," said Joshua Clark, an economist at HotPads. "Now that we know just how much of an economic effect this company can have, I think that's going to completely change the game."

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