The view on street from the hill in San-Francisco.
Getty
Social media giant Facebook is following in the footsteps of other tech giants in the Bay Area, and announced a $1billion commitment to improve California’s affordable housing options. The company has made more than $180 billion dollars in revenue since 2016, and has been under constant scrutiny for valuing private profits more than public welfare. Is Facebook actually ready to pay for a housing problem in which they’ve helped to exacerbate?
The Breakdown You Need to Know: CultureBanx reported that essentially, the company is putting less than 1% of what it made in revenues in the last three and half years towards fixing the housing problem, and this doesn’t really show a deep financial undertaking. Facebook is committing $150 million of the $1 billion pledge for the development and construction of affordable housing, this will include housing for the homeless, something that is desperately needed. In 2017, the San Francisco Homeless Count Survey found the differences between the city’s population and those experiencing homelessness were vastly distinct, with African Americans making up 34% compared to just 6% of the general population. Overall the money which is a mix of grants, loans, and land is intended to help teachers, nurses, and first responders live closer to where they work.
The housing crisis is bad in California, spurred by the big tech companies that have completely pushed their employee incomes in a direction that the city’s housing can’t support. Just to put this into perspective for you a family of four earning $117,400 a year or less is considered low income in the Bay Area, according to the latest U.S. Department of Housing and Urban Development. This figure puts them ahead of Los Angeles and New York City where the low income bracket starts at $77,500 and $83,450 respectively. The “very low income” category for the Bay Area ranges from $44,000 to $73,300 a year for a family of four, and this is the range for teachers in the area that Facebook claims its billion dollar housing commitment is going to help.
Bursting The Tech Housing Bubble: Facebook is mirroring what Google, one of the Bay Area’s largest employers just did this past summer. The search giant decided to invest an additional $1 billion in housing across the area. They established a $250 million investment fund as part of their commitment, to provide incentives for developers to build at least 5,000 affordable housing units for the market.
For Facebook, throwing money at the problem probably won’t be enough, due to high construction costs that are also hampering efforts to ramp up building of affordable housing units in the region. A typical unit for a low-income family in San Francisco costs around $400,000 to build, according to the Government Accountability Office. Based on this number and Facebook’s goal of creating up to 20,000 new housing units, they would need to actually put $8 billion dollars towards the cause.
Developers aren’t necessarily keen on these types of projects, because in 2016 San Francisco voters passed a proposition that increased the portion of buildings subject to affordable housing fees from 20% to 30%. This means developers pay about $200 per square foot on that portion of the project. For example, a 100,000-square-foot rental housing development would garner a fee of about $6 million.
Housing Hangups: Other tech giants like Microsoft and Amazon have also made shallow attempts to curb the housing crisis in their native Seattle area. Specifically, software giant Microsoft is trying to help the city be more inclusive with a $500 million cash injection into the Seattle’s affordable housing projects. They plan to use $25 million of the money in the form of grants to service low-income and homeless residents in Seattle, which is merely a drop in the bucket for the tech company. To further clarify this number, the company’s plan represents just 2.7% of its annual net income. Not to mention in the past decade they have made $184 billion in net income. It could also be viewed as a one-time 31% increase in the company’s advertising budget.
What’s Next: Perhaps this investment from Facebook is better late than never, but only time will tell how effective it will be for residents. In the meantime, the company will have its hands full sorting through a plethora of government regulation issues. CEO Mark Zuckerberg will undergo a hearing today with the Financial Services Committee about its Libra crypto currency and of course housing practices.