Amazon's 10,000 Person Problem
HQ2 is making Virginia's housing crunch worse, and there's no real plan to fix it.
10,000: That’s the number of residents that could be displaced by Amazon’s second headquarters, dubbed HQ2, which is coming to Northern Virginia. A new study breaks down exactly who will be affected and, surprise, surprise, it is poor, Latino people who will be priced out of their neighborhoods when Jeff Bezos’ new complex rolls in.
When Amazon made the announcement that it had settled on New York City and the D.C. suburbs as its new location, plenty of critics, myself included, said the deal was a bad one for those cities. Activists in New York successfully chased Amazon away. But the Virginia HQ is still on the books, with Amazon due some $750 million in tax breaks from the state and another $23 million at the county level.
This isn’t all just about dollars and cents, though. The people who face the negative effects of corporate tax deals on the ground are, in many ways, far more important to hear from and about than any economic analysis regarding costs and benefits.
As a review, Amazon’s search for a new headquarters to pair with its current one in Seattle initiated the embarrassing spectacle of mayors and governors across America throwing tons of incentives at the company. Those we know about included money, land, and other giveaways, including allowing Amazon to decide how tax revenue gets spent. Many of the bids still haven’t been disclosed, meaning CEO Jeff Bezos knows more about what cities offered him than the taxpaying residents of those places do.
The whole auction was based on a faulty premise: That these cities would make up in economic growth and job creation what they spent on incentives.
There’s tons of evidence showing incentives don’t do those things. Recently, a damning audit of Nevada’s tax incentive programs revealed that companies didn’t meet job creation or investment requirements, and yet still continued to receive public money. In one ludicrous example, Ebay received $13.6 million in tax breaks for a data center to create — wait for it — two jobs.
Too often, no one tracks those job creation and investment decisions, meaning companies can get away with breaking their promises free of public scrutiny. (New Jersey, at the moment, is making a lot of news by revealing just how unaccountable and corrupt many incentive programs are.)
But knock on effects when companies receive incentives also have to be taken into account. They are the flip side of all the studies people like me shout about regarding how corporate tax breaks don’t create growth in ways that actually help everyone. And that’s where the story about Northern Virginia really takes off.
Following Amazon’s announcement, home prices in the area where HQ2 will land – which has been renamed National Landing, since apparently Amazon has the power to change neighborhood names whenever it pleases – spiked considerably, as folks anticipated the new development and richer residents that would, in theory, be coming to town. In the zip code around HQ2, median asking prices for homes are up nearly 100 percent year over year. In the wider county, it’s nearly 20 percent.
And this is all occurring in a part of the country where there is already an affordability crisis. Buying a home is laughably out of reach for even many middle-class families in the D.C. metro area, rents are high, and rental units that cater to families — as opposed to yuppy professionals who haven’t had kids yet — are few and far between. Here’s who that study, by researchers at Tenants and Workers United, George Washington University, and Wuhan University, finds will be affected most by HQ2:
The Arlandria tenant population is overwhelmingly Latinx. Seventy-five percent of its residents speak Spanish and the Latinx residents are, in descending order, Salvadoran (42 percent), Honduran (22 percent) and Guatemalan (7 percent).
The Arlandria Latinx population has been in the neighborhood for a long time. The average length of residency was 12.5 years. This is an indicator of the unique cultural role of Arlandria. There is a sense of community derived from common histories, language, culture and in-language shopping and small businesses. The residents of Arlandria housing generally work and are very low-income. Sixty-seven percent of the respondent households earn less than 30 percent of area median income (AMI) and another 28 percent earn less than 40 percent of AMI. […]
Residents are already paying a huge portion of their income toward rent. They are not likely to be able to pay significant rent increases. Arlandria tenants need two and three-bedroom apartments to be properly housed. Over three-fourths of surveyed residents have three or more people in their household.
Of course, a price spike can be good news for current homeowners. But it’s bad news for people who are living on the edge already. And while the plan to give Amazon huge tax breaks for HQ2 is very real, the plan to deal with those affected by the accelerated housing crunch is half-baked at best, mostly in the form of plowing more money into already existing programs that have proven insufficient. There are also vague, hand-wavy promises that Amazon itself will invest in affordable housing to mitigate its own effect in the area. It has pledged $3 million to that cause.
Let us savor the ridiculous situation for a moment: A hugely profitable company was given hundreds of millions of dollars to set up shop just outside the nation’s capital — where it likely wanted to be all along, incentives be damned — which will cause a housing crisis to get worse. But fear not, because the company will spend a tiny fraction of what it received in subsidies to fix some of the issues it exacerbated in the first place.
Here’s a wild idea: Use the money that would have gone to Amazon on affordable housing programs instead.
This is the opportunity cost inherent in all corporate tax incentive programs: States and cities have to balance their budgets, so giveaways to corporations come at the direct expense of services provided to residents. In my book, I relay a story from a former Las Vegas city council member, who successfully helped redirect money from a ridiculous soccer stadium that literally had no tenant to creating 16 city parks. Virginia could have done just about anything else with the money that it instead plowed into Amazon incentives.
Now, people will inevitably argue that Amazon’s presence will result in more revenue than the cost of its subsidies. History has shown that doesn’t really happen, but even if it does in this case, it doesn’t help those 10,000 displaced residents unless there is a concrete plan to do something about their housing costs. Right now, there simply isn’t.
Tech companies these days are receiving very little benefit of the doubt in the capital, which is quite the turnaround from just a few years ago when they were the toast of the town, with politicians from the left and right tripping over themselves to access Silicon Valley’s ideas and dollars. Some Democratic presidential candidates want to break the biggest tech companies up, and even the president has evinced some desire to rein in their power (for all the wrong reasons, of course). Facebook’s ill-conceived plan to launch a new currency – called Libra – was met with bipartisan skepticism in a pair of Capitol Hill hearings.
Which is all well and good: But we can’t forget the practical effects of Big Tech companies wielding their power on the ground in local communities. HQ2 is happening, hurting people, and Amazon is not only getting away with it, but being celebrated for it.
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