Today’s rates for all major HUD multifamily loans
Check Today's Rates →
Corporate Affordable Housing Commitments: Meaningful, or Cheap PR?
Corporations make some impressive-sounding commitments to affordable housing, but as the affordability crisis continues to grow, is it enough?
It’s clear to most people that, despite an overwhelming shortage of affordable housing in the U.S., not enough is being done on a systemic level to close the gap. As this blog has previously discussed, there are ample reasons to invest in affordable housing, but large-scale investment is still very much the exception than the rule.
That said, many large corporations are keen to make large announcements about dedicating funding for affordable housing initiatives. Take Amazon, for example. In March, the e-commerce giant pledged to invest $124.4 million to build affordable housing in the Puget Sound region and near its HQ2 development in Arlington, Va. Then in mid-April, health insurance provider Humana announced a $25 million investment to improve affordability, boasting of impacts “in the states of Florida, Georgia, Illinois, Indiana, Kentucky, Louisiana, Ohio, Oklahoma, South Carolina, Virginia, and Wisconsin.”
Will Corporate Funded Affordable Housing Have an Impact?
Now, on its surface, more investment in affordable housing is, of course, a good thing. But will it actually have a measurable impact?
Let’s take a magnifying glass to Amazon’s latest commitment. The $124.4 million investment will create 1,060 affordable homes, the company says. Broken down, that’s a little under $120,000 per unit. Considering the fund will be deployed in two of the most expensive multifamily markets in the country, this amount doesn’t seem to be able to do what it promises, on the surface.
To its credit, Amazon has committed far more than this most recent announcement, with a total of approximately $2 billion earmarked to affordability issues. The Amazon Housing Equity Fund’s 2022 impact report, released in March, gives a clear view of the fund’s priority. While all $1 billion of the announcements so far have indeed focused on what would traditionally be considered some form of affordable housing — namely those families earning 80% or less than area median income — the investments are heavily skewed toward the upper cohort in this bracket. Again, this investment is a net good, but it does little to nothing to provide for those at the very bottom of the totem pole: those families earning 30% or less than AMI. To date, 0.3% of Amazon’s fund focuses on this group. And yet, this group is one of the most in need, with a reported shortage of 6.8 million units across the country last year, as the National Low Income Housing Coalition reported in 2021.
Should Corporations Do More in the Affordable housing Sector?
The $2 billion investment sounds like a lot — and it is — but many argue the company has a responsibility to do more. With profits nearly doubling this past holiday season compared to 2020, and a reputation for paying far less than its fair share in taxes, $2 billion is barely a drop in the bucket for one of the world’s largest and most profitable corporations. A Quartz article from late March dug into an interesting aside, as Mackenzie Scott, Jeff Bezos’ ex-wife, donated $436 million to Habitat for Humanity to finance low-income housing. That’s about one-fourth Amazon’s commitment, despite Scott possessing a 4% stake in the company.
Of course, this only draws Humana’s $25 million investment across 11 states into sharper relief. Part of a larger, $50 million commitment, one does wonder what impact such a fund could possibly have across such a large area. Consider a 2020 report put out by the Terner Center for Housing Innovation at UC Berkeley. The article states that affordable housing construction costs came to about $425,000 per unit in California in 2016 — and that’s before the massive spike in construction costs hit. Now, while California is one of the most expensive states for multifamily development, even assuming an average cost of half that figure, $50 million on its own pencils out to about 235 units — across 11 states.
The Bottom Line
While it’s clear these affordable housing initiatives will help some people — even if it’s just a few thousand out of millions in need — it’s just as clear that more could and should be done to multiply impacts. And, in fairness, it’s easy to point to companies like these who are offering token commitments which provide significantly greater PR returns. Apple, Google, Microsoft, Bank of America, and many, many others, too, have jumped into the fray, with commitments as high as $500 million to $2.5 billion.
These numbers sound large, but the true way to measure if a company is being socially responsible is in results, not contributions. As many large employers play a significant role in driving up property values and renter demand near their offices, this has a sizable impact on local communities, often effectively forcing residents to search for cheaper places much, much further afield — even if they still need to commute back to their overpriced neighborhoods to work each day.
Related Questions
What are the benefits of corporate affordable housing commitments?
Corporate affordable housing commitments can have a number of benefits, including providing more housing options for low-income individuals and families, helping to reduce homelessness, and providing a boost to local economies. Additionally, these commitments can help to improve the public image of the company, as well as provide a sense of social responsibility.
For example, Amazon's $2 billion commitment to affordable housing initiatives is expected to help create or preserve 20,000 affordable housing units in three states. Additionally, Mackenzie Scott, Jeff Bezos' ex-wife, donated $436 million to Habitat for Humanity to finance low-income housing, which is about one-fourth of Amazon's commitment.
Humana's $25 million investment across 11 states is also expected to have a positive impact on affordable housing. According to a 2020 report by the Terner Center for Housing Innovation at UC Berkeley, affordable housing construction costs came to about $425,000 per unit in California in 2016. Assuming an average cost of half that figure, $50 million on its own pencils out to about 235 units across 11 states.
How do corporate affordable housing commitments impact the local economy?
Corporate affordable housing commitments can have a positive economic impact on local economies. According to CommonBond.org, these commitments can lead to increased job opportunities and a significant increase in local consumer spending. Additionally, these commitments can help to reduce homelessness and provide more affordable housing options for those who need it, which can help to reduce the need for long commutes to work.
What are the challenges of corporate affordable housing commitments?
The main challenge of corporate affordable housing commitments is that the amount of money they are committing is often not enough to make a meaningful impact. For example, Amazon's $2 billion commitment sounds large, but it is a drop in the bucket for one of the world’s largest and most profitable corporations. Additionally, a 2020 report from the Terner Center for Housing Innovation at UC Berkeley states that affordable housing construction costs came to about $425,000 per unit in California in 2016 — and that’s before the massive spike in construction costs hit. This means that even a $50 million commitment, such as Humana's, would only be enough to build about 235 units across 11 states.
In addition to the amount of money being committed, there is also the challenge of ensuring that the money is being used effectively. Companies should be held accountable for the results of their commitments, not just the contributions.
What are the best practices for corporate affordable housing commitments?
The best practices for corporate affordable housing commitments are to ensure that the commitment is meaningful and has a lasting impact. Companies should consider the local context and the needs of the community when making a commitment. Additionally, companies should consider the long-term impact of their commitment and how it will affect the local community. Companies should also consider the cost of construction and the potential for cost overruns when making a commitment. Finally, companies should consider the potential for leveraging their commitment to create additional affordable housing opportunities.
For more information, please see the following sources:
- Wall Street Journal: Amazon Q4 Earnings Report 2021
- Institute on Taxation and Economic Policy: Amazon Avoids More Than $5 Billion in Corporate Income Taxes
- Quartz: Mackenzie Scott's $436 Million Donation is a Downpayment on US Affordable Housing
- Terner Center for Housing Innovation at UC Berkeley: The Cost of Building Housing Series
How can corporate affordable housing commitments be improved?
One way to improve corporate affordable housing commitments is to focus on results, not just contributions. Companies should also consider the impact they have on local communities, such as driving up property values and renter demand near their offices, which can effectively force residents to search for cheaper places much further afield. Additionally, companies should consider the cost of construction when making commitments. For example, a 2020 report from the Terner Center for Housing Innovation at UC Berkeley states that affordable housing construction costs came to about $425,000 per unit in California in 2016.
What are the long-term implications of corporate affordable housing commitments?
The long-term implications of corporate affordable housing commitments depend on the type of commitment and the amount of money invested. Companies that make large commitments to affordable housing initiatives can have a significant impact on local communities, helping to reduce property values and renter demand near their offices. However, if the commitment is token in nature, it may not have a meaningful impact. For example, Amazon's $124.4 million investment will create 1,060 affordable homes, which is a little under $120,000 per unit. This amount may not be enough to do what it promises, especially in two of the most expensive multifamily markets in the country. Additionally, Amazon's fund is heavily skewed toward the upper cohort in the 80% or less than area median income bracket, with only 0.3% of the fund focusing on those families earning 30% or less than AMI. According to the National Low Income Housing Coalition, this group is one of the most in need, with a reported shortage of 6.8 million units across the country last year.
Overall, corporate affordable housing commitments can have a positive impact, but it is important to consider the type of commitment and the amount of money invested to determine the long-term implications.