With its $500 million pledge to address affordable housing in the Seattle area, Microsoft isn’t primarily cutting checks to local charities. Private companies have done that before. Nor is it proposing to create housing for its own employees, as corporations have done in the past, too.
Rather, Microsoft is trying to help fix a market failure — a job government typically does.
“It really represents something almost unprecedented,” said Matthew Gordon Lasner, an associate professor of urban studies and planning at Hunter College. “What we’re seeing Microsoft do is in effect privately assume the role that historically the federal government and the states have played.”
Microsoft’s announcement is welcome news in the Seattle region, where housing costs have risen faster lately than in any other part of the country. But the fact that a tech company has to step in to help ensure the development of affordable housing points to a long-building reality nationwide: The federal government has largely retreated from this role.
The government spent about three times as much on housing programs in the 1970s as it does today, according to the National Low Income Housing Coalition. In the years since, the government has gotten out of the business of building public housing. And capital funds to repair the remaining public housing stock have been cut in half over the last 15 years.
Over this time, federal resources have increasingly shifted away from subsidizing the construction of affordable housing to subsidizing renters who find housing in the private market. And now most new below-market-rate housing is built not by public agencies, but by nonprofit developers leveraging tax credits. The value of those credits has declined recently as well, as a result of changes in the tax bill passed in 2017.
In a sense, Microsoft’s proposal is an extension of this story, as private actors continue to step in where the government once stood.
“Our part to play is to bring capital to solve this problem,” Microsoft’s president, Brad Smith, said at an event introducing the plan on Thursday.
Today in the Seattle region, the problem isn’t simply that government support has dwindled. Construction and land costs to build new housing have risen, and the wages that low-skilled workers can afford to spend on rent have stagnated.
“There is no public entity that can fill a hole as big as this,” Mr. Smith said. If the only focus is putting money into public housing, he said, “it will go too slowly and you will end up with housing that may not stand the test of time.”
Microsoft says it plans to spend $25 million on grants to local nonprofits working on homelessness. But the bulk of the money will be invested, some in affordable housing developments that use tax credits, and others in middle-class developments that wouldn’t be financially feasible without lower-interest loans.
As those loans are repaid, Microsoft will lend the capital to other developments as well, in theory leveraging the money to create what Microsoft estimates could be tens of thousands of units of housing, or far more than would be possible if the company simply spent the money directly building apartments itself.
Ed Goetz, a professor at the University of Minnesota who has studied the history of public housing in America, said: “I don’t want to diminish the magnitude of what they’re doing. I think it’s important, and it will help. But it won’t solve Seattle’s problem.”
Microsoft has called for other companies to become involved. But Mr. Goetz said he couldn’t imagine a situation where there were enough Microsofts out there to truly address the country’s housing crisis.
“The federal government is the entity that has the resources to do this,” Mr. Goetz said.
Diane Yentel, the president of the National Low Income Housing Coalition, said she would welcome a trend in which more major tech companies put up money to address housing. But she warned of the risk of further letting the government off the hook.
“Today’s modern phenomenon of homelessness didn’t exist in the late 1970s because our country housed almost everyone, including the lowest-income and most vulnerable families,” Ms. Yentel said in an email. “The key difference between then and now is declining federal subsidies.”
As Microsoft unveiled its plans, the Department of Housing and Urban Development remained largely shuttered in Washington during the government shutdown. Federal contracts with hundreds of property owners who provide housing to subsidized tenants have expired during the shutdown, leaving thousands of families at risk of losing their homes.
Activists in communities like Seattle have made a strong case that tech companies bear some responsibility for making the housing crisis worse. Those companies have brought thousands of highly paid workers into housing markets that don’t have room for everyone. But among the many culprits behind the crisis, the government’s retrenchment is critical, too.
“This is a problem that is rooted in our political culture,” Mr. Lasner said. “It’s a problem that’s rooted in the myths we tell ourselves about who we are as Americans. We’ve always been skittish and uncomfortable with the idea of housing subsidies, or even interventions like rent control.”
Americans are more comfortable with private-sector solutions, he said. But for an area as complicated as housing, he added, “they’re not enough to cope with the challenge.”
Karen Weise contributed reporting.