Google pledges $1B to ease Bay Area housing crisis

Mortgage

It is the largest single commitment from a tech company to fight the housing shortage that threatens to stall the economic engine of Silicon Valley, as even well-paid workers must wrestle with escalating rents or finding a home to buy.

“For several months, we have encouraged Google to make a bold commitment to address our region’s affordable housing challenge,” San Jose Mayor Sam Liccardo said in a statement to this news organization. “We look forward to working with Google to ensure today’s announcement manifests itself into housing that will benefit thousands of San Jose residents struggling under the burden of high rents.”

The initiative comes as Google faces enormous pressure to alleviate the impact of its rapid growth, particularly as it plans a transit-oriented mixed-use campus in downtown San Jose where 15,000 to 20,000 of its employees would work.

“I applaud Google’s leadership for stepping forward to build affordable homes for California’s working families,” Gov. Gavin Newsom stated in a Twitter post. “I hope today’s announcement inspires other companies — big and small — to make similar direct investments in housing affordability throughout our state.”

Other tech companies have made financial contributions to housing, but nothing on this scale.

In January, the Chan Zuckerberg Initiative, the San Francisco Foundation, Facebook, Genentech, and others announced a new $500 million fund to build or preserve more than 8,000 homes in five Bay Area counties over the next five to 10 years. Microsoft has committed $500 million to build affordable housing and tackle homelessness in the Seattle area, and Wells Fargo recently said it would spend $1 billion for affordable housing as part of a broader national philanthropic push.

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But Google, in an unusual turn, said in a blog post it would spend $750 million to build housing on its own land.

Aimed at freeing up land for 15,000 homes, this process could take up to 10 years. Google would work with cities to rezone land that is mostly designated for office or commercial uses. In 2018, a scant 3,000 homes were built in the South Bay, Google noted.

The tech titan also will create a $250 million investment fund that will enable developers to build at least 5,000 affordable housing units across the region, according to the blog post from Sundar Pichai, Google’s chief executive officer.

The announcement comes as groups like Working Partnerships USA, a labor-backed organization focused on addressing inequality and poverty in Silicon Valley, have raised concerns that Google’s foray into San Jose could trigger gentrification and displacement.

“It’s encouraging to see Google taking the concerns of local communities seriously by recognizing some responsibility for its role in our region’s housing crisis,” Jeffrey Buchanan, the group’s director of public policy, said in a statement.

In a report published last week, Working Partnerships pressed Google to commit to helping build more than 17,000 homes in San Jose to help ensure tenants won’t be saddled with an estimated $235 million in rent hikes by 2030, the approximate completion date for Google’s transit village near the Diridon train station.

“Today, more than 45,000 of our employees call the Bay Area home,” Sundar Pichai, Google’s chief executive officer, wrote. “Across the region, one issue stands out as particularly urgent and complex: housing.”

The problem is intensified among those least equipped to tackle the skyrocketing and stubbornly high home prices and residential rental costs, Pichai asserted in the post.

“The lack of new supply, combined with the rising cost of living, has resulted in a severe shortage of affordable housing options for long-time middle- and low-income residents,” Pichai said.

The tech titan’s quest appears to be a remarkable effort, said Carl Guardino, president of the Silicon Valley Leadership Group.

“Google has given us one billion more reasons to recognize them as the great company and the great community partner that they are,” Guardino said. “Google has clearly shown they are a company that believes in ‘Yes in our backyard’ and will donate their own backyard to make it happen.”

The initiative arrives at a time when the internet giant, through a head-spinning array of property purchases and rental deals, has dramatically widened its footprint in the Bay Area. Beyond San Jose, Mountain View-based Google also owns properties in cities such as Palo Alto and Sunnyvale. It wasn’t immediately clear which Bay Area sites might become residential projects.

In San Jose alone, Google’s deals could bring the Bay Area’s largest city 22,000 to 27,000 new tech jobs.

In addition to the neighborhood near the Diridon train station in the city’s downtown district, consisting of office buildings, homes, shops, and restaurants, the search behemoth has plans in north San Jose. There, near the city’s airport, Google has leased four big office buildings where another 3,600 could work. And near San Jose’s Alviso district, the company has bought five office buildings where 3,500 more could be employed. Google also has bought three giant industrial buildings near Alviso.

“We’re really excited about their commitment to housing,” said Leslye Corsiglia, the executive director of SV@Home, a nonprofit that advocates for affordable housing and has worked with Google throughout Santa Clara County.

The announcement could help satisfy a commitment the company made to San Jose to include affordable housing in its development near Diridon Station. But it doesn’t absolve Google of other commitments. For instance, If the city passes a commercial impact fee — a fee paid by companies to help fund affordable housing — Google would still be obliged to pay that fee.

“It definitely stands out as a big investment,” Corsiglia said, adding that she appreciates that the company is helping offset some of the impact of the jobs it is creating. “That’s not something you see every day.”

And while San Jose’s planning department has resisted some attempts to rezone its shrinking supply of industrial land, Liccardo has also called for some 25,000 units of housing to be built in the city in the next several years.

“The housing crisis is the effect of the Bay Area being an economy that is the envy of the world,” said Jim Wunderman, president of the Bay Area Council. “It’s reasonable that we are seeing major institutions like Google stepping up to the next level to help.”

Google said that it hopes the first new homes can be quickly launched.

“Our goal is to get housing construction started immediately, and for homes to be available in the next few years,” Pichai stated. “In Mountain View, we’ve already worked with the city to change zoning in the North Bayshore area to free up land for housing, and we’re currently in productive conversations with Sunnyvale and San Jose.”

Google also said it would provide $50 million in grants through Google.org to nonprofits focused on the issues of homelessness and displacement.

“This is an absolute game-changer for San Jose and the South Bay,” said Teresa Alvarado, director of the San Jose office of SPUR, a nonprofit civic planning organization. “This should be an absolute model for other companies and other communities. I hope this tells local government officials that it’s OK to build housing.”

Google has already taken preliminary steps to create potential housing sites that would flank the company’s future mega-campuses in downtown San Jose, northern Sunnyvale, and north Mountain View. In all of these development zones, Google has assembled sufficient parcels that the company could provide stretches of land for homes within walking distance of its offices of tomorrow.

“Solving a big issue like the housing shortage will take collaboration across business, government and community organizations,” Pichai wrote in the blog post. “We look forward to working alongside others to make the Bay Area a place where everyone who lives here can thrive.”


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