SEATTLE – A master's degree and a full-time job as a middle-school counselor weren't enough to help Sam Baker land an apartment she could afford in Seattle's east-side suburbs. But a $750 million commitment by a local tech giant helped do the trick.
In August, Baker moved into her new apartment in one of three complexes recently purchased by Urban Housing Ventures, a partnership backed in part by Microsoft's affordable housing initiative. The group is cutting rents at 40% of the units in the three buildings, including Baker's fourth-floor one-bedroom overlooking Lake Washington, as part of an effort to make sure teachers, nurses and other middle-income professionals can live in the communities where they work.
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The rent cuts are being accomplished without local public subsidies, but with a model designed to remain attractive to investors — an approach that could and should be replicated nationwide, its supporters say.
“Having this program has made it so I can afford to live here,” said Baker, 51, a counselor at Eastside Catholic School in Sammamish. “I don't want to commute too far. I like being in an area where I can walk a lot — there's restaurants and banks and dentists and hair salons and bars. It makes it very convenient.”
Microsoft launched the initiative two years ago to address a problem its own success helped create: As the region's tech industry has boomed and well-paid tech workers have driven up the cost of housing, even people with decent middle-income jobs have been priced out. Jane Broom, the company’s senior director of philanthropies, noted in a blog post Thursday that from 2011 to 2019, jobs grew 24% while housing only grew 12%; median household income rose by 34% while housing prices soared 78%.
Other tech giants, including Google and Apple, have also invested hundreds of millions of dollars recently to boost affordable housing, following years of complaints that they had worsened the problem.
Microsoft initially committed $500 million, saying that much of the money would provide market-rate or below-market-rate loans to developers who want to build affordable housing. Some was targeted for grants to address homelessness, such as by providing legal help to those facing eviction. Early this year, Microsoft upped the ante by $250 million, committing to providing credit to help the Washington State Finance Commission finance about 3,000 additional units of affordable housing.
But building new affordable housing takes time. So on Thursday, the company announced that it had invested $40 million to help Urban Housing Ventures buy three existing market-rate complexes — two in Bellevue and one in Kirkland — that together have 335 units. Urban Housing Ventures is immediately cutting rents for residents who earn 60% to 80% of the area's median income. The partnership is also benefitting from a $325 million financing commitment from the Federal Home Loan Mortgage Corp., better known as Freddie Mac.
For Baker, who has four grown children and lives on her own, that means a discount of about $600 a month — $1,623 instead of more than $2,200. It’s not enough that she’s saving much, she said. But she can make ends meet without having to take a seasonal department store job over the holidays, as she did when she lived at her old apartment.
And it's a nice place — across the street from a beach, with covered parking and a gym, she said.
“The Puget Sound region hasn’t built enough housing for the people who live here, including many who are on the front lines of our community’s response to COVID-19,” Microsoft President Brad Smith said in a written statement. “We need fresh, creative approaches like this one to quickly bring new private sector financing and funding to address the affordable housing crisis – in our home state of Washington and nationwide.”
Part of the reason that buildings remain attractive to investors is that the below-market-rate units are in such high demand that they're expected to have less turnover, and fewer vacancies in an economic slump, said Tim Cavanaugh, a managing member at Stream Real Estate Development, which oversees operations at Urban Housing Ventures.
In addition to the $40 million toward its $750 million commitment, Microsoft on Thursday announced it was providing $25 million to the Washington State Housing Finance Commission to offer financing to affordable housing developers.