The UK’s Help to Buy scheme, which subsidises the costs of home ownership for first-time buyers with cheap loans, was introduced by the British government to tackle a perceived crisis of affordability.
California also has an affordable housing problem, but the solution involves a slightly different kind of saviour.
From an Apple press release yesterday:
In partnership with Governor Gavin Newsom, the state of California and community-based organizations, Apple is providing a significant investment that offers statewide housing support as well as funding for projects in Silicon Valley and the Bay Area.
The world’s biggest company is launching a $1bn affordable housing investment fund and a $1bn mortgage-assistance fund. It is also adding $150m to a Bay Area housing fund, putting $50m towards supporting “vulnerable populations”, and making $300m of its land available for construction.
The first of these will provide the US state and other organisations in California with an “open line of credit”. Apple has so much cash that it can lend money to the state’s government, to help fund more construction, so as to address a housing crisis which it — along with other big tech companies — partially caused by generating huge amounts of cash for its employees in the first place.
This is not the first time one of the big tech companies has waded into the world of US housing policy. They are now quietly filling a role that might otherwise be played by the government, even as the debate over whether they pay enough in tax continues to rage (compare and contrast the above with the tone in this Apple press release, from 2017).
Microsoft earlier this year committed $500m to affordable housing in Seattle. As the New York Times pointed out, that move came shortly after Amazon successfully blocked a tax that would have funded … wait for it …. affordable housing services.
In January, Facebook contributed equity funding to a partnership that aimed to provide affordable housing in San Francisco. And last month, it added a further $1bn to “help address the affordable housing crisis”.
Recipients of its largesse include teachers and nurses – in other words, people who work for the government. Precisely the same people are the intended recipients of Apple’s mortgage assistance.
While Apple is deploying some of its own land, a quarter of the Facebook cash will be used for a public partnership on – and the wording in the release is telling – “excess state-owned land”.
Tech companies have accrued huge amounts of cash, but are not in the business (yet) of owning vast amounts of land. Governments, on the other hand, like religions, universities and other quasi-governmental institutions, are rich in land, but often constrained in their spending by powerful political forces, far removed from local circumstances.
Part of the context here is the role of so-called philanthropic capital, where US companies spend excess cash on the kind of things – housing, education and healthcare – that you’d usually associate with government spending. One way to think about this is as hypothecated tax, paid to alleviate pressure to pay higher conventional taxes, or as a way of building goodwill with legislators. It echoes many of the developments around 19th century industrialisation, from Carnegie’s libraries (now: Bezos) to “corporation parks” in the North of England.
The amounts involved are currently small, in comparison with the scale of government spending somewhere like California. But if the infrastructure for funnelling the proceeds of cash into housing services under these new approaches becomes embedded in the philanthropy of tech companies as well as the state and federal governments (rather than simply the tax machine), then that’s another reason not to dismantle them.
Also, it’s hard to imagine profits arising from paying corporation tax. But subsidising real estate is a different story. Take the case of Help to Buy in the UK. The government is taking an equity position on real estate in precisely the areas where first-time buyers are active. It might lose money, but it might also make money.
It is the internet boom that has made the tech companies in question among the world’s most powerful. But the internet is also impacting real estate, by redistributing its value. Prices have risen in urban hubs where economic activity is channelled, where younger workers migrate to work in internet-heavy, globally interconnected industries, and where other workers have migrated to provide them with other services.
So if tech companies are beginning to act like the state, it isn’t happening everywhere. Apple isn’t trying to bring down the cost of housing in rural Nebraska. Though perhaps, in a roundabout way, the internet and its winners already have.