Amazon headquarters

Amazon headquarters

It wasn’t cheap to live in Arlington before Amazon moved to town. But the company’s expanding presence threatens to send rent and home prices skyrocketing even higher.

A $20 million commitment from Amazon to add affordable housing units will provide some cushion, but how much more is needed to assure that low-income residents aren’t priced out of the area?

And what exactly did Amazon get in exchange for this payment?

Produced by Julie Depenbrock

Guests

  • Ally Schweitzer Business and Development Reporter, WAMU 88.5; @allyschweitzer

Transcript

  • 12:00:02

    KOJO NNAMDIYou're tuned in to The Kojo Nnamdi Show on WAMU 88.5. Welcome. It wasn't exactly cheap to live in Arlington before Amazon named the county home to its newest headquarters, but the company's expanding presence is threatening to send rent and home prices skyrocketing even higher. Amazon's new $20 million proposal to add affordable housing units may provide some cushion, but how much more is needed to assure that low income residents aren't priced out of the area. And what exactly did Amazon get in exchange for this $20 million profit? Joining me in studio is Ally Schweitzer, WAMU's Business and Development Reporter covering economic policy, housing and matters related to the private sector. Ally, good to see you.

  • 12:00:45

    ALLY SCHWEITZERGood to see you as always.

  • 12:00:46

    NNAMDICan you briefly give us an overview of what Amazon's HQ2 is bringing to the region?

  • 12:00:51

    SCHWEITZERYeah, so this company called Amazon. It's pretty big. It's opening a corporate office in Arlington. It's already on track to hire about 400 positions this year. And over the next 10 to 12 years it's looking like at least 25,000 jobs created for this new corporate office. It's not a warehouse. It is a corporate office. These are white collar jobs. The base salary according to Amazon is about $150K. And about half those jobs will be engineering, by the way.

  • 12:01:19

    NNAMDIWhat is the precise timeline here? Amazon is already posting jobs for HQ2, but how soon will they be operating with all 25,000 or so employees?

  • 12:01:28

    SCHWEITZERSo that 25,000 plus employees that's a forecast. That's what Amazon is committed for the next 10 to 12 years. So we're not going to see that ramping up happen in the next couple of years. It's going to be gradual. They have a schedule that they've laid out with the state that says, here's how many employees we're going to hire basically every year. And 400 is the target. Four hundred jobs is the target for this year.

  • 12:01:49

    NNAMDIYou've been digging into Amazon's effect on housing in the region. Tell us about this $20 million proposal. Exactly what will it do?

  • 12:01:57

    SCHWEITZERSo the $20 million proposal is really interesting, because it is a straight up negotiation with the county. I think that it's -- the terms of this are kind of complicated. And it might not be, even from the very good coverage that was in the Post, it might not be immediately clear exactly what this $20 million offer is. So essentially Amazon is saying to the county, look we want bigger buildings. We want buildings that are bigger than what zoning currently allows. And what that does is that triggers a process with the county where the county says, okay, well, we're going to consider giving you, allowing you to build this bigger facility. But we're going to want something in exchange. So what Arlington is doing is it's saying, okay, well, here is the package of community benefits that we are prepared to offer you in exchange for this very lucrative density, right?

  • 12:02:46

    SCHWEITZERSo they're saying here, okay, we're going to offer you some community benefits. Here's a park. Here's a bike lane. And we're also going to throw in, you know, $20 million for the affordable housing fund, Arlington's main loan fund for constructing affordable housing.

  • 12:03:00

    SCHWEITZERSo it's a part of this negotiation that is very much in exchange for lucrative density that Amazon will most certainly benefit from. And the $20 million is equivalent to about 235 housing units or so. And that will go right into that loan fund. It's a huge investment in that loan fund from a single entity, but it's not just an act of philanthropy. It's very much and exchange.

  • 12:03:26

    NNAMDIHow does this compare to other deals that tech companies have made with city officials?

  • 12:03:30

    SCHWEITZERWell, I would say overall this is -- I mean, this type of negotiation is 100 percent standard for Arlington County and for many local jurisdictions. This is what the type of negotiation that a developer will enter with the county when it wants to get something. Such as a zoning change that will allow it to build a bigger building. So in the context of Arlington and in the context of this region the only thing that's really remarkable about this particular deal is that it's very big. I mean, it's a very big company. It's a lot of density.

  • 12:04:00

    SCHWEITZERThey're getting -- I think it's in the neighborhood of 28 percent bigger than what zoning would allow. It's a lot of people that they're going to be hiring. And it's a huge huge company owned by the richest person in the world. But in the context of Arlington, in the context of this region, this is pretty normal type of negotiation that you'll find with developers that want to build outside what zoning currently allows.

  • 12:04:22

    NNAMDIIt's the greatest single infusion of money ever into Arlington's housing fund. Baltimore is home to two gigantic Amazon warehouses operating on the sites of chattered General Motors and Bethlehem Steel plants, what has Amazon's presence done and not done for the City of Baltimore?

  • 12:04:40

    SCHWEITZERThis is an interesting question, because the New York Times had this incredibly good story Sunday about sort of the reach, all the tentacles that Amazon has kind of extended throughout greater Baltimore, right? So you have these two warehouses. You also have, of course, Amazon web services, which is a huge part of Amazon's infrastructure in this region. And you have Whole Foods, which Amazon also owns. Then you have all these Amazon Ring devices that people are installing in their homes. Amazon has touched an aspect of probably most Baltimore area resident's lives in one way or another.

  • 12:05:16

    SCHWEITZERSo the story in the New York Times really lays this out very well about how you can't really turn around without seeing some part of Amazon in Baltimore. And I think it's becoming the case that also become the case throughout much of the country, because Amazon is so huge and has so many different entities and so many different technologies. So I think -- if you're talking about Baltimore in particular in these warehouse jobs, so yeah, you have these two fulfillment centers that are massive, right? And it really has kind of filled a vacuum that was left by the decline of the industrial economy in Baltimore.

  • 12:05:50

    SCHWEITZERI mean, Baltimore like many postindustrial cities, it really struggled with that transition. And Amazon is sort of the next phase of that economic transition, right? And there's a lot of caveats that come with that. Amazon, as we know, like most of the tech industry is very anti-union. It's not amiable to, you know, collective bargaining. These jobs are known for being very cut throat, very intense. So there are a lot of questions that are being raised about the type of work that Amazon creates in these sort of postindustrial vacuums. I think Baltimore is ground zero for that. And I think the New York Times story -- if you haven't read it out there folks, you really should check it out. It does an excellent job of sort of giving the overall sweep of how Amazon has really transformed Baltimore.

  • 12:06:31

    NNAMDIAre there any lessons to be learned there as Arlington moves forward?

  • 12:06:35

    SCHWEITZERI think the thing that this really raises is -- because we're not talking about warehouse jobs. Of course, these are different jobs, the ones that are coming to Arlington. But I do think there are still a lot of lessons to be learned about particularly the conversation about tech incentives or incentives for the tech industry, right? So we know that Virginia, of course, ponied up up to $750 million in incentives to court Amazon to Virginia. Arlington offered its own incentives package. What was that, twenty-eight million or $23 million? Somebody is going to call me and yell at me for not knowing the exact number. But it was something in that range of the next 12 years, right?

  • 12:07:10

    SCHWEITZERSo I think what this does is that it's what this article really lays out, the New York Times article is that it says, look at the costs, right, we have all these benefits. We know about the benefits. Yes, it's jobs. Yes, it's economic growth, but what are some of the costs that Baltimore is now facing as a result, right? And I think that that is an involving conversation.

  • 12:07:30

    SCHWEITZERWhen you have governments that are weighing these multimillion dollar incentives packages for these companies, they're often really kind of just looking at the benefits. And they're not necessarily thinking about what are the longer term impacts on the workforce, on the housing markets. And I think that that incentives piece is going to be an evolving conversation. And we'll have a lot of lessons to learn from seeing the economic impacts of Amazon in other parts of the country.

  • 12:07:55

    NNAMDIHere's Ed in Maryland. Ed, you're on the air. Go ahead, please.

  • 12:07:58

    EDThank you for having my call. And it's like -- and I'm a little familiar with government. (unintelligible) what is the difference between this and a quid pro quo? It's like the -- I mean, where's the line here? I think you understand my point. I'd like to hear your response. Thank you.

  • 12:08:20

    SCHWEITZERYou know, I think that for folks, who maybe don't normally -- and I don't mean to say this in a condescending way and this applies to me too because I didn't really know how these transactions and these negotiations were made until I started covering them, I think what the public will see is quid pro quo, right? They are going to look at this as, yes, this is a deal that the county is making with Amazon. On the other hand this is actually normally how it works. This is what -- when a developer wants to build a bigger building in Arlington County, this is the process, the negotiation process that you enter. And it works this way in D.C. as well. So on its face, yeah, it's a pretty straight up transactional type of thing, right? It's not Amazon saying, here's a big present of $20 million. No, they are getting something in return.

  • 12:09:05

    SCHWEITZERBut this is the way that these types of zoning changes are negotiated. If a company of a developer wants a bigger building beyond what zoning allows, the county from their perspective they probably see it as, this is what we're doing to make sure that residents are getting something in exchange for this bigger footprint and extensively a bigger impact on the neighborhood, right, of Crystal City. They're saying, what are we going to get in exchange for this? So you're basically extracting the biggest pound of flesh that you can from these developers in order to serve your constituency. Now to the extent it really satisfies the constituency's needs is another question.

  • 12:09:44

    NNAMDIWell, my next question was how are Arlington residents reacting to this news? But for that, let me go to Christine in Arlington, Virginia. Christine, you're on the air. Go ahead, please.

  • 12:09:53

    CHRISTINEHi, Kojo. Thanks for taking my call. So ordinarily outside of this, the country says they can't get involved in zoning. They can't increase density. They can't affect where affordable housing goes. That's a zoning issue, which becomes this like, we're not in charge of that. Now they're going to let Amazon change zoning for their warehouse. I don't really have a problem with that. But using that same thought, how about if they increase the density allowed for affordable housing and put it in places where before now they've said, oh no. We can't put affordable housing there. The zoning doesn't let us do that. So they can either change the zoning or they can't change the zoning. But they seem to always want to have it one way and the other. And so I just think they're very disingenuous sometimes when they're talking about these things.

  • 12:10:44

    SCHWEITZERWell, the county does -- I'm interested in what your experiences have shown, because the county does have direct oversight over zoning. This is pretty -- you know, these types of zoning changes they come up fairly frequently in the county. And it is something that the county is empowered to deal with directly. And the Arlington County Board will be having a hearing on this on December 14th, possibly the 17th, but it's slated now for the 14th.

  • 12:11:12

    SCHWEITZERBut to your point about allowing more density for affordable housing, I mean, this is a major issue for affordable housing advocates in Arlington. This issue that Arlington like much of the region is zoned for single family, I mean, the vast majority of Arlington is zoned for single family and it is a challenge to up zone and allow bigger buildings to be built throughout the county. And a lot of that too is a political issue in the county. There's a lot of political opposition or not really political, but, you know, public opposition to seeing bigger buildings get built in the county. So it's a very complex issue. I don't necessarily think, though, that the county has said, no. You know, we can't do anything about this. I do think that this is a conversation that they are actively engaged in.

  • 12:11:54

    NNAMDIIndeed, county officials seem to be responding very positively to the proposal. You have said that the county is working very closely and collaboratively with Amazon. What does that relationship look like?

  • 12:12:05

    SCHWEITZERWell, so I think -- I mean, I don't have, you know, a secret camera in the chambers here. I don't necessarily know ...

  • 12:12:11

    NNAMDIWell, arrange to get one.

  • 12:12:12

    SCHWEITZER(laugh) Yeah, right. But the County Manager, Mark Schwartz, has been very closely from what I understand, with Amazon and their representatives. So this has become obvious in this whole zoning change conversation. I mean, Arlington recently approved a change that would allow Amazon essentially to divvy up its community benefits in a different way than it normally would have, right? So it allowed Amazon this $20 million housing investment that it's making. This has come as a result of some changes that the county recently approved. And say, okay, if you want to build a bigger building these are your different options for the way you can sort of pay back the county. And it made that compensation structure a little bit more forgiving and flexible for Amazon.

  • 12:12:56

    SCHWEITZERAnd so that's where we got this $20 million offer from Amazon in addition to all these community benefits. So, yeah, this has been -- you know, the county has worked very closely with Amazon from the beginning and seem to be very -- it seems to be a fairly cordial working relationship.

  • 12:13:13

    NNAMDIHere now is Catherine in Arlington, Virginia. Catherine, you're on the air. Go ahead, please.

  • 12:13:17

    CATHERINEYes. So it seems to that $20 million acquitting to being able to construct 235 affordable housing, it seems a little overstated. It really is land and construction costs in Arlington County are really so outrageous that I think we'd be lucky to build half as many units for that price. So it seems like the offer is really about half what it should be from Amazon. And also if we're bringing in 400 new families in just the first year of operations, 400 new jobs, we're going to displace at least 400 families just in the first year. I feel like we would really need to aim to create at least 400 units.

  • 12:14:00

    SCHWEITZERSo I think that 235 number of units, by the way that might also include preservation of existing units. It might not be the estimated cost of construction of new units. And that also that 235 units is based on the way in which the affordable housing fund in the past has been able to allocate funds. I have to double check on this, but it might not actually be applicable toward just the construction cost. Preservation of affordable housing is generally cheaper because we're dealing with existing homes.

  • 12:14:36

    NNAMDIOrion emails us, we live two blocks from Virginia Tech's new campus location and about a mile or so from where Amazon will be located. And we are petrified that our rent will rise too fast and we'll have to leave a neighborhood we love and have been part of for 10 years. It was just over a year ago that Amazon chose Arlington for its new headquarters. How have we seen the price of renting and buying home change in the region since that time?

  • 12:14:59

    SCHWEITZERWell, since that time there's definitely been an increase in asking prices for real estate in Arlington especially the closer you get to the future HQ2. There is no question that there has been an impact. I mean, if you talk to many folks who sell real estate in that area or are close observers of the housing market, they would say, yeah, I mean, pretty much as soon as Amazon that it was going to be coming here we started seeing that speculation start to creep in. And I think that was an impact that frankly was underestimated by some of the folks who were putting together projections for the area.

  • 12:15:29

    SCHWEITZERI think that we did not give enough thought to that real estate speculation issue that would arise. I mean, the cost of housing in that area have gone up significantly. And, of course, it's very much aggravated by the fact that not enough housing has been built in this area over the last decade or more. And so there was an existing problem that Amazon and frankly any economic growth in this area is going to exacerbate.

  • 12:15:53

    NNAMDIWell, on the other hand George emails, why is it considered a right to be able to afford to live in Arlington? If Amazon or any company pushes rents up, the local economy will simply have to adjust it.

  • 12:16:06

    SCHWEITZERWell, I mean, of course, you're going to hear that argument that, you know, the cost of living in this area is, you know, that has to do with the quality of life in this area. And sure, you know, that folks who have a certain -- you know, who are lawyers, for example, or who are high income who have been fortunate in life, you know, I've heard this argument many times. Well, you know, they've worked hard and they should be able to afford to live here. And that's what, you know -- that's capitalism. Sure.

  • 12:16:31

    SCHWEITZEROn the other hand there are interventions that elected officials, that government officials have not taken over the last 10 plus years to ensure an adequate supply of affordable housing in this area. I mean, you have got to have -- in order to have a robust economy you really have to have all wage levels represented. It cannot just be an area where it's only high income people. Think about, you know, restaurants. Think about hotels. Think about services. These are industries that fundamentally do require workers that are not getting paid six figure salaries. It is an economic necessity to have diversity of incomes. You cannot have a region be economically successful really and only be composed of the highest incomes folks.

  • 12:17:16

    NNAMDIHere's Susan in Falls Church, Virginia. Susan, your turn.

  • 12:17:20

    SUSANGood morning. I am interested in the dollar figure of $20 million. Microsoft in Seattle has contributed in the range of over a billion dollars to help affordable housing. And I wonder if we aren't using the wrong the policy mechanism. We're doing this construction by construction, but we need to look at the overall impact of Amazon as many callers and your guests have said, and Amazon should be ponying up more. I'd like to see them come at $100 million.

  • 12:17:55

    SCHWEITZERI think ...

  • 12:17:57

    SUSANAnd I'd like to see more policy options than just new construction.

  • 12:18:00

    SCHWEITZERI think that's an interesting idea, yeah.

  • 12:18:02

    SUSANWe're confused about what the numbers are. Is it old construction, new construction? We're kind of -- we're a little too cozy with Amazon and not really taking into account the whole -- as you've said, the costs, but also the impact on the community.

  • 12:18:16

    NNAMDIGlad you mention that because ...

  • 12:18:17

    SUSANYou know, on citizens and voters and what Arlington is turning into.

  • 12:18:21

    NNAMDIWe saw the backlash that happened against the other HQ2 in Queens. How is Amazon working to establish ties in Arlington and secure public support?

  • 12:18:29

    SCHWEITZERLet me just first I want to get to something that Susan had said, which I think is a good point. I mean, let's be very clear. The $20 million offer, as I said earlier that is not similar -- that can't really be compared to the other investments that we've seen in affordable housing. Some tech companies on the West Coast like Apple their $2.5 million investment into affordable housing in California. Those are different types of deals, right? That was actually more of a philanthropic effort than this. This $20 million thing, this $20 million negotiation is very much a transaction, and it should not be seen as a philanthropic donation to affordable housing. It was basically Amazon meeting county requirements.

  • 12:19:07

    SCHWEITZERAnd so you can say, yes, there should be. There should be more. Absolutely, you know, you can make argument that the private should be paying more into affordable housing. But basically this was Amazon saying, here's the bare minimum. We're going to meet the county requirements with this $20 million proposal. It was a negotiated amount $7.5 million of that was required to meet the county zoning ordinance. And the rest of it was a negotiation with the county. So it was very much a pragmatic thing. It wasn't a gift. So if we're comparing it to those investments on the West Coast, I actually think it's a pretty uneven comparison. Now, Kojo, to pivot to your question can you ...

  • 12:19:44

    NNAMDIPublic support.

  • 12:19:45

    SCHWEITZERPublic support, I think of this whole -- I'm not entirely sure actually how Arlington County residents are reacting to this particular negotiation. And I think that opportunities to hear what people have to say are going to be abundant in the coming weeks, because there is this ongoing public process. So there is a hearing tonight. There's also going to be a hearing next month. So we will have opportunities to hear what the public has to say about this.

  • 12:20:10

    NNAMDIAnd at what point is the Arlington County Board going to vote on the proposal?

  • 12:20:15

    SCHWEITZERThis will be mid-December. It's slated for December 14th. There will be a public hearing.

  • 12:20:18

    NNAMDIHere is Star in Washington D.C. Star, you're on the air. Go ahead, please.

  • 12:20:23

    STARThank you very much for taking my call. I think that the issue of what affordable housing is nationally and particularly locally, what it has really meant needs to be addressed as part of this conversation. I know in D.C. where you have something like 90,000 people in need of housing units and only about 500 units have been fulfilled under affordable housing provisions in the last 10 years, what the landlords have typically done is make a deal to -- with the developers to build apartments with just enough units reserved for affordable housing to satisfy the deal with the city.

  • 12:21:06

    STARHowever, they have been -- they scrutinize the people who they're going to rent to. They don't rent these affordable units to low income people, who perhaps don't have a lot of formal education and aren't conventionally upwardly mobile. They rent them to people who are perhaps interns or, you know, just coming out of an internship who had employment who are going to potentially ...

  • 12:21:32

    NNAMDISo your question is you want to know how Arlington County is going to make sure that if this affordable housing in the form of 235 units comes around that they have to ...

  • 12:21:42

    STARWell, the math on that works out that each of those units, if they're giving $20 million for 235 units that's going to work out to, what, $180,000 per unit.

  • 12:21:56

    NNAMDISo you're saying that won't be affordable to low income people.

  • 12:22:00

    STARExactly. Exactly.

  • 12:22:02

    NNAMDIIs there a concern about that, Ally?

  • 12:22:03

    SCHWEITZERWell, the affordable housing fund that this is going into, it's a loan fund. And there hasn't been that -- that $20 million first of all hasn't even been approved yet. This is all still kind of in the realm of the hypothetical. Though, it is likely to be approved. That $20 million there are not necessarily strictures on exactly the units that those dollars are going to go to. So it will be subject to affordability acquirements that are existing in the county for any affordable housing project.

  • 12:22:28

    SCHWEITZERAnd I think what you're referring to is inclusionary zoning requirements in the District, right? This is when developers have to meet a certain minimum number of affordable units in new development. And there has been criticism of what's called IZ or inclusionary zoning, because it doesn't necessarily target very low income residents. And there are issues with that that I've heard raised by many tenant advocates and folks, who are in favor of affordable housing generally in the city. I mean, one of the big challenges in affordable housing generally is that the deeper level of subsidy that you need basically the lower income your tenants are the more public subsidy is required to get those units built, because they're not profitable. So you need to find a lot of extra public dollars to support that very deeply subsidized housing. And those dollars simply are not available in this area currently.

  • 12:23:15

    NNAMDIFinal question. We got a tweet from carfreehq who says, for reference, VDOT has committed 12 and a half times that amount, $250 million, to Route 1 street scape changes. What does that say about our priorities? What kinds of transportation efforts will Amazon be funding?

  • 12:23:32

    SCHWEITZERWell, Amazon has this with this community benefits program or offer that hit has offered up to the county this $20 million investment in affordable housing comes with another suite of community benefits that are infrastructural changes or improvements in the area. So I actually -- I'm shaky on exactly what those infrastructural improvements are, because I was mostly focused on looking at the housing package. But from what I understand there are things like bus shelters. There's a bike lane that's going in its various infrastructure improvements in the immediately are that extensively benefits Arlingtonians and potentially also benefit Amazon itself and its workers. So yeah, there's an infrastructural component to this community benefits package. And, of course, there's the infrastructure spending that's coming along with the state funding of Amazon.

  • 12:24:19

    NNAMDIIt's all quite complicated, but you said there's a hearing tonight.

  • 12:24:22

    SCHWEITZERThat's correct. The Arlington County Planning Commission has a public hearing tonight at 7:00 p.m.

  • 12:24:26

    NNAMDIWe'll be hearing more from the public. Ally Schweitzer is WAMU's Business and Development Reporter. Ally, thank you so much for joining us.

  • 12:24:31

    SCHWEITZERThank you. Thank you.

  • 12:24:33

    NNAMDIWe're going to take a short break. When we come back we will be talking about labor disputes in this region and the effect of labor unions. I'm Kojo Nnamdi.

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