Microsoft Pitches in to Help Affordable Housing

SEATTLE—Across the region, housing costs have risen and increasingly pushed out people with lower and even middle incomes. As a result, the Puget Sound has become the sixth most expensive region in the country and has recorded a 21% increase in jobs since 2011, coupled with only a 13% increase in housing units. This problem is even more pronounced in the smaller cities around Seattle, more so than in Seattle itself.

This week, Microsoft Corp. announced a $500 million commitment to preserve existing affordable housing, spur construction of new units and partner with nonprofits to address the affordable housing crisis on the Eastside of King County and the Puget Sound region. The majority of this capital will be deployed during the next three years.

Microsoft’s commitment will include $225 million invested at below market-rate returns, focused on preserving and developing new middle-income housing on King County’s Eastside; $250 million invested at market-rate returns to support low-income housing across the King County region; and $25 million in philanthropic grants to address homelessness.

This includes two initial commitments: $5 million for the new Home Base program through the United Way of King County to prevent people from becoming homeless by providing legal representation, helping with back rent and offering caseworker help; and $5 million for the aligned funding that supports Seattle and King County creation of a consolidated entity to address homelessness. This funding will help kick-start a new philanthropic funders collaborative that will work with government and other partners.

“If we’re going to make progress, we’ll all need to work together as a community,” said Microsoft president Brad Smith and Microsoft chief financial officer Amy Hood in a joint blog post. “Ultimately, a healthy business needs to be part of a healthy community. And a healthy community must have housing within the economic reach of every part of the community, including the many dedicated people who provide the vital services on which we all rely.”

The announcement accompanies a joint declaration from the mayors of nine of the largest cities around Seattle to take steps to increase affordable housing capacity. Mayors of Auburn, Bellevue, Federal Way, Issaquah, Kent, Kirkland, Redmond, Renton and Sammamish will consider changes in zoning to increase the pipeline of housing in selected areas, providing desirable public land near transit locations, addressing permitting processes and fees, and creating tax incentives for developers.

“Microsoft is really incentivizing new homes for mid-income earners on the east side of King County, so I’d expect that we’ll start to see more affordably priced homes rather than a massive drop in prices due to how Microsoft plans to phase in the loan program,” Ray Sturm, CEO of AlphaFlow, tells GlobeSt.com. “The additional loans for low-income housing will certainly help to create more opportunities across King County, but again, with a phased roll in of capital, the impact won’t be as stark. For new home developers, the $225 million for below market-rate loans for middle-income housing looks to be a great opportunity, compared to traditional financing methods and will make developing those homes (compared to higher priced or low-income homes) more attractive than they had been.”

Sturm says the additional $250 million in low-income housing development loans should also incentivize developers to continue to build out affordable low-income housing. For investors who currently focus on rent-generating properties, the availability of newly affordable housing for low-middle income earners could certainly put a downward pressure on rents, as those families may soon have options to buy a home instead of renting one.