Amazon Responds to Its Impact on Housing Market With New Fund
Amazon recently announced that it will be committing $2 billion to preserve and create more than 20,000 affordable homes in Puget Sound, Washington; Arlington, Virginia; and Nashville, Tennessee. These are communities in which the company expects to have 5,000 employees each in the coming years. Now, a few years after Amazon’s announcement to build its second headquarters in Arlington, the company has filled 1,000 of its committed 25,000 roles, all of which are projected to be filled within the next decade.
While some look at this new fund’s commitment to affordable housing as a good thing, others see it as a simple bandage for the Amazon effect that has emerged since the company opened its headquarters in Seattle. Amazon’s announcement to expand to Arlington was met with criticism from affordable housing advocates in Virginia, stressing that Amazon’s impact in the Old Dominion State will parallel that of Seattle. To get a better understanding of the current state of Amazon’s news and potential impact in Arlington, here is the good, the bad, and the ugly truth behind Amazon’s new housing equity fund.
The new fund’s first major investment will include $381.9 million in below-market loans and grants to the Washington Housing Conservancy (WHC) to preserve and create 1,300 affordable housing units in Arlington’s Crystal House property. These affordable housing units should boast significantly lower rental prices to appeal to households earning less than 80% of the average median income. The conversion of existing apartments to more affordable apartments began on January 1, 2021 and is projected to continue over the next five years.
“Washington Housing Conservancy disrupts a market cycle that leads to displacement and offers the kind of stability that lets residents focus on their future, instead of the uncertainty of escalating rents,” WHC executive director Kimberly Driggins said. “With Amazon’s support, we are advancing our vision for inclusive, mixed-income communities of racially diverse middle-income and low-income families and individuals, to live near their employment and access high-performing schools and community amenities.”
Shortly after Amazon’s announcement to expand to Arlington, home sales increased 21% year-over-year with the median list price increasing 33% to $863,300. Protests and advocates for affordable housing met Amazon head on with plenty of criticism, citing the real estate market in Seattle as their warning to Arlington. Over the last six years since Amazon announced its plans for Seattle, home prices have soared 73%. Amazon’s hope with this new affordable housing commitment is to get ahead of future issues while showing advocates in Virginia they are being heard.
The positive and uplifting news of affordable housing comes after years of high competition that led to a statewide shortage of homes. The demand for housing in the Arlington area drove investors and homeowners to create a dramatic housing shortage. Homeowners holding on to their properties are looking to maximize their ROI, but are unintentionally driving prices to a point where buyers might lose interest.
"The 'Amazon effect' has branched out of its home base of Seattle, and it has clearly stamped its fingerprint on the Northern Virginia housing market,” George Ratiu, senior economist at realtor.com® said. “The impact of the company's expansion in the suburbs of Washington, D.C., diverges along homeownership lines, with homeowners experiencing noticeable equity gains and buyers feeling the sting of higher prices. Following Amazon's initial announcement that it was scouting cities for a second headquarters, we knew the winner would see a considerable jump in demand for housing, especially from investors and speculators looking to cash in on increased demand. Looking back a year after the announcement, we can see how dramatic the move has been in the market."
What Can Virginia Do to Mitigate Amazon’s Impact?
Virginia should be proactive and aware of the changes Amazon will bring to the Arlington area, taking notes from Seattle. Publisher and Market President of the Puget Sound Business Journal Emory Thomas highlighted key issues that affected the Seattle area post-Amazon’s move and gave his thoughts on what could have been done better. When asked what he wished he knew heading into the birth of Amazon in Seattle back in 2010, he responded that he wished he was more active in his community to press local leaders about accommodating the projected growth and using that as a time to reflect and champion ambitious changes for human services, transportation, and whatever else the city has planned.
The one thing Seattle did right, according to Thomas? Upzoning and densifying some areas of the city, which paved the way for there to be residential life in the middle of the city instead of the majority of residents commuting into the city. Arlington would do well to heed Thomas’ advice and push their leadership to conceptualize and plan for the possibility of explosive growth while maintaining affordability and housing options for both current and future residents.
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