Amazon could detonate a gentrification ‘prosperity bomb’ in the city it chooses for its new headquarters

amazon seattle biosphere dome

At least 50 cities are expected to submit proposals to host a new $5 billion Amazon campus, dubbed HQ2, by today's deadline.
Amazon claims its second headquarters would create 50,000 jobs in the to-be-determined city.
But some residents worry that the new headquarters would increase traffic, spur gentrification, and lead to prolonged construction.
A new report looked at HQ2's potential impact on 15 cities, and found that it could increase rent prices in up to 2% annually.

Cities across North America are vying to become the home of Amazon's second headquarters. The company said in early September that it plans to invest $5 billion in the construction of a new campus, dubbed HQ2, which it hopes will eventually hold 50,000 Amazon employees.

CEO Jeff Bezos said HQ2 will be equal in size to Amazon's current headquarters in the Seattle area, where the company grew from a small set-up in Bezos' garage into a global e-commerce giant. Cities in the running include New York City, Philadelphia, Denver, San Jose, and Toronto.

Many city leaders are optimistic about the thousands of jobs Amazon claims HQ2 would create. But some residents worry that it would also spur the same problems that Seattle has seen since Amazon arrived in the late 1990s: increased traffic, soaring housing prices, and prolonged construction.

In The Oregonian, a Portland resident questioned how the city would cope with the population growth HQ2 could bring. Meanwhile, Philadelphia Inquirer columnist Will Bunch expressed worries about higher rents that could price out "young artists and dreamers ... crushing any and all cultural diversity and vibrancy."

James Thomson, an ex-head of Amazon Services (the division that recruits sellers to the company's marketplaces), told the Toronto Star that inviting an Amazon HQ comes with risks.

"The expense is a trade-off against schools, infrastructure, health care, etc.," he said. "Can Toronto support 50,000 high-net earners who all want nice homes, nice restaurants, easy commutes, etc.? Amazon is NOT a fan of unions or regulation."

As of bid day, 73 community organizations across 21 states have signed an open letter to Bezos listing several concerns around a possible HQ2 in their cities, including out-of-state hiring, lack of investment in transportation infrastructure, unaffordable housing, and gentrification.

Their worries about higher rent prices are not be unfounded, according to a recent report from the real estate website Apartment List. The site made a few predictions about HQ2's potential impact on housing prices in 15 major cities, based on historical home-building statistics and data from the US Census and Bureau of Labor Statistics. According to the report, the metro areas with the highest rent increases would include Raleigh, North Carolina (1.5% to 2% annually); San Jose, California (1% to 1.6%); Pittsburgh, Pennsylvania (1.2% to 1.6%); and Baltimore, Maryland (1% to 1.3%).

The study suggests that most cities would add more jobs than they would housing units and struggle to keep up with residential demand, though different cities would likely have different rates of housing construction.

seattle In Seattle, Amazon is the largest property taxpayer and private employer. Since 2000, the area has added 99,000 new jobs, with 30% of them in tech, contributing to a construction boom. Since then, Amazon has continued to spur an influx of high-skilled, majority-white tech workers.

According to the Washington Technology Industry Association, there are now 250,000 people working in tech jobs in Washington state, a number that's growing at about 10% annually. Nearly 90% of those jobs are in King County, Seattle, the home of Amazon's campus. Seattle is also now the second-highest-paying city in tech, with an average salary of $99,400, according to the tech recruiting company Dice Holdings.

Somewhat unsurprisingly, the growth has made Seattle's housing less affordable for some longtime residents, who have accused Amazon of perpetuating income inequality in the city.

From 2005 to 2015, Seattle's median rent went from $1,008 to $1,286, an increase nearly three times the national median. Recent data shows Seattle's median home price hit $730,000 in mid-2017, up nearly 17% from a year ago.

As Bloomberg notes, the expansion of the city's tech industry (most notably Amazon) has clogged roadways as well. Seattle drivers spent an average of 55 hours in traffic in 2016, placing it among the top 10 worst US cities for congestion, according to the most recent analysis by Inrix. In June, King County Metro even added more buses to accommodate Amazon's summer interns.

In The Seattle Times, columnist Danny Westneat warned Amazon's next, "Other North American City" about all these issues.

"If there’s one thing we know in Seattle, it’s boom and bust. We’ve gone from billboards urging the last one leaving to turn out the lights to now, our first million-dollar neighborhood. Both the rush, and the relapse, of the fast buck are in our civic DNA," he wrote. "So heads up, Other North American City: Amazon is about to detonate a prosperity bomb in your town."

Amazon has recently tried to temper this image. In May, it announced efforts to house 200 local homeless people in one of its new Seattle buildings. Two months earlier, Bezos gave $35 million to Seattle’s Fred Hutchinson Cancer Research Center, in addition to earlier gifts of $30 million. And in 2016, Amazon donated $10 million to fund a new University of Washington computer science and engineering building.

It's not yet clear where Amazon will make its new home. The company plans to announce a decision in 2018, and start construction by 2019. The company said the ideal city would have at least 1 million people, an international airport, and a "stable and business-friendly environment."

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