Google is pledging to invest $1 billion to develop housing in and around Silicon Valley, where the success of the search giant and its competitors has contributed to soaring home prices.
Over the next decade, the company plans to lease to developers $750 million worth of land it owns in the San Francisco Bay Area to be developed into at least 15,000 new homes.
"As we work to build a more helpful Google, we know our responsibility to help starts at home," Chief Executive Sundar Pichai said in a blog post Tuesday. "For us, that means being a good neighbor in the place where it all began over 20 years ago: the San Francisco Bay Area."
Adding homes will increase supply, but it won't fix the region's problem. Cities have long failed to allow enough housing to be built to meet the demand created by a rush of workers entering the area.
"If (Google) were to build five times that amount – 100,000 units over the next decade – it probably still wouldn't solve the housing crisis," said Jesse Gundersheim, CoStar Group's director of market analytics for the San Francisco Bay Area.
Changes since the dot-com boom
The Bay Area has changed rapidly since Google was a startup, founded in 1998 – as the dot-com boom heated up – by two graduate students at Stanford University. The company has grown into a tech behemoth that employs 45,000 people in the Bay Area, with about half working at its headquarters and offices in Mountain View.
Average apartment rents in Mountain View have doubled since then, to $3,068 a month, according to CoStar Group. Home prices have jumped as well; since early 2015, the median sales price is up nearly 50% to $1.47 million, according to Zillow. The prices put homeownership out of reach even for some tech workers.
The amount of housing has also not grown sharply enough to meet demand as tech companies have hired rapidly, pushing some employees to live far from work, resulting in long commutes that cause heavy traffic congestion. Meanwhile, lower-income workers or retirees are priced out of their longtime homes and have resorted to living in their cars or cramming their families into RVs parked on the street.
Alphabet Inc.-owned Google is "becoming a better neighbor by taking responsibility on building workforce housing on their own sites," said John McAlister, a Mountain View city councilman. "They need to be building the workforce housing because of all the unintended consequences of their growth in the area."
Bay Area cities that long welcomed tech titans – and tolerated the burdensome effects of their growth – have become increasingly concerned.
'Huge pushback on their growth'
Mountain View recently pushed back: Last year, voters there decided to tax businesses based on their size and how many people the firms employ in the city. Google, as Mountain View's largest private employer, is hit hardest by the tax and is estimated to pay more than $3 million annually. Most of those funds are expected to go toward transportation-related efforts.
"It would be nice for them to think outside the Bay Area to expand to lessen the impact of their success," McAlister said. "I think they are starting to realize that there is a huge pushback on their growth."
Across the Bay Area, tech companies have become synonymous with unprecedented growth and gentrification. Shuttles that ferry tech commuters from San Francisco to Silicon Valley have been derided as "Google buses," and have been sporadically blockaded over the years.
Tech companies have tried to make nice with their critics.
When Apple Inc. built its fancy headquarters in the Silicon Valley city of Cupertino, capable of holding thousands of workers, it paid about $6 million into an affordable housing fund and invested $75 million to improve infrastructure and ease traffic in nearby cities. It still faced objections from housing advocates, who felt the company could do more. This year, Microsoft Corp. pledged $500 million to develop affordable housing in and around its hometown of Seattle, and a group including Menlo Park-based Facebook Inc. launched a similar project in the Bay Area.