We'll look back, one day, at two events from last week's work week--the 14th through the 18th of January 2019, and sooner or later recognize what they really mean to people whose livelihoods draw from making new homes and communities for other people.
One event was what didn't happen--a sustained flow of key data points from federal economic research and information agencies, namely the U.S. Census, Commerce Department, and Bureau of Labor Statistics. Credit our partial government shutdown for that event. Here's one take on some sobering, if not alarming, implications from Brookings Institution contributor, Robert Shapiro, chairman of the economic and security advisory firm Sonecon and a Senior Policy Fellow at the Georgetown University McDonough School of Business.
Everyone who collects and analyzes the monthly data on residential housing construction, new and existing home sales, and business investments in new offices and factories also is on extended forced leave. As a result, the thousands of companies that produce the goods and services used to build and outfit new structures and to furnish existing homes and buildings also have to rely more on intuition than facts. Inevitably, the intuitions of many of those companies will prove wrong, inflicting unexpected costs on their workers and their shareholders.
In the coming week, from Tuesday through Friday, here's a roster of benchmarks that will go MIA, the ramifications of which we'll only learn months from now.
----- List of Key Delayed Releases ----
- New Home Sales (Census) for November from the Census Bureau. The consensus was for 560 thousand SAAR, up from 544 thousand in October.
- Construction Spending (Census) for November. The consensus was for a 0.3% increase in construction spending.
- Light vehicle sales (BEA) for December. The consensus was for light vehicle sales to be 17.2 million SAAR in December, down from 17.4 million in November (Seasonally Adjusted Annual Rate).
- Trade Balance report (Census) for November from the Census Bureau. The consensus was the trade deficit would be $53.9 billion. The U.S. trade deficit was at $55.5 billion in October.
- Retail sales for December. (Census) The consensus was for a 0.2% increase in retail sales.
- Housing Starts for December. (Census) The consensus was for 1.256 million SAAR, unchanged from 1.256 million SAAR.
Fortunately, stakeholders do have recourse for reliable, real-time data, as I mentioned in this past Friday's note here.
The other key game-changing event last week came in the form of an announcement by Microsoft that it pledged to invest $500 million in new capital initiatives to help with Seattle's affordable housing s---storm.
The announcement comes layered, through-and-through, with significance, and its moment shines both as a conclusion and as only-a-beginning.
The conclusion--in so many words--is an indictment of current market and policy forces' failure to attend to and fix the fabric of an urban community, the Puget Sound area, so that it can generatively support itself, economically, culturally, societally, and environmentally.
It's a half-billion bright line moment that says, in its way, "what's been done is all well and good, and very well-intended, but it's massively deficient in addressing what needs to be done."
And that's just in Seattle. Not to mention San Francisco, Los Angeles, San Diego, New York, Washington, DC, Boston, Chicago, Denver, and countless--yes, countless--other urban areas where the ability to make a good living, and the ability to access decent housing options are in an inverse, or upside-down relationship with one another.
On its surface, Microsoft's announcement is big enough and bold enough to do a couple of very positive things.
Microsoft’s money represents the most ambitious effort by a tech company to directly address the inequality that has spread in areas where the industry is concentrated, particularly on the West Coast. It will fund construction for homes affordable not only to the company’s own non-tech workers, but also for teachers, firefighters and other middle- and low-income residents.
Let's unpack some of the take-aways from Microsoft's newly announced "money-where-its-mouth-is" capital commitment.
The company, which announced the plans late Wednesday, has earmarked $475 million to fund construction loans for affordable housing in the area over the next three years. The other $25 million will fund grants to address homelessness.
The Puget Sound region has been among the nation’s hottest real-estate markets, as business has boomed for both Microsoft, based in Redmond, Wash., and Seattle-based Amazon.com Inc. AMZN 0.18% Much as in Silicon Valley, those who have benefited most from the tech boom have bid up home prices, forcing others to look for housing far away.
At a meeting with journalists this week, Microsoft Chief Executive Satya Nadella and President Brad Smith emphasized affordable housing as one of the issues tech companies need to address to strengthen trust in their industry and ensure the health of their communities.
The layers of the story come through here:
- tech giant
- hot market
- social responsibility investing
- private sector housing market dislocation
- local jurisdictional self-destructive prohibitive behavior
- housing as a core challenge to local viability and sustainable stakeholder gains
Housing is part of towns', cities', regions' essential fabric.
Stewards, stakeholders, land-holders, profit-making companies, elected and appointed officials, etc., of those localities have begun to realize that if and when housing fails to be a regenerative, inclusive, viable fiber in that fabric, the future of region's or municipality's fabric--including those firms that live in those regions--fall into doubt.
There's a lot of skepticism about how effective Microsoft's affordable housing venture will be in Seattle, and whether it can serve--for other hot-marketplaces seized-up by affordable housing crises of various magnitudes of intensity.
Ed Goetz, a professor at the University of Minnesota who has studied the history of public housing in America, said: “I don’t want to diminish the magnitude of what they’re doing. I think it’s important, and it will help. But it won’t solve Seattle’s problem.”
Microsoft has called for other companies to become involved. But Mr. Goetz said he couldn’t imagine a situation where there were enough Microsofts out there to truly address the country’s housing crisis.
“The federal government is the entity that has the resources to do this,” Mr. Goetz said.
Diane Yentel, the president of the National Low Income Housing Coalition, said she would welcome a trend in which more major tech companies put up money to address housing. But she warned of the risk of further letting the government off the hook.
“Today’s modern phenomenon of homelessness didn’t exist in the late 1970s because our country housed almost everyone, including the lowest-income and most vulnerable families,” Ms. Yentel said in an email. “The key difference between then and now is declining federal subsidies.”
Problem is, many look at times when federal--taxpayer--money poured into housing programs at significantly greater orders of magnitude, and don't see many examples of wild success, solved challenges, sustainable impact.
For home builders, the bright-line moment in Microsoft's announcement may be to look at mega tech players as allies, not only in the sense of having huge capital resources to bring to the game, but, equally important, ones who need something that home builders and developers and their partners are the best at.
From both a pragmatic essential worker economic pipeline standpoint, and from the perspective of needing to stand for--in abundantly clear, financially committed, and strategically core ways--social responsibility, tech companies like Microsoft need to align and ally with market-rate home builders to fight the fights on local policy, to engage with communities and build advocacy, to understand land-sellers and their ROI goals, to map sub-markets to viable community-building opportunities, etc.
These skills, these relationship-fueled deep local insights, this ability to be agile, effective, and patient where necessary, are precisely the learned and experienced skill-sets firms like Microsoft, Google, Amazon, Apple, Facebook, Tesla and others will need as they move forward with big, bold, flashy commitments to plow money into solving affordable housing.
Microsoft's moment--in every bit the way Amazon's conclusion that it would locate its HQ2 headquarters in Queens, New York and Arlington's D.C.-area market--may be the conclusion of one set of decision-making processes.
But it's only the beginning of a new series of opportunities for home builders, developers, and other market-rate housing players to rise up as part of a solution that now assumes that partnerships will take a new turn toward public-private-and-tech stacks of capital, land, policy, and talent resources to address housing attainability.
Housing's affordability crisis may look like it's happening to others, to people we don't need to factor in to our business models' capacity to resiliently adapt and thrive. Don't be deceived. Housing's affordability challenge is a crisis, and it affects all of our businesses, all of our stakeholders, and all of our futures.