The Seattle City Council is considering a new tax law that will charge large employers about $500 per employee and dedication three-quarters of the resulting tax revenue toward building just under 2,000 affordable housing units in the city. The remainder would go toward services for the homeless. Although Amazon is largely credited for the economic and housing booms in Seattle, it has also been labeled as the primary factor in the city’s ongoing affordable housing crisis. In fact, many analysts fear the city that ultimately “wins” Amazons second headquarters, dubbed HQ2, could be in for a rough ride thanks to a sudden population influx that will stress local infrastructure and the local housing market.
“It’s going to drive up housing prices. It’s going to put pressure on wage rates. It’s going to put pressure on transit. It’s going to put pressure on local services,” warned Richard Florida, a professor at the University of Toronto who had been extremely vocal in his opposition to the idea of host cities granting Amazon tax incentives in order to lure the company into granting the area its second headquarters. In early 2018, Florida wrote and published a letter asking elected officials in HQ2 finalist cities to “reject egregious tax giveaways and direct monetary incentives for Amazon.”
Investor Insight: Watch local and state legislation carefully in your markets. Laws and policy directly affect the flow and creation of jobs, which directly affect the strength of a housing market.
Seattle’s tax plan would apply to companies with at least $20 million in taxable gross receipts, and the “head tax” would convert to a payroll tax in 2021. Seattle estimates it would bring in about $75 million annually, about $30 million of which would come from Amazon. That number could rise “significantly” when the head tax converts to a payroll tax. Not surprisingly, Amazon has been lobbying against the new tax, and some locals believe halting construction is a negotiation tactic. However, a local councilmember reported the company did not “ask for anything” but simply informed the city “what they’re going to do.”
Seattle’s mayor, Jenny Durkan, said she was “deeply concerned” about the pause in construction and “the impact this decision will have on a large range of jobs, from our building trades, to restaurant workers, to nurses, manufacturing jobs, and tech workers.” She promised to work with local business, labor, and community leaders to “find common ground” before the council votes on the tax proposal on May 14, 2018. “At the same time, our city must urgently address our homelessness and affordability crisis and lift up those who have been left behind,” she said.
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