Coronation Street in California
“Trailer for sale or rent, rooms to let, fifty cents.”
‘King of the Road’
Housing prices have changed a bit since Roger Miller wrote those lyrics in 1964. A 2016 New Yorker article suggests an average apartment rent in the mid 1960’s would cost the equivalent of $500 per month in today’s money. Anybody looking at an average rent of €3,500 in San Francisco or £1,600 in London might be envious.
19th Century red brick terraces may not become part of the modern city but the idea behind them may help alleviate the housing crisis while simultaneously improving the tarnished reputation of the tech giants.
The distributed working and consequent emptying of the inner cities that information technology promised never happened (just like that paperless office). Instead, thousands of workers have flocked into new city centre technology jobs and city rents have ballooned in proportion. Monthly rents for a 1 bed apartment in major cities are regularly way more than 50% of median income.
Companies like Google, Apple and Facebook can drawn thousands of new workers into cities but the old Residential Hotels and Boarding Houses that once housed the majority of America’s single workers are long gone. The result has has been catalogued ad nauseam. House prices skyrocket. Rents go up and up. Tensions mount, bad blood simmers, rocks get thrown through bus windows. Long time residents are priced out and the mom-and-pop businesses they run go with them. Two and three bedroom homes that should be housing families are taken up by singleton house-shares and lively, thriving cities are transformed into soulless dormitory towns.
How do you fix sky-high rents?
Simply paying workers more would help – briefly. It would pretty swiftly result in ‘all the market can bear’ landlords raising rent dollar for dollar so everyone would soon be back where they started. It’s the nature of a free market that it’s less interested in solving the problem than riding the wave and milking tenants for all they’re worth. Tech giants could relocate to cheaper cities of course. ‘Startup cities’ like Austin, Seattle and Denver are already benefiting from some overflow and property prices are pretty low in Detroit right now. It may not be considered prime real estate but at least it doesn’t spend it’s summers on fire. The big tech companies are pretty well established though so moving probably isn’t an immediate solution and a lot more people are flooding in than moving out. A 2016 Morgan Stanley report expected job growth to exceeded new accommodation build by a factor of 9 in San Francisco over the next few years. Where are all those extra people going to live and how much will they have to pay?
The government could always lend a helping hand but a Marshal Plan for housing is unlikely to happen. Socialist style, government funded blocks of rent-capped affordable apartments might solve the housing crises but the very idea would be anathema to the capitalistic spirit, particularly the roid-rage, all-for-us-and-nothing-for-others capitalism of recent years
Back to the future
Maybe it’s time to borrow a leaf out of the book of a previous generation of entrepreneurs. Rows of red brick terrace homes are strewn across the industrial landscape of the North of England. Built in the thousands (and relatively lavish by the standards of the day) by the magnates and moguls of the Industrial Revolution, they housed the multitudes that flooded to new technology jobs in 19th century cities. Generations lived and thrived in the shadows of the factories and mills in which they earned their living.
I’d like to suggest that the Amazons, Googles and Apples of the world use their cash surplus to go into the real estate business by building homes for their workers. Maybe not red brick terraces but basic, inexpensive apartments for the thousands of young and single workers they are attracting to overstretched cities.
It’s not quite as far-fetched as it seems. Companies like Google already maintain apartments, even blocks of apartments for their visiting top brass. Something similar, if rather more frugal, for the rank and file would be just a change of scale rather than a wholly new undertaking.
Frugal doesn’t have to mean spartan though. There are no end of clever designs for Tiny Homes and Micro Apartments with space saving, folding, sliding and unfurling furniture – sort of like living inside a domestic Transformer. Not places to raise a family but maybe places to take a date or find some personal space and certainly a step up from the dorm rooms many of the potential residents are used to.
Cost is the main factor. According to Amazon’s own figures, a basic, full-time employee can expect to take home somewhere around $2000 a month. Rents for any company micro apartments will need to be close to those 1960’s levels of $500 a month or something like 25% of available salary for the lower paid workers. That’s a tight budget to achieve but per-unit cost could be pushed way down with pre-fab mass production so rents mostly just have to cover maintenance. There will probably be some trial and error design involved but get the solution right and you can sell it from Beijing to Bangalore – everywhere job booms are squeezing city infrastructure. Still, building thousands of even the most compact of apartments is bound to be expensive and possibly without any immediate fiscal return. There are, however, considerable intangible, long-term benefits.
While tech giants are making warehouses of cash right now they could do even better without the drag from the anchor of bad publicity. Companies seen to be supporting their workers and communities are the sort of companies more people will feel good about giving their money to as well as being less of a target for political ire. The bad blood simmering between new and existing city residents could be dispelled too as the buildings needn’t be just characterless apartment blocks. The same standard size units without most of the fittings could be rented out at a similar low cost on the ground or first floors for commercial purposes. Someplace for mom-and-pop operations to thrive, a step up for garage startups, workshops and stores for artists and craftspeople – giving back to the city exactly those things protesters say tech companies are currently taking away.
No Magic Bullet
No one thing, no single idea, is the solution for every problem. Company housing would help a lot but it won’t be a magic bullet for all social ills, it will come with it’s own issues. Thousands of renters taken out of the open market will result in rents stagnating or falling so there will probably be pushback from landlord organisations. Locations have to be found (maybe some of those almost dead malls?), planning laws streamlined, deals and compromises made. The same will be true for any solution though and, at the end of the day, what politician doesn’t want to tell their constituents that they’ve brought thousands of good quality, low cost homes to the city?
A drawback for workers is that they lose their apartment if they lose their job but a big plus for employers is that workers will be extra motivated to keep that job. A deal with the devil for some perhaps but one nobody is obliged to take. In big cities, living in discounted micro apartments will be an option, not a requirement. Some people will prefer the sociability of shared living arrangements and it will always be possible to retain more independence at the cost of higher rent or longer commute.
It may not be the good life but without crippling rents it could be a good life for the lower paid. As for company boards and city managers, well, they might like to think of it as the pressure valve on a kettle. It’s not intended to stop the boiling, just the explosion.
One last thing
There is one other advantage – one more old world leaf that tech billionaires might consider borrowing. Those 19th century mills and factories are shuttered and gone, their fortunes often evaporated. While business tycoons rise and fall, linages like the UK’s Walden and Grosvenor families maintain generations of inherited wealth because their ancestors invested in land (swaths of London in their case). A day may come a decade or a century hence when Facebook is forgotten and iPhones are irrelevant but people will always need somewhere to live.