Which Amazon HQ2 finalists have the housing market to support it?
Last week, Amazon announced that they had narrowed down the list of potential landing spots for their second headquarters to 20 places. The list had a few surprise omissions, including San Francisco and the Bay Area, Detroit, and Kansas City. Still, most of the 20 cities and counties chosen for the right to “win” Amazon’s HQ2, and all the tax revenue and jobs that come with it, made sense.
While Amazon talks a lot about the benefits of adding HQ2, there are also a lot of concerns about how the company’s arrival could lead to ballooning home prices and rising rents that leaves little room for those who can’t afford to live there anymore.
That’s often what people point to when they look at Seattle. Amazon’s home base has seen home prices skyrocket in recent years. In the last five years alone, as Amazon grew in prominence in the city, remaking the South Lake Union neighborhood in its own image, Seattle has seen housing prices more than double. It’s also been the hottest housing market in America for 14 months running and many people point to the tech giant as the key cause. Not only have rents and home prices risen around their campus, but the effect has rippled across neighboring sections of the city, turning once-cool Capitol Hill into a condo epicenter and making Downtown Seattle practically unaffordable to anyone who, well, doesn’t work at Amazon.
The reality is that while Amazon and companies like them have had a real effect on how Seattle is changing, it doesn’t tell the whole story either. The truth is that Seattle was woefully unprepared for what was coming from a housing and infrastructure perspective. The city sat on its hands for decades when it should have been pushing for more affordable housing, better public transit, and expanded regional light rail. It didn’t and it’s been trying to play catch up ever since. Now, unless you’re making six figures, it’s hard to figure out how to call Seattle home. The Amazon Effect merely amplified and sped up the results.
So as 19 American cities (and one Canadian city) prepare to up the ante in order to attract Amazon, one of the biggest questions they need to ask themselves is whether or not they have a strong enough housing market and infrastructure to balance the rising costs that will come with it. On paper, some of these cities don’t seem to measure up. Others appear to have a chance not to get swallowed up into the Ama-Zone. To see which is which, let’s take a closer look and see which of the finalists have a better shot at impressing Jeff Bezos.
Cities With Low Inventory and High Prices
There is a distinct line you can draw between the finalists when it comes big metropolitan markets used to winning these kinds of battles and smaller cities and regions that are experiencing rising costs but haven’t maxed out just yet. It’s easy to point to large finalists like New York City, Los Angeles, Washington, D.C, Miami, Boston, and Toronto and assume they’ll take the prize (we’re also lumping Montgomery County and Northern Virginia in with D.C. here). However, all of those cities are already among the most expensive housing markets in the nation and are dealing with low inventory that doesn’t seem to ever get better. The idea of Amazon coming into any of these cities and driving prices up further (if that’s even possible) must sound terrifying for those who can barely afford to keep living there as it is.
Cities in the Midst of Massive Change
The next level down are cities like Denver, Austin, Nashville, and Raleigh. These finalists are the kinds of growing metropolises that Amazon might find as a sweet spot. However, these are also cities that have been watching housing prices and rents climb for a few years already. If Amazon picks one of these cities it’s only going to cause whatever pricing trend is already happening to move into hyperspeed. From there, the fight will be stronger and the opponents will get louder as the tech giant establishes its footprint. There are reasons to think Amazon could end up in one of these cities, but there’s also a lot of good reasons for both parties to walk away from one another.
Cities With Room (and a Need) to Grow
Some of the cities on the list were met with surprise, given the competitors listed above. Indianapolis, Newark, Philadelphia, and Pittsburgh might not have seemed like potential destinations to some but each of them presents an interesting opportunity for Amazon. Of all the cities on the list, Pittsburgh has the lowest housing prices, but it also has an aging inventory that needs some serious upgrading for the company’s modern-minded tech workers. Philadelphia and Indianapolis aren’t that much more expensive and the former offers a chance for Amazon to really “own” an East Coast city while the latter provides a strong mid-American home base. Newark’s prices rival Denver but it also provides Amazon with a chance to be at the forefront of revitalizing this city while also putting roots in the shadow of New York City. While these options must be enticing for Amazon, they’ll likely be met with concern from locals about the future of affordable housing.
Large Cities With Flexible Housing Markets
That brings us to the remaining markets that might just be the Goldilocks zone for Amazon, at least in terms of their impact on the housing and rental markets. Chicago, Atlanta, Dallas, and Columbus are all different in what kind of environment they can offer, but they share a few key qualities. Their housing markets aren’t out of control (yet), they’ve got room to grow and expand, they have the kind of regulations that allow for quick residential and commercial growth, and they already have a mix of older and modern housing properties to appease all kinds of buyers. Columbus could be the odd one out given its size compared to the other three, but then again it also offers Amazon a chance to remake the city in their own image, something that surely appeals to the monolith.
Of course, there are many other factors at play for Amazon besides available and affordable housing. Transportation options, tax breaks, a skilled workforce, and plenty of office space will be major considerations as well. It’s unclear how much Amazon will consider their effect on housing prices and rents when they bestow one city with their new headquarters, but perhaps the leaders of those cities should remember that when they get close to signing on the dotted line.