It’s been just over a year since Amazon, the massive online retail and web services corporation based in Seattle, announced that it would be expanding its headquarters to a second North American city. At first,…
It’s been just over a year since Amazon, the massive online retail and web services corporation based in Seattle, announced that it would be expanding its headquarters to a second North American city.
At first, its promises were extravagant: One lucky city would be the host of what it called “HQ2,” with 50,000 new well-compensated jobs, $5 billion of investment and all the attendant economic benefits of having a top 10 Fortune 500 company within its limits. All the would-be host city had to do was draw up a pitch outlining why it should win. On the company’s wishlist were a major metropolitan area with at least a million residents, a business-friendly environment and a strong pool of tech talent. And if the host city wanted to throw in untold millions in tax breaks, well, that would be OK, too.
By Tuesday, when Amazon announced its decision, the benefits had shrunk by half. Now there will be two new “headquarters” cities: Long Island City in New York, on the western edge of Queens, just across the East River from Manhattan, and Crystal City in Arlington, Virginia, just across the Potomac River from Washington. Instead of 50,000 jobs in one city, the company plans to hire 25,000 each in those two cities, plus an additional 5,000 in Nashville. While it’s not quite as extravagant as promised, it’s still enough development to transform the immediate surroundings of the new host communities, and create ripple effects in their wider metro economies.
So what kinds of changes can these communities expect?
1. New Jobs, New Construction (and New Names)
At the most superficial level, the Amazon decision means new buildings and new people in Long Island City and Crystal City. (In Crystal City’s case, the decision has already created an even more superficial change: In the long tradition of gentrification by rebranding, Amazon has dubbed the site “National Landing,” inviting mockery from some locals.) Tracy Gabriel, president of the Crystal City Business Improvement District, says the area still has high office vacancy from a round of federal agency departures about a decade ago, so in the immediate term, Amazon’s arrival could mean refilling some of those spaces and building out new ones. The Crystal City BID has been trying to invest in walkable downtown retail amenities, and the area has planned for growth, with close to 4,500 residential units already in the construction pipeline.
“I think ultimately it will help to yield an even better Crystal City for residents and workers, and I think it gets us closer to or helps to accelerate our vision for being a great walkable urban neighborhood,” Gabriel says.
The biggest impacts will be felt in the immediate vicinity of the new headquarters sites, says Joseph Parilla, a fellow at the Metropolitan Policy Program at the Brookings Institution, but the projects could also have spillover benefits in the form of drawing other tech firms to the area.
“The main positive would be that Amazon creates kind of a gravitational pull for these cities, which already have extremely strong gravitational pulls, which is why Amazon went there in the first place,” Parilla says.
2. A Housing Crunch
Both the New York and Washington metropolitan areas already struggle to provide enough housing for their existing residents. Around half of renters in both cities are cost-burdened, meaning tenants spend more than 30 percent of their income on housing. Both metro areas are also massive, so 25,000 new jobs will be less impactful there than in some smaller cities, but the influx of new people will highlight the existing housing challenges.
“I think New York is better positioned than most other cities across the country to absorb that number of new workers and the families or partners that come with them,” says Dani Simons, vice president for strategic communications at the Regional Plan Association, a group that creates long-range growth strategies for the New York metropolitan area.
But the region is still facing a “shortage of housing at all different price points,” she says. The addition of 25,000 well-paid tech workers won’t make those challenges any easier.
And it’s no different in D.C.
“(Housing) is a very pressing issue that everyone is aware of and even has solutions to,” Parilla says. “The problem is that everyone wants to build housing regionally, but no one wants to do it in their neighborhood.”
3. Displacement Concerns
Both New York and Washington have been gentrifying for years, and all signs suggest that the cost of housing in the areas around Long Island City and Crystal City will spike in the wake of the Amazon announcement. Already, there’s a reported rush on property by potential buyers in Long Island City. When housing costs rise high enough, the poorest tenants are pushed out, either through eviction or attrition.
The case of Seattle, Amazon’s home base, should be read as a warning, says Renata Pumarol, deputy director of New York Communities for Change. The city’s rapid growth, partially a byproduct of Amazon’s presence there, has been accompanied by a sharp spike in homelessness over the last few years, Pumarol notes. Greater protections for tenants should be a first step to heading off the worst impacts of the Amazon announcement, she says.
Housing challenges may be particularly pointed in the neighborhoods adjacent to new development sites, but costs will also rise as development occurs along transit routes that lead to those sites, says Tracey Ross, associate director of the All-In Cities Initiative at PolicyLink, which has created a policy toolkit for urban anti-displacement efforts.
4. Transit Congestion
“It is no secret that our subways and buses are not in great shape right now,” says Simons with New York’s RPA. “People have called it a crisis.”
As much pressure as thousands of new tech workers will put on housing stocks in New York and D.C., they’ll also put on transit infrastructure, either in the form of public transportation systems or highways. Amazon said it was looking for cities that had strong transit infrastructure, and New York and Washington both have expansive public transit systems. But Washington’s Metro system, like New York’s subways, has seen better days. The Crystal City project will include a new pedestrian bridge to the Ronald Reagan Washington International Airport, and other infrastructure improvements are planned as part of the development as well, including a second entrance to the Crystal City subway stop. With so many new commuters, both cities will also face new pressures to maintain transit systems, from roads and rail lines to train cars and bus fleets.
5. Foregone Tax Revenue
In its announcement, Amazon revealed that it was receiving government tax subsidies worth several billion dollars. In New York, the company says it will claim up to $1.5 billion in state tax credits to help pay for the development. In Virginia, the company says it will claim around $573 million in tax incentives, and benefit from an additional $200 million in public infrastructure investment in the surrounding area. The total value of all the incentives is still being calculated, says Greg LeRoy, executive director of Good Jobs First, which tracks economic development policies.
The quality of the jobs that Amazon is promising to bring to both cities — salaries will average above $150,000 a year, according to the company — was one of the main attractions of the HQ2 bonanza, LeRoy says. Those kinds of jobs can have “downstream” economic benefits, in that well-paid headquarters workers will support local restaurants and small businesses. But those benefits need to be weighed against the full range of taxpayer incentives offered to the company in return.