Perhaps looking to distance himself to George Pullman comparisons or people blasting Tennessee Ernie Ford’s “Sixteen Tons” in the direction of Facebook’s Menlo Park, CA headquarters, Mark Zuckerberg and Facebook are building no less than 1,500 apartment units that won’t solely go to Facebook employees.
Facebook looking to avoid “company town” comparisons?
Facebook’s expansion of its headquarters and plans of the hiring of 6,500 new employees isn’t making the already ridiculously inflated Silicon Valley real estate market any more affordable. Or that’s what you might think. Facebook’s hiring push has essentially forced the company into real estate development, but for public relations or altruistic reasons, Mark Zuckerberg has vowed to do it a bit differently.
Facebook is certainly not the only tech company that has driven rents in Silicon Valley into the stratosphere. People want to live near work and when you have the salaries that many tech employees have as well as a limited supply of housing, both home prices and rents are only going to go in one direction.
So, while Facebook plans to build no less than 1,500 apartment units, the company has announced that they will rent to the general public and that 15% of the units will be reserved for low- or middle-income families.
“There is a lack of housing in the area,” said John Tenanes, Facebook’s head of real estate earlier this month. “The intent here is to make an impact … it’s to try something new and something bold and to try to make a difference.”
So far the plan has yet to be completely fleshed out by Facebook. The apartments will be built on a site that houses numerous industrial buildings that Facebook owns. It’s unclear when development will begin or when it will be completed and its unsure whether Facebook will start its own construction/development company (it certainly has the cash) or will simply contract the project out to another company.
If Facebook is looking to ingratiate itself with the surrounding communities hiring a number construction workers might be the smart play, but its plans are unknown. I’ve never heard of a drywall hanging specialist getting stock options in a social media company but I wouldn’t shy from the job, especially given its stock performance over the last year.
Facebook has also contributed millions to study the areas traffic problems with a pledge to invest more to improve transportation in order to deal with locals’ complaints of crowding do to the sheer volume of Facebook employees.
Silicon Valley adds jobs, not housing
Between 2010 and 2015, San Francisco, San Mateo County and Santa Clara County added nearly 400,000 new jobs according to numbers from the California Employment Development Department. However, at the same time according to the U.S. Census Bureau, permits from various cities and municipalities in those counties lagged well behind with less than 60,000 units approved.
Real estate in these aforementioned counties is nothing short of ridiculous and the growth in population is not supported by a sufficient infrastructure to ease crowding and congestion.
The lack of housing permits is quite simple math for many communities, office buildings bring in more taxes than housing. Additionally, more housing mean more potential families and a need for little things like schools.
While Facebook seems to be doing the “right thing” in offering 15% of its units to low- or middle-income families, the plan is not without opposition.
“We’re on the verge of transforming this area into a superrich, exclusive series of company towns,” said Steve Schmidt, a former Menlo Park mayor and vocal member of a group opposing Facebook. “We want a more orderly and balanced kind of growth.”
“What we’d like to see is that the housing be built first,” Mr. Schmidt said knowing that building 1,500 units will take years while Facebook can hire 6,500 people pretty quickly.
Facebook is still interested in winning approval for a 1.1 million-square foot expansion of its headquarters and was recently not done many favors by a January report by the World Bank accusing large tech companies of exacerbating income inequality.
“Some of the perceived benefits of digital technologies are offset by emerging risks,” the report said. “Many advanced economies face increasingly polarized labor markets and rising inequality—in part because technology augments higher skills while replacing routine jobs, forcing many workers to compete for low-paying jobs.”
That’s not to say Facebook doesn’t also have support.
Ray Mueller, a member of the Menlo Park City Council, acknowledges the problem but applauds Facebook’s plan.
“If other corporations stepped forward, it would help make a big dent,” he said.