The Evolution of the 'Company Town'

Big companies used to run their own monopoly towns. Now they take a more incremental approach to city development.
By Scott Beyer | Jun 10, 2019 |
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By Scott Beyer | Jun 10, 2019 |
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(Facebook headquarters / wikimedia)

Big U.S. companies have a history of providing housing for their employees, especially when operating in housing-scarce markets. During the Gilded Age, giant corporations effectively doubled as city builders for their workers. Today’s big companies take a different approach, using various financing and policy methods to house their staff and the wider public. Although humbler in scope, these modern initiatives could help address America’s affordable housing shortage, precisely in markets where the shortage is worst.

The notion of “company towns” became popular in America throughout the 1800s and early 1900s. By then many large companies, writes Shaun Richman in the American Prospect, were escaping the crime and taxes of big cities. The undeveloped areas they settled for had housing shortages, so many company magnates built their own housing, and in many cases their own towns, replete with retail, banks and entertainment.

The first of these planned communities was Lowell, MA, founded in the 1820s for textile production. Others popped up nationwide, from Hershey, PA to Gary, IN, which was built by U.S. Steel. Because these companies had monopoly power in their self-made towns, they practiced excessive control over employees. They could spike rents, price gouge for products, and loan money at uncompetitive rates, leaving their workers in debt. Having employees so close to their workplace let the companies spy on and dictate their schedules and consumption habits. This is why many of the towns had violent strikes, with the infamous one in Chicago’s Pullman neighborhood causing 30 deaths.

By the 1960s, company towns had gone out of style. But in the time since, various companies have been involved with employee housing situations, in response to a new problem. That problem: when big corporations add jobs and people to already-hot metro areas, they’re perceived as worsening the affordable housing shortage. Just as well, these companies have, because of the shortage, trouble fielding workforces.

Some companies have thus gotten involved in the financing, planning and construction of employee housing; or have funded broader initiatives to lessen their own impacts on the market, and keep vulnerable populations in the community housed.

A recent article on Glassdoor gives examples. In Asheville, the city school system, partnering with charitable organizations, opened a 24-unit complex of subsidized apartments for teachers. Other school districts nationwide also do this. AmeriCorps, the voluntary civil service organization, provides free room and board for many of its positions. The wealth management firm Addepar, which has offices in New York City and Mountain View, CA, gives $300/month credits to employees who locate close to work. The University of Chicago, like other academic institutions, has a program providing up to $10,000 in down payment assistance, or up to $2,400 in rental assistance, to employees who live near campus.

Housing policy is also fairly common in the health industry. The Cleveland Clinic provides assistance to encourage home-ownership among employees, and revive surrounding neighborhoods. I wrote a TCA article about how various renowned hospitals—such as Minneapolis’ UnitedHealth Group—have spent millions to finance affordable housing. And PPR Travel Nursing offers paid private housing to their roving nurses.

The Tech Sector

Tech companies, however, seem to be the likeliest to engage in housing policy. This makes sense, given the most high-profile companies are either in the Bay Area or metro Seattle, two places with housing shortages, and a populace anxious to find scapegoats. Seemingly every well-known tech firm has made a housing-related allocation.

When Apple opened its new headquarters in Cupertino, it committed $6 million to the city’s affordable housing fund. Amazon contributed $80 million to public and private efforts to build affordable housing and end homelessness in Seattle. Google plans to build 6,600 housing units—20 percent of them affordable—near where it is headquartered in Mountain View. The project will also include 3.5 million square feet of office and retail space, and 35 acres of public open space.

But the two biggest tech sector housing actors are Microsoft and Facebook. In January, Microsoft, which is headquartered in the Seattle suburb of Redmond, committed $500 million to address regional housing needs. $225 million will be capital injected at below-market returns to subsidize the preservation and construction of middle-income housing. $250 million will be market-rate capital. And $25 million is philanthropic grants to address homelessness. In announcing the commitment, President Brad Smith detailed the region’s housing shortage.

“Since 2011,” he wrote on Microsoft’s blog, “jobs in the region have grown 21 percent, while growth in housing construction has lagged at 13 percent. This gap in available housing has caused housing prices to surge 96 percent in the past eight years.”

The Three Ps

Facebook’s housing commitments are arguably even more advanced. During a recent call, Menka Sethi, director of location strategy and site optimization, summarized the company’s strategy as three P’s: “producing more housing for all income levels; protecting those who are currently housed; and then preserving current housing, especially affordable housing.”

Facebook has launched a Catalyst Housing Fund that could reach $75 million, and is meant to increase construction in East Palo Alto and Menlo Park. Unit number estimates from the fund are between 3,000 and 3,500. The company has financed a 22-unit pilot project to house teachers in the area. Facebook has, according to Sethi, another $1 million Affordable Housing Preservation Fund and a $1.5 million Housing Innovation Fund. And Facebook is seeking approval for the Willow Village mixed-use development in Menlo Park, which could have potentially thousands of housing units.

But the big move, announced this January, days after Microsoft’s announcement, is Facebook’s involvement in Partnership for the Bay’s Future. This is a $500 million investment fund that also includes commitments from Genentech, The San Francisco Foundation, The Ford Foundation and the Chan Zuckerberg Initiative, the philanthropy of Mark Zuckerberg. The fund’s goal is to spur new housing production, preserve existing affordable units and change the Bay Area’s political dialogue around housing. Facebook’s strategy is thus multi-faceted and meant to engage the community.

“We’re not looking to build company towns,” says Sethi. “We’re looking to integrate within the urban fabric.”

This highlights the difference in how large employers approach housing, then and now. The old company town model was premised on the idea that moguls could house their employees in isolated monopoly markets. The current model revolves around housing both employees and existing populations, rather than displacing them. But the common thread of both eras is that housing is still a big issue in America.

[This piece was originally published by HousingOnline.com]

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