Amazon's HQ2 is expected to bring soaring housing prices - here are the cities that could be hit hardest
- Amazon's second headquarters, called HQ2, will likely transform the city it comes to.
- Promising 50,000 workers and $5 billion in investment, HQ2 will likely increase rent and home prices in its chosen metro, according to housing experts.
- Cities including Columbus and Indianapolis could see less dramatic increases in housing prices. Miami and Boston could see more significant rises.
In March, Seattle officials and business leaders debated whether Amazon has been good for its hometown of Seattle. The Seattle Times reports that, while the company spurred a now-booming tech industry in the city, leaders also voiced concerns regarding the tech giant's role in several issues now facing Seattle, including a spike in housing prices and gentrification.
As Amazon grew between 2005 and 2015, Seattle's median rent went from $1,008 to $1,286, an increase nearly three times the national median. Recent data also shows Seattle's median home price hit $777,000 in February, up 18% from the year prior.
There are now new worries about how Amazon's new headquarters, dubbed HQ2, will affect housing prices in its chosen metro. The company revealed the top 20 contenders in January and will announce the winner later this year.
HQ2 will likely raise rent and home prices in whichever city it chooses, Aaron Terrazas, a senior economist at the real-estate listing site Zillow, told Business Insider. But some metros will see more dramatic rises than others, based largely on their existing population densities and room for growth.
According to Terrazas, the cities least likely to see a huge change in housing prices are Indianapolis, Columbus, Chicago, Atlanta, and New York City. The first four cities have low-to-medium population densities, as well as plenty of vacant housing and space for Amazon to grow.
New York City - the nation's largest city - is a bit of a unique case. While housing is in short supply, over 8.5 million residents already live in New York. So Terrazas suspects that even if 50,000 people moved there, the population growth would only make a tiny splash on the housing market. NYC, particularly Manhattan, also has a relatively big high-end housing market, which could provide room for Amazon's "high-paying" HQ2 hires, Terrazas said.
He added that the DC center, Miami, and Boston - may see the largest increases in housing prices, because they are cities with high rent prices and little housing stock.
"Growth of any kind creates enormous opportunities but also new challenges [for cities]," Terrazas said. "It's important to keep in mind that adapting to this growth is very difficult, particularly when it happens very quickly."
How population, income, and growth-potential affect home prices
In Amazon's RFP, the company writes that its $5 billion campus will bring 50,000 jobs. However, it's uncertain whether all of those jobs will be filled by residents, meaning the chosen city could see a population boom and thus a higher demand for housing. Cities with lower populations are more likely to see greater community effects, Terrazas said.
In Seattle, Amazon is the largest property taxpayer and private employer with 40,000 residents working for the company. Since 2000, the area has added 99,000 new jobs, with 30% of them in tech, and since then, Amazon has continued to spur an influx of high-skilled, majority-white tech workers. As many urbanism experts have noted, Amazon's dominance has likely contributed to making Seattle's housing less affordable for some longtime residents, who have also accused the company of perpetuating income inequality in the city.
Another big factor will be the HQ2 city's physical potential for growth, Terrazas said. Cities that have higher rates of housing vacancies or room to develop are better equipped to absorb the shock of HQ2.
HQ2 and the top cities' housing markets
A researcher from the Brooking Institution, Jenny Schuetz, came to similar conclusions when she considered how HQ2 would affect the housing markets in each finalist metro. In a recent analysis, she divides the 19 American short-listed metros into four categories. (Newark, New Jersey was lumped into the NYC metro area, and Montgomery, Maryland and Northern Virginia were included as part of the DC metro area. Toronto was excluded, because there was not comparable data available.)
HQ2 finalists in this category - light blue - may see the least strain on their housing markets if Amazon came to town, according to the analysis. They are Dallas, Atlanta, Chicago, and Columbus.
At the same time, Schuetz cautions that HQ's prosperity could bring some downsides.
"As the 20 finalists negotiate with Amazon over the next year, local policymakers should be asking themselves - and their constituents - whether the benefits of HQ2 will outweigh the economic and social costs," she writes.