Amazon (NASDAQ: AMZN) isn't the sort of company communities tend to embrace -- unless, of course, it's opening facilities that lend to job creation. But generally speaking, Amazon gets a negative rap as a destroyer of small businesses, so it's never a bad thing for the online retail giant to attempt to build some local goodwill. And its latest endeavor -- trying to build more affordable housing -- could accomplish just that.
Addressing the affordable housing crisis
It's estimated the U.S. has a shortage of 7 million affordable rental homes available to extremely low-income households, reports the National Low Income Housing Coalition. Specifically, only 36 affordable rental units exist for every 100 renters with an extremely low income. These renters face a shortage in every U.S. state, including Washington, D.C.
Part of the problem is that affordable housing is expensive to build. The cost of construction materials has risen by 24% since 2009, reports the U.S. Bureau of Labor Statistics, and while lumber finally started to come down in cost in 2018 after years of steadily rising prices, a recent shortage set back the construction industry as a whole.
Amazon, meanwhile, wants to step in and help Americans gain access to affordable homes. To this end, it's pledging more than $2 billion over the next five years to build tens of thousands of affordable housing units in three of its major employment hubs: Seattle; Nashville, Tennessee; and Arlington, Virginia.
Amazon isn't the first company to offer assistance in this regard. In the past, Apple (NASDAQ: AAPL), Google (NASDAQ: GOOGL), and Facebook (NASDAQ: FB) have all pledged money to tackle the affordable housing crisis in the San Francisco area, where housing costs are exorbitant. But by facilitating the construction and development of affordable housing, Amazon is doing its part to make its employment hubs more affordable places to live. That could, in turn, help the company attract talent, all the while contributing to a very important cause.
Seattle, for example, is known for being an extremely expensive place to live. The average rent for a one-bedroom apartment in Seattle is $1,770 a month, while a two-bedroom averages $2,486. On a national level, meanwhile, the average rent for a one-bedroom apartment is $1,617 and $1,909 for a two-bedroom. By building more affordable housing, Amazon may incentivize Seattle workers to stay on board while making it possible for new employees to live locally.
What it means to real estate investors
Of course, an uptick in affordable housing opens the door to opportunity for real estate investors. There are tax incentives to owning these units, and those are never a bad thing.
In fact, a number of real estate investment trusts (REITs) have a large chunk of their portfolios in affordable housing units, and given the general push toward socially impactful investing, it's easy to see why investors might jump at the chance to get in on the affordable housing bandwagon. Affordable housing units are also notably high in demand, so vacancies are less of an issue. The result? The potential for a steady stream of income.
It'll be interesting to see if Amazon opts to expand its affordable housing program to cities it doesn't have a presence in. But the fact that the online giant has committed to helping solve a major crisis is certainly a positive piece of news.