Seattle is home to some of the nation’s hottest tech companies, including Amazon and Microsoft. Not surprisingly, tons of wealthy founders live there. For example, Bill Gates and Jeff Bezos both own homes in Medina, a suburb of Seattle. Starbuck’s longtime leader Howard Schultz lives in the city. And other billionaires including Microsoft’s Steve Ballmer and several members of the Nordstorm family are in the Seattle metro area as well.
With soaring stock prices, particularly for Seattle’s longtime rainmaker Microsoft, area housing prices have been surging in recent years:
However, the housing gains are not equal. Prices are continuing to surge at a double-digit clip in some of Seattle’s wealthiest neighborhoods. Less affluent areas have showed markedly less growth. Our Harsh Chauhan helped explain this dynamic: Interest rates drive housing affordability for the majority of folks. With mortgage interest rates going back up, this means an average worker can afford less and less house for their income, particularly as wage growth has struggled to keep up. Of course, if you’re a tech employee with enough stock options, this hasn’t been a problem. Others have not been so fortunate.
This has led to the unbelievable situation where Microsoft is now having to build subsidized housing in Seattle. In fact, they’re spending a hefty $500 million on the project. Nearly half of this will be on loans to developers to build housing targeting people making $62,000-$124,000 per year. The Seattle housing market has gotten to the outrageous point where the tech companies feel the need to offer a handout to help people making six figures find a home.
Seattle’s boom shows the increasing disparity between the executives and everyone else. Ironically, Medina, WA, that Seattle-area community where Bezos and Gates both have houses, is running out of money . As Medina explained on its website:
“You may find it hard to imagine that the City doesn’t have enough income to sustain current service levels, particularly in this economy. While property values continue to rise, the City’s tax revenues don’t rise in tandem,”
Bill Gates has slammed wealth tax proponents such as Elizabeth Warren and Alexandria Ocasio-Cortez, saying their plans are unrealistic and would simply lead to more tax dodging. Gates shouldn’t look past his own role in this though. Consider reports that his Medina home is worth $131 million , yet he pays just $1.0 million (less than 1%) annually in property tax, of which just $83,000 goes to the city of Medina.
And as far as the tax shelters that folks like Gates are alluding to? Real estate plays a role. One recent op-ed suggested that anonymous wealthy individuals and corporations are secretly buying up high-end Seattle real estate to safeguard their wealth.
We see a lot of discussion about whether the housing market will crash again or not. Remember, though, that real estate consists of many smaller local markets. The rise of mega-successful employers like Microsoft and Amazon is causing housing prices to surge in some areas while leaving other areas to fall behind. In some cases, rising prices are creating as many problems as opportunities:
When you see Microsoft subsidizing the Seattle housing market for folks earning up to $124,000 a year, you know something has gone amiss.