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  January 30th, 2018 | Written by

Amazon’s HQ2: Which Cities Really Have What it Takes

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  • Not all metropolitan areas have enough housing capacity to absorb a second Amazon HQ.
  • Amazon’s plans for HQ2 include 50,000 future employees and eight million square feet of office space.
  • Employment growth from Amazon’s HQ2 will put upwards pressure on housing costs.

To hear most media outlets tell the story, any of the 20 metropolitan areas on Amazon’s shortlist for the site of its second headquarters (HQ2) would regard winning that title as a plum. But a recent report written by Jenny Schuetz, a fellow at Brookings’ Metropolitan Policy Program, debunks that theory, arguing that policymakers in the cities in question “should be asking themselves—and their constituents—whether the benefits of HQ2 will outweigh the economic and social costs.”

Amazon’s plans for HQ2 include 50,000 future employees and eight million square feet of office space over the next few years. “That level of employment growth,” the report notes, “will almost surely put upwards pressure on housing costs, unless the selected metro has excess housing capacity…or the ability to build a lot more housing quickly.”

In fact, Seattle, the location of Amazon’s current headquarters, has experienced average annual housing price increases of 10.3 percent from 2012 to 2017, much higher than the 6.2-percent national average.

The report places the 19 US finalists—the complete list also includes Toronto—into four categories.

High-priced and hard-to-build. This group includes Boston, Los Angeles, Miami, New York City (but not Newark), and all three locations in the Washington, DC, area. Prices and rents are already high, and local governments have zoning and regulations “that make developing new housing and commercial real estate time-consuming and difficult.”

Recently gentrifying – and griping.  Areas like Denver, Nashville, Austin, and Raleigh “are already struggling with higher housing costs—and are pushing back against perceived gentrifiers,” said the report. Amazon’s HQ2 would be as welcome as a tidal wave for many of these cities’ residents.

Stable, growth-friendly. Atlanta, Chicago, Columbus, and Dallas have stable housing markets that have accommodated population growth and lack the onerous regulations of Northeast and West Coast cities. They also have ample suitable office space downtown (except Columbus). “This group offers the highest likelihood of absorbing HQ2 with relatively minimal disruption to the existing housing market,” concludes the report.

More capacity, older housing. Indianapolis, Newark, Philadelphia, and Pittsburgh have housing markets with moderate prices and higher vacancy rates. But “much of the vacant housing stock is older and poor quality, which would need upgrading to meet the preferences of Amazon’s workers.”

Most of the cities on Amazon’s list are already battlegrounds over gentrification and affordable housing, the report also noted. As local officials negotiate with Amazon, they may be tempted to sweeten their deals with incentives and relaxed regulations. But that move may have the effect of “annoying local residents and other firms.”