Fighting the forces of the housing market is a tall order, even for a $1.5tn company run by one of the world’s richest men. Amazon’s decision to wade into the US property shortage with a plan to build affordable housing and provide low rate loans for employees looks ambitious. It also appears to be part of a bigger plan to put Amazon employees to work in more ways than one.
Tech companies are known for generous campus freebies, with food, laundry and games offered to keep workers happy and on site. One of the best parts about trekking out to company headquarters is the opportunity to compare the perks available (Facebook has the best snacks; Apple has the best outdoor space). But Amazon’s venture is more reminiscent of the paternalistic Victorian employers who believed they had a duty to provide housing, education and health to employees and their families.
The online retailer has earmarked $2bn for three cities where it has large workforces: Seattle, home of Amazon headquarters, Arlington, and Nashville, where it is expanding its offices. In all three areas, the influx of Amazon workers has triggered accusations that the company makes life difficult for residents by raising prices.
Seattle has gone from a relatively affordable west coast city to one of the country’s most expensive in the past 25 years. The three-bedroom house that Amazon chief executive Jeff Bezos rented in 1994 was worth $135,000 at the time and sold for $182,000 in 1998. In 2019 it sold for $1.53m — probably helped by marketing that dubbed it “the birthplace of Amazon”.
When Amazon announced plans to search for a second headquarters, a Seattle council member said they hoped it would give the city breathing room from years of hypergrowth.
That did not stop cities from engaging in frenzied pitches for the honour of hosting HQ2, vying for the influx of jobs and investment. Eventually, the bidding war ended in late 2018 with a fizzle and the decision to split staff between two locations: Crystal City in Arlington, Virginia, and Long Island City in New York.
For the lucky homeowners there appears to have already been an increase in prices. In April 2019, the average home price in Arlington County was $742,000 — up 12 per cent on the previous year, according to the Northern Virginia Association of Realtors.
Amazon has not yet announced a model town in the mould of Bournville, the pretty Birmingham suburb built by the Cadburys. Mr Bezos is no paternalistic Quaker tycoon. Promising $2bn (2 per cent of sales in the last quarter) towards loans and grants to housing partners will help relieve the affordable housing problem but it will not transform the market. It has, however, led the San Francisco Examiner to run a column titled “Amazon may not be all evil” — which is something.
Housing is not the only utility that Amazon is experimenting with. A pilot for virtual and in-person healthcare for employees via Oasis Medical began last year and will expand. Amazon’s interest in primary care services is linked to plans to operate in the $335bn pharmacy market. So is its new fitness tracker, Halo. Perhaps the company’s efforts to track its workers will one day encompass their health.
Behind these plans is a gigantic and fast-growing workforce. At the end of 2017, Amazon reported 566,000 employees. Two years later this had increased to 798,000. Last year it said it added a further 400,000 full or part-time employees. Excluding contract workers, Amazon now employs close to 1.2m people. If it continues to grow at the same pace, it will eclipse Walmart as the largest employer in the US this year.
This captive, non-unionised, audience is a huge asset for Amazon’s experiments. If successful, the services it provides for its workforce could be rolled out to customers. In addition to Amazon shopping, shipping, groceries and entertainment, Prime subscribers might one day be offered incentives to take up Amazon healthcare, housing and finance too.
Enjoy the rest of your week.
Deputy Head of Lex
Get alerts on Amazon.com when a new story is published