Economy & Trade

Five ways Amazon HQ2 could impact the DC area

Amazon’s new Northern Virginia headquarters is set to to send economic tremors throughout the Washington, D.C. region.

The arrival of 25,000 highly-skilled tech workers and millions of dollars in planned investments is likely to accelerate the steady development of the gentrifying capitol area.

While Virginia and D.C. officials tout Amazon’s arrival as an economic boon to Greater Washington, an influx of expensive labor could pose steep costs for the area’s most vulnerable residents.

From housing prices to political pressure, here are five ways Amazon’s new headquarters could affect the D.C. area after Amazon on Tuesday announced that it would split its "second headquarters" between New York City and Arlington, Va.

Rising housing prices

Housing costs in the Washington region have risen over the past decade as investment transformed once struggling D.C. neighborhoods.

House prices and rents in D.C. are among the highest in the nation, and Amazon’s arrival is likely to increase the pressure.

Median sale prices for houses in D.C. and Arlington County, Va. are close to $600,000 while the capitol region suffers from a severe affordable housing shortage, according to an Urban Institute study from October.

The impending arrival of highly-paid workers has already put upward pressure on regional housing prices, the Washington Post reported Tuesday, setting off a bidding war in what was already one of the nation’s hottest housing markets.

While homebuyers could see much higher asking prices immediately, renters aren’t expected to see major increases for at least a year, said Igor Popov, chief economist at rent-tracker Apartment List.

“We haven’t seen an uptick yet because I suspect that most of the development, job creation, and new infrastructure will take a while to materialize,” Popov said in an email.

“Once the timeline becomes clear, and changes are expected to come within the twelve month horizon, we’ll start to see rent increases.”

Deeper income inequality

D.C’s rapid economic development led to the vast displacement of lower-income residents, as they were driven out of gentrifying areas by rising rents and housing prices. A rush of high-skill tech workers threatens to rip open the gap between Washington’s wealthiest and poorest.

Amazon said Tuesday that the 25,000 employees stationed in Virginia will make an average salary of $150,000 — almost 50 percent more than the median household income for Arlington ($108,706 in 2016) and close to 100 percent more than the median household income in D.C. ($75,506).

The expected increase in housing prices driven by the arrival of new Amazon employees could push poorer Washingtonians further from the city in search of affordable places to live.

That could force the region’s most vulnerable to spend a greater share of income on housing and spend longer times commuting, both of which hinder long-term economic health.

Target on crumbling infrastructure

A massive expansion of Northern Virginia’s business sector is certain to put pressure on the region’s crumbling infrastructure and maddening traffic gridlock.

Regional officials have struggled for years to repair the frequently troubled  Washington Metro system while major roads and bridges surrounding the capitol teeter on the brink of collapse.

Virginia plans to spend $195 million to boost infrastructure in the area around the new Amazon office, including upgrades to two Metro stations and a pedestrian bridge between the headquarters and Reagan National Airport.

But the sheer size of Amazon’s incoming workforce and the new development it spurs could stress roads and public transit throughout the region, demanding broader fixes from local governments.

Amazon’s political footprint

Amazon was slow to enter the K Street swamp, but once they did, the company’s Washington footprint has expanded dramatically.

But Arlington County government -- and, by extension, nearby neighbors like Washington -- will find a different sort of corporate player when Amazon moves to town, one that is getting into the habit of flexing its economic and political muscle and running over local officials.

When the Seattle City Council passed a new tax on major employers earlier this year, one that would have added millions to Amazon’s tax bill, the company leveraged its growing political power to engineer a reversal of shocking speed.

Amazon threatened to reduce its economic footprint in Seattle, and to move thousands of jobs to other areas.

The city reversed itself in less than a month, an embarrassing blow to liberal Seattle leaders who haven’t shied away from higher taxes on individuals and small businesses.

Major tax breaks

Taxpayer-funded corporate subsidies in exchange for big numbers of jobs are great for politicians seeking headlines. But rarely do the corporations that benefit from those subsidies actually deliver all that they promise.

Washington State has passed several billion-dollar subsidy packages to entice aerospace giant Boeing to keep jobs in the Puget Sound region, but Boeing has consistently delivered fewer of those jobs than initially promised.

Nevada gave the electric car manufacturer Tesla more than $1 billion in subsidies for its gigafactory outside of Reno, but the factory has attracted less economic activity than rosy projections initially suggested.

Wisconsin legislators passed $4 billion in subsidies for the Taiwanese manufacturer Foxconn, though the company now plans to build a factory smaller than initially planned.

“Foxconn is a great deal for Foxconn and an absolutely terrible deal for Wisconsin,” the urban planning expert Richard Florida told The Hill earlier this year.

Amazon will earn billions in taxpayer-funded subsidies for its two new headquarters facilities, and millions more for a third project in Tennessee.

New York economic development officials have promised $1.85 billion in subsidies, while Virginia officials will pay $819 million.

That money will support tens of thousands of new jobs in Queens and Arlington, two areas where economies are booming.

But they will be paid, in part, by taxpayers in upstate New York or in Virginia’s Coal Country, economically struggling areas that are unlikely to feel the benefit of HQ2.


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