Housing Policy

Facebook's Plans To Spend $1 Billion on Housing Development Is a Drop in the Bucket

The source of the state's housing affordability problems are onerous government regulations and fees that artificially drive up the costs of housing.

|

Facebook is the latest tech company to try to fix California's housing woes. On Tuesday, the social media giant announced that it would invest $1 billion to spur the construction of 20,000 new housing units in Silicon Valley and the San Francisco Bay Area.

"In San Francisco, a family of four making over $100,000 per year is considered low-income," wrote Facebook CFO David Wehner in a blog post, saying that developing new affordable housing required a partnership of "companies, communities, non-profit organizations, and policymakers statewide."

The announcement received a glowing endorsement from California Gov. Gavin Newsom (D), who said in a statement that "state government cannot solve housing affordability alone, we need others to join Facebook in stepping up." Google announced its own $1 billion housing initiative in June, which also promises to deliver 20,000 new units.

As with Google's plan, however, Facebook's investment will require a lot more money from other groups in order to make its 20,000-unit goal a reality. That's because the state and local regulations that have created California's housing crisis could stymie both companies' efforts.

Of the $1 billion Facebook is planning to spend, $250 million of it will go toward developing mixed-income housing on excess public land. Another $150 million will be given to the Partnership for the Bay's Future, a group made up of companies and non-profits that currently invests in low-income housing developments. The company also has a pre-existing commitment to spend $25 million building up to 120 units of teacher housing on public land in San Mateo and Santa Clara counties. Facebook's $1 billion promise also includes $225 million in company land near its Menlo Park headquarters, where the San Francisco Chronicle reports it plans to build 1,735 homes.

Facebook told the Chronicle that its Menlo Park project—first proposed two years ago—would not be limited to employees. However, it is still unclear if Facebook will donate the land, lease it to other developers, or develop the site itself.

A huge portion of Google's $1 billion housing proposal, roughly  $750 million, was also company land, which it plans to lease to housing developers.

Facebook will hold $350 million in reserve, which the company says it will allocate later "based on the rollout and effectiveness" of its other housing commitments.

All told, the company is promising to spend $50,000 for every unit of housing it wants to create, which will likely necessitate more financing given current construction costs.

According to the University of California Berkeley's Terner Center, the average 100-unit multifamily affordable housing project in the state cost $425,000 per unit to build in 2016. It's likely higher today. Per-unit costs above $700,000 are not unheard of.

Indeed, a huge chunk of Facebook's $50,000 per-unit investment will end up being eaten by city development fees.

In the Bay Area city of Fremont, for instance, city fees total $75,158 per unit in a 100-unit multifamily development, according to the Terner Center. That's an outlier for sure, but even Oakland is charging $34,000 per unit in city fees.

And all of this assumes the projects Facebook invests in will sail easily through the planning process. Objections from neighbors could mean the company, or its development partners, will have to spend hundreds of thousands of dollars, not to mention years of delays, responding to environmental appeals and lawsuits.

That means $1 billion might not add up to all that much housing, something state Sen. Scott Wiener (D–San Francisco) pointed out on Twitter.

A pro-development bill written by Weiner stalled in the legislature this year. Weiner's bill would have rezoned land near transit lines and employment centers to allow for more, denser housing and made building four-unit homes by-right (meaning government planners couldn't use their desertion to deny permits) statewide.

There's also obviously a PR element to Facebook's announcement. The day after Facebook rolled out its housing initiative, its CEO, Mark Zuckerberg, was dragged before the House's Financial Services Committee where he was grilled about the company selling discriminatory housing ads.

None of this means that Facebook's investment isn't substantial, but it is obviously self-interested. Absent wider reforms, it will still be a drop in the bucket when it comes to addressing California's affordability problems.

NEXT: Dick's CEO Becomes Latest Anti-Gun Billionaire To Dream of a Third-Party Presidential Run

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  1. Did I miss the part where they will donate the income from leasing the land to the NRA?

  2. How is this not a bribe from Facebook to the California government?

    “Oh no, Gavin, please don’t investigate us for anti-trust! Here’s a billion dollars to make you look good!”

    At least, I assume that’s the new standard judging by recent impeachment articles.

  3. They won’t accomplish anything unless they use that $1B to bribe legislators and the Governor to roll back all the crap they’ve been passing.

    1. You joke, but I’m fairly certain more housing would get built if they used it all to reduce regulations than if they spend any of it on housing itself.

  4. “The source of the state’s housing affordability problems are onerous government regulations and fees that artificially drive up the costs of housing.”

    Nah. I still think it’s Drumpf’s fault. His high-tariff / low-immigration policies have caused a recession. That’s why so many people can’t afford housing.

    #OpenBordersWillFixHomelessness

    1. Prices are high because California is over populated.

    2. Sometimes you’re not even trying.

  5. “In San Francisco, a family of four making over $100,000 per year is considered low-income,” wrote Facebook CFO David Wehner in a blog post. He added, “Four Asian Facebook employees can easily fit into a single efficiency unit and still have room to practice karate. Covering the costs of the schooling and housing is still cheaper than hiring American employees.”

    1. Google and Facebook are offloading unsellable marshlands and selling them to poor families who will have to deal with it. This is truly wrong.

      Google & Facebook owe Americans everything. They used our government to get started, they used tax invested funds, they stole our data and sold it. Now they want to give people a swamp to live in that smells like Dukie half the year. It’s not good. It’s not ok. These people are not good people. Research it

  6. 1 Billion in housing from Facebook – Good, praised by CA governor.

    1 Billion from various real estate developers – Bad, evil capitalism, crush them with permitting and social/environmental restrictions?

    1. Yup. And further, BART recently got green-lighted to go into the real estate development business and now has absolute authority to develop its properties in any way it sees fit without regard to local building codes/zoning ordinances.

      But can you?

      Hah. Silly citizen.

      1. Boy, should be interesting to see how that works out next time the ground decides to heave.

        It’s always nice to see an entity that controls regulations exempt itself from them though. Just another illustration of the dangers of unaccountable government monopolies that California seems to adore.

    2. I’m guessing more of Facebook’s investment is going directly to line the pockets of various bureaucracies.

      1. Did you read the part about the housing units for teachers?

  7. Or they could build offices in a less expensive location.

    Or they could build a virtual workforce because internet and stuff.

    1. B-b-but then they may have to travel to work.

  8. 1 Billion in housing from Facebook – it’s really amazing

    1. Zuck gave a hundred million to Newark schools. How did that work out?

    2. More like 2,000 units than 20,000.

  9. “Nothing could prevent the California electorate from simultaneously demanding low electricity prices and no new generating plants while using ever increasing amounts of electricity.” Professor Thomas Sowell

    “Nothing could prevent the California electorate from complaining about the price of homes while voting for increased population despite a fixed supply of land.”

    1. Wow, you’re really committed to the notion that it’s demand, and not the artificially restricted supply, huh?

    2. Google and Facebook are offloading unsellable marshlands and selling them to poor families who will have to deal with it. This is truly wrong.

      Google & Facebook owe Americans everything. They used our government to get started, they used tax invested funds, they stole our data and sold it. Now they want to give people a swamp to live in that smells like Dukie half the year. It’s not good. It’s not ok. These people are not good people. Research it

  10. I’m glad someone’s finally stepping up to invest in California real estate development.

  11. Facebook’s Plans To Spend $1 Billion on Housing Development

    After the environmental studies, only $37.56 was left for construction, which was not large enough for a purely coincidental I assure you donation to one or more of the councilmen before a functionary approves.

    1. Google and Facebook are offloading unsellable marshlands and selling them to poor families who will have to deal with it. This is truly wrong.

      Google & Facebook owe Americans everything. They used our government to get started, they used tax invested funds, they stole our data and sold it. Now they want to give people a swamp to live in that smells like Dukie half the year. It’s not good. It’s not ok. These people are not good people. Research it

  12. Trying to keep pace with Google and Facebook, but not wanting to cough up a billion dollars, Amazon said they would just work their California employees 24 hours a day so they wouldn’t need housing.

  13. Google and Facebook are offloading unsellable marshlands and selling them to poor families who will have to deal with it. This is truly wrong.

    Google & Facebook owe Americans everything. They used our government to get started, they used tax invested funds, they stole our data and sold it. Now they want to give people a swamp to live in that smells like Dukie half the year. It’s not good. It’s not ok. These people are not good people. Research it

Please to post comments