Speaker 1: There's an ugly standoff going on in Seattle. Anxiety is
Speaker 1: in the air, the housing market is nuts. Hundreds of
Speaker 1: people are moving to Seattle each week. They're attracted by
Speaker 1: Amazon and other booming tech jobs here, and the homeless
Speaker 1: population is growing, with tents popping up across the city.
Speaker 1: Housing has become scarce and expensive. Local authorities say they
Speaker 1: don't have the money to deal with the problem, so
Speaker 1: the city has been considering something called a head tax
Speaker 1: on big businesses. Then on May two, Amazon, Seattle's largest employer,
Speaker 1: decided to play hardball. Amazon employees more than forty people
Speaker 1: at its headquarters and said it was halting its expansion
Speaker 1: plans in the city pending the vote on the head tax.
Speaker 1: Amazon's move provoked an outpouring of rage on both sides.
Speaker 1: Construction workers tested the tax outside Amazon's headquarters. Meanwhile, homeowners
Speaker 1: are divided, with tensions running high. It led to a
Speaker 1: showdown at a meeting several city council members hosted later
Speaker 1: that day. I'm a lifelong Democrat, I have never been
Speaker 1: so fed up and disgusted and embarrassed for my city.
Speaker 1: All Right, we do not trust you anymore. You have
Speaker 1: the most regressive tax structure in our city, which is
Speaker 1: in a state with the most regressive tax structure in
Speaker 1: the entire country. So who are you gonna take the
Speaker 1: money from. I'll tell you say, we need five billion.
Speaker 1: That's a pretty conservative estment. Five billions how much Jeff
Speaker 1: Bezos made in ten minutes when Amanon announced they bought
Speaker 1: Whole Foods. We're gonna tax that mother. On Monday, the
Speaker 1: city council had to decide whether or not to move
Speaker 1: ahead with this controversial new tax. Hi, I'm Brad Stone
Speaker 1: and I'm Karen Wise. And this week on Decrypted, we're
Speaker 1: taking a look at Seattle, which just found itself pitted
Speaker 1: against one of the world's largest companies run by the
Speaker 1: world's richest man. The growth of Amazon and other tech
Speaker 1: companies has created a lot of high paying jobs here,
Speaker 1: but it's also contributed to soaring rents and home prices.
Speaker 1: Recent studies linked the lack of affordable housing to an
Speaker 1: increase in the homeless population. As tech clubs around the
Speaker 1: world grapple with these unintended consequences of the tech boom,
Speaker 1: can Seattle, Washington paved the way stay Last week, I
Speaker 1: sat down with someone who's been following this story for
Speaker 1: a long time. Her name is Erica C. Barnett. She's
Speaker 1: a long time city hall reporter and now writes a
Speaker 1: progressive blog see is for Crank. I came out here
Speaker 1: for a job at Seattle Weekly, and um, I came
Speaker 1: out here in the middle of the summer, and it
Speaker 1: was the most beautiful place I'd ever seen in my life.
Speaker 1: Eric has been living in Seattle for close to twenty years.
Speaker 1: I couldn't believe, you know, the mountains and the water
Speaker 1: and just you know, the beautiful hills and the neighborhoods
Speaker 1: and just everything about it was so beautiful. And I agree,
Speaker 1: it is gorgeous, rainy, but gorgeous. That's part of what
Speaker 1: drew me here too. But the city has changed a
Speaker 1: lot since Erica first moved here. I lived in Ballard
Speaker 1: when I moved here, and and I left because it
Speaker 1: was so sleepy. And look at Ballard now, it's completely different.
Speaker 1: Seattle is the fastest growing housing market in the US,
Speaker 1: and home prices have gone up ab in the past year,
Speaker 1: and they did the same in the previous year. The
Speaker 1: median cost of a single family home is almost eight
Speaker 1: hundred and twenty thousand dollars a lot of that growth
Speaker 1: has come from the tech boom. Amazon was founded here
Speaker 1: in Today it's an eight hundred billion dollar company with
Speaker 1: more than five hundred thousand employees worldwide. Microsoft, Expedia, Zillo
Speaker 1: are also based in the area, and Google, Facebook, Uber.
Speaker 1: So many tech companies have opened up large offices in
Speaker 1: Seattle too. I know some people hate it. It feels
Speaker 1: a little more anonymous than it used to, and it
Speaker 1: also um just feels like there are a lot of
Speaker 1: people coming here that only plan to be here for
Speaker 1: a year or two, you know, and that does kind
Speaker 1: of impact the way that your interactions are with people.
Speaker 1: One economist I spoke to said that every new tech
Speaker 1: job creates about four to five new non tech jobs.
Speaker 1: Some of that non tech work is for professionals like
Speaker 1: lawyers and doctors, but the bulk of it is not
Speaker 1: think Uber drivers and plumbers. In boomtowns like Seattle, wages
Speaker 1: generally go up across the board, but cities don't add
Speaker 1: enough housing supply to keep up with the growing demand.
Speaker 1: That makes cities way less affordable. The economist said. Seattle
Speaker 1: is an extreme example of what's happening in other tech
Speaker 1: hubs like the Bay Area and in Austin. Yeah, Karen,
Speaker 1: it really reminds me of the of the same exact
Speaker 1: dynamic that's going on here in San Francisco. You know,
Speaker 1: cities competed so hard to be the home to these
Speaker 1: tech companies, and now they are realizing that there there
Speaker 1: are some drawbacks from having these high growth companies in
Speaker 1: their myths. It's interesting Seattle is actually doing a better
Speaker 1: job than the Bay Area of building new housing, but
Speaker 1: even that isn't keeping up with the growing population here.
Speaker 1: Such an emotional issue for people, you know, and it's
Speaker 1: worth noting that, you know, these are both heavily democratic cities,
Speaker 1: and so you ask most people in Seattle or in
Speaker 1: San Francisco, and they're intellectually in favor of more housing
Speaker 1: or more affordable housing. But then when it comes to
Speaker 1: their neighborhoods, or putting high density apartment buildings with affordable
Speaker 1: housing units below marker rate units in their neighborhoods, or
Speaker 1: even along kind of transport you know, public transportation lines,
Speaker 1: and you know, you get a kind of quiet resistance
Speaker 1: to it. And and even I would say modest things
Speaker 1: like adding a backyard cottage or allowing a single family
Speaker 1: home to be a duplex, not even building, you know,
Speaker 1: low rise, multi family things are very contentious. The city
Speaker 1: in Seattle is currently debating something that would resone just
Speaker 1: six percent of single family neighborhoods to allow that type
Speaker 1: of kind of more basic development, and that I'm sure
Speaker 1: will be very contentious when it actually comes up to
Speaker 1: a vote. When people say that we're becoming San Francisco,
Speaker 1: they're not wrong. I think that is exactly where we're headed.
Speaker 1: Seattle has seen a surge in homelessness. There are so
Speaker 1: many contributing factors. The opioid crisis, a lack of mental
Speaker 1: health re sources, but also rising rent is probably part
Speaker 1: of it. There are as many as four locations in
Speaker 1: the city where people are living in tents or makeshift shelters,
Speaker 1: and at times that has been a source of friction
Speaker 1: with residents. People are torn between having compassion and being
Speaker 1: frustrated with what seems like the city's inability to help.
Speaker 1: Here's Erika again. When you go to other cities, and
Speaker 1: I travel quite a lot, and um, you just don't
Speaker 1: see anything like what's in Seattle. I mean, I was
Speaker 1: in Houston recently, and Houston is a much less expensive city.
Speaker 1: They have very different economic issues than we do. But
Speaker 1: I mean, you just don't see any tents outside, and
Speaker 1: so I think when people are going to other cities
Speaker 1: are comparing Seattle to what Seattle was like even twenty
Speaker 1: or ten years ago. It's shocking and the fact that
Speaker 1: there are tents everywhere is absolutely unacceptable. But Seattle is
Speaker 1: an unusual bind. That's because the Washington State constitution forbids
Speaker 1: income tax. That means the city is unusually dependent on
Speaker 1: property and sales taxes. As a result, people with less
Speaker 1: money spend a bigger share of the income on taxes.
Speaker 1: So the city council came up with the idea of
Speaker 1: a head tax, where businesses making more than twenty million
Speaker 1: dollars in annual revenue would pay up to five per employee.
Speaker 1: The city wants to use the money to build more
Speaker 1: public and low income housing and to boost services for
Speaker 1: the homeless. How does this relate to Amazon. I think
Speaker 1: people see Amazon, rightly or wrongly, as like our golden
Speaker 1: goose kind of our modern Boeing. Amazon would be the
Speaker 1: company most affected by the head tax. Amazon chose to
Speaker 1: grow in the city, not in the suburbs, and it
Speaker 1: just dominates here. The Seattle Times did an amazing analysis
Speaker 1: last year and found that Amazon occupies more office space
Speaker 1: in the city than the next forty employers combined, and
Speaker 1: it's building even more. I think people see Amazon as,
Speaker 1: you know, this economic force that's driving jobs at striving growth,
Speaker 1: that's driving their home prices up, because a lot of
Speaker 1: the kind of split in the city right now is
Speaker 1: between homeowners who are seeing you know, their meet their
Speaker 1: home values go up so and then on the other hand,
Speaker 1: renters who feel like they're being left out. In September,
Speaker 1: Amazon announced plans to build a second headquarters, which kind
Speaker 1: of freaked the city out. Just the whole idea that
Speaker 1: Amazon could decide to move jobs away from Seattle or
Speaker 1: at least grow elsewhere. That might partly explain the shock
Speaker 1: when Amazon announced it was halting construction planning on a
Speaker 1: new office tower until it sees the outcome of the
Speaker 1: vote on the head tax. To the head tax would
Speaker 1: be a new tax on large employers in Seattle to
Speaker 1: help fund wholelessness programs. Amazon does not like it at all,
Speaker 1: so much so that they are halting construction on this
Speaker 1: seventeen story building in downtown Seattle. Let me tell you
Speaker 1: about this head tax. The plan that would applies to Karen.
Speaker 1: The relationship between Amazon and Seattle, it reminds me of
Speaker 1: like a bad romantic relationship. Seattle is having a hard
Speaker 1: time with Amazon, but it doesn't want Amazon to go
Speaker 1: and date any body else. Yes, they're definitely kind of
Speaker 1: codependent in a weird way right now. So Amazon is
Speaker 1: bringing a lot of jobs, a lot of revenue into
Speaker 1: the city, but it's also just creating an obvious burden
Speaker 1: on city services. I mean, it's the head tax a
Speaker 1: good way of addressing that. Yeah, the head tax is
Speaker 1: very interesting because it risks slowing down the job growth
Speaker 1: if you listen to what the company is saying, and
Speaker 1: we may not put as many new jobs here. So
Speaker 1: that's one way to manage the growth is just to
Speaker 1: actually slow it down. And it also tries to solve
Speaker 1: a little bit on the housing supply side because it
Speaker 1: does go to fund new affordable housing, but it doesn't
Speaker 1: touch that huge issue about zoning and where you're gonna
Speaker 1: put new housing, and that is the thing that has
Speaker 1: just really stifled new development in the Bay Area, in
Speaker 1: Seattle and other kind of booming tech cities too. So
Speaker 1: the h Q two search was announced last year, but
Speaker 1: the whole dispute this year on the head tax. It
Speaker 1: just makes me think that Amazon was awfully farcet sited
Speaker 1: uh in trying to find another city. Did they foresee
Speaker 1: all this? Yeah, I mean there's no doubt that the
Speaker 1: pressures on the city have been growing a lot, and
Speaker 1: particularly in the past couple of years. I mean, they
Speaker 1: have to imagine there were own recruiters here trouble about
Speaker 1: concerns about the housing stock here and the and the
Speaker 1: ability even for a high paid engineer to find to
Speaker 1: find something. And they they have said, you know, I
Speaker 1: think the most talent thing I've heard out of them
Speaker 1: is Jeff Wilkie, the executive, at a conference in Seattle
Speaker 1: last fall, said something to the effect of, I love Seattle.
Speaker 1: It's been fabulous for me and my family, but not
Speaker 1: everyone wants to live here, and we are growing at
Speaker 1: a rate where we really need to be able to
Speaker 1: find a place to work for anyone that we can get.
Speaker 1: Not everyone enjoys those rainy winters. So what what should
Speaker 1: Amazon apply in terms of the lessons of its long
Speaker 1: tangled relationship with the city of Seattle. What should it
Speaker 1: apply to the search for another city? To host its
Speaker 1: second headquarters. Amazon was really it for a really long
Speaker 1: time in Seattle, and I suspect probably they have regrets
Speaker 1: about that because they didn't help the city get ahead
Speaker 1: of this problem really, and so when they're talking to
Speaker 1: new places, they're really trying to understand how how is
Speaker 1: this city going to accommodate all of these kind of
Speaker 1: housing needs and the transportation needs, and all of the
Speaker 1: additional burden on the infrastructure that comes with really building
Speaker 1: as we've talked about, not just the headquarters for these employees,
Speaker 1: but then all of the additional auxiliary work rights. And
Speaker 1: cities can also learn from Amazon's experience in Seattle and
Speaker 1: know that if they win HQ two, they're getting a big,
Speaker 1: powerful company. They're getting a lot of jobs, but they're
Speaker 1: also going to be dealing with some political issues that
Speaker 1: are very hard to predict. Yes, I mean, Amazon has
Speaker 1: shown it can play hardball, and so if I were
Speaker 1: a city, I'd be a little nervous at the same time.
Speaker 1: Next up, strong reactions he roughed on all sides. After
Speaker 1: Amazon pauses its expansion plants in Seattle until it knows
Speaker 1: the outcome of the head tax vote. Amazon statement hit
Speaker 1: around midday on May two, Amazon has stopped construction on
Speaker 1: a new office building in Seattle, where its current headquarters are.
Speaker 1: This comes after the city proposed a new tax on
Speaker 1: top business. Since then, things have been moving really fast.
Speaker 1: The tax has become a polarizing issue. The construction workers
Speaker 1: union has come out against it, but services sector unions
Speaker 1: are supporting it. Some residents are happy that the city
Speaker 1: is pushing back on Amazon, which let's remember, is the
Speaker 1: second largest company in the world run by the wealthiest
Speaker 1: man in the world, but other residents don't trust the
Speaker 1: city to spend the new money wisely. Emotions came to
Speaker 1: a head later that night. Hundreds of people packed into
Speaker 1: a Methodist church where what was supposed to be a
Speaker 1: town hall meeting but instead and evolved into just inventing
Speaker 1: a rage m It's refreshing to see ordinary citizens revolting
Speaker 1: against this lousy city council. This clause a religious organization
Speaker 1: that tells us how we're supposed to think, what we're
Speaker 1: supposed to do with our money, what we're supped to
Speaker 1: do with our plastic bags. We cannot be trusted homeowners
Speaker 1: shouto down the council members, saying the money they pay them.
Speaker 1: Property taxes have been spent unwisely. And if you've lived
Speaker 1: here for a few years and you've seen this city
Speaker 1: government take on affordability by bulldozing all the backyards and
Speaker 1: ballard and putting up nine dred thousand dollar condos, you
Speaker 1: might start to think maybe they should just kind of
Speaker 1: deal with water, sewer, garbage, police, fireman, libraries, and parks
Speaker 1: and get out of the rest of this step. Because
Speaker 1: it's you're it's not. But other people told the council
Speaker 1: they couldn't afford taxes to go up even more because
Speaker 1: I know that as a middle class worker in the city,
Speaker 1: I'm a future in the You should be homeless myself,
Speaker 1: because that's the way our city is going. Our middle
Speaker 1: class is not able to afford our houses, our rents
Speaker 1: were not able to afford any of it. All of
Speaker 1: you here wants to live in a in a happy
Speaker 1: life with Erica was there. She saw people struggling with
Speaker 1: how to deal with the city's growth. And I think
Speaker 1: there's a weird sort of brain split where like, we
Speaker 1: like the economic growth and we like the fact that
Speaker 1: home prices are rising, but we don't like the fact
Speaker 1: that those people need places to live. They're living in
Speaker 1: town homes and apartments that you know, or we're maybe
Speaker 1: built where a single family house was bulldozed. A lot
Speaker 1: of residents invented about the way tents and makeshift housing
Speaker 1: was affecting their neighborhoods. They're sick of seeing tents everywhere.
Speaker 1: There is a perception that there are needles everywhere, but
Speaker 1: they're just they're upset about about the issue of homelessness
Speaker 1: and UM the way it's being handled UM Council. I
Speaker 1: recognize that there's a crisis of homelessness in Seattle, and
Speaker 1: I generally support red a new and services to address
Speaker 1: that crisis. But whatever we do, it's going to take time,
Speaker 1: and in the meantime, we're going to continue to have
Speaker 1: encampments all over the city. And the impact that those
Speaker 1: encampments are having on their immediate neighbors is really tangible
Speaker 1: and problematic, and I think it's driving a lot of
Speaker 1: the frustration and hostility and the anger that you see tonight.
Speaker 1: So at times the dialogue totally broke down. I see, Okay,
Speaker 1: So blaming poor people for what's going on is like
Speaker 1: blaming Syrian refugees for Isis. Amazon As isis In any case,
Speaker 1: I wish you would act more like kindergarteners than like
Speaker 1: over entitled rich white people pay. Yeah, you know, I've
Speaker 1: been to about a million of these meetings before, and
Speaker 1: I'm you know, I'm not like a shrinking flower. I
Speaker 1: don't get upset. But it felt I mean, you know,
Speaker 1: people are going to make fun of me for this,
Speaker 1: but it felt scary. Um, it felt like, you know,
Speaker 1: people were going to rush the state. Okay, so today
Speaker 1: is Tuesday. Yesterday, on Monday afternoon, the Seattle City Council
Speaker 1: voted on the controversial head tax. Please call the roll
Speaker 1: on the passage of the amended bill O. Brian Swant, Bagshaw, Gonzalez,
Speaker 1: her Bold, John one waras Mosqueta I President Harold A.
Speaker 1: Nine in favor, none opposed it. Okay, so now we
Speaker 1: have a resolution which basically embodies the spending plans just
Speaker 1: one moment here and so please read that into the record.
Speaker 1: The vote came after a weekend of frantic negotiations. Basically,
Speaker 1: the mayor said she might veto of five per head
Speaker 1: tax if the council passed it. So after all this
Speaker 1: back and forth, they got it down to two seventy
Speaker 1: five dollars per employee, and then the city council passed
Speaker 1: it nine to zero. Right, So for now the standoff
Speaker 1: is over what lesson to other cities like Mountain View,
Speaker 1: which was weighing a similar Google tax. What do they
Speaker 1: take from this episode? It's interesting. I mean I think
Speaker 1: clearly you learn it's hugely divisive and a risky thing
Speaker 1: to do, and it's hard to know now you know,
Speaker 1: how it will affect growth in the city. Will people
Speaker 1: pull back or is there already enough good job and
Speaker 1: and enough of a cluster of tech work here that
Speaker 1: people Amazon and others will continuing hiring here. Everybody's wondering
Speaker 1: how this impacts the search for h Q two, and
Speaker 1: I don't know. Some of the candidate cities sent letters
Speaker 1: to Seattle encouraging the council to resist the pressure from Amazon.
Speaker 1: What does this impact the HQ two search? Yeah, I mean,
Speaker 1: if I were a city, I think that this shows
Speaker 1: shows two things. It shows that a city can put
Speaker 1: some onus on Amazon, or cities have can have the
Speaker 1: political will to do that. But it also shows that
Speaker 1: Amazon plays hardball, and that's it's a reality. I had
Speaker 1: a guest in town this weekend from Germany, and this
Speaker 1: made the news in Germany. So I think it's not
Speaker 1: even just HQ two, but it's all their global expansion plans.
Speaker 1: People are watching this, watching to see what they'll do
Speaker 1: and how to play out. So now Seattle has a
Speaker 1: two seventy five dollar per employee head tax. Does it
Speaker 1: solve Seattle's problems? And when you talk about the congestion
Speaker 1: in the city, the ever increasing price of housing, what
Speaker 1: does this do? Yeah, so this is I think one
Speaker 1: thing that definitely will help is this does build more housing,
Speaker 1: specifically affordable housing. And there was a lot of back
Speaker 1: and forth over how much should go to services versus construction,
Speaker 1: and the end about two thirds of the new revenue
Speaker 1: will go to building new units. But we're talking fewer
Speaker 1: than a thousand units, and I believe that the current
Speaker 1: affordable housing gap is something like fourteen thousand units in
Speaker 1: the county. So it's it's a improvement, but not a
Speaker 1: huge one. And is it possible that this head tax
Speaker 1: slows down Seattle growth? That that is the big question.
Speaker 1: Will it slow down this kind of crazy increase in
Speaker 1: in jobs and high paying jobs that are coming here.
Speaker 1: And I spoke with one of the council members who
Speaker 1: co sponsored the legislation, Michae O'Brien. I spoke with him
Speaker 1: last week and he said, you know, I don't think
Speaker 1: it's going to slow down the growth here. I think
Speaker 1: we've got enough momentum here that will keep Amazon on
Speaker 1: others continuing to come. But if it does slow down
Speaker 1: the growth, maybe that's okay. Maybe that's what we need
Speaker 1: to catch your breath a little bit. And that's it
Speaker 1: for this week's episode of Decrypted. Thanks for listening. Do
Speaker 1: the issues we talked about today apply to the city
Speaker 1: you live in? We want to know how the growth
Speaker 1: of the tech industry has affected you. Send us an email.
Speaker 1: Our address is Decrypted at Bloomberg dot net or I'm
Speaker 1: on Twitter at pay wy Wise and I'm at brad Stowe.
Speaker 1: If you enjoy the show, please spread the word with
Speaker 1: your friends and consider leaving us a rating and a review.
Speaker 1: It really helps us find new listeners. This episode was
Speaker 1: produced by Pia Gattari and tofor Foreheads. Francesca Leave is
Speaker 1: the head of Bloomberg Podcast. We'll see you next week.