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Solimar Research

A 'Dislike' for Facebook's Housing Bonus

Josh Stephens on
Dec 23, 2015

Boundless as cyberspace may be, the companies that rule the internet still have to take up real estate. And their employees still have to put their heads down somewhere at night. For whatever reason, the mysterious forces of the "innovation economy" have lured an outside share of those companies, and their employees, to Silicon Valley. 

With all those likes, stock options, and organic cafeteria items comes, of course, a housing crisis. As absolutely no one is unaware, rents in Silicon Valley have gone up like Pets.com stock over the past few years. 

Last week Facebook announced that it was going to make an investment in the crisis. Not an investment in housing, mind you. Just an investment in the crisis.

Facebook is reportedly offering $10,000 to workers who relocate within a 10-mile radius of its Menlo Park headquarters. On face, there's something admirably civic-minded about this. For one, Facebook wants employees to reduce their commute times and, by extension, their emissions. That's something that pretty much every city in California is trying to do, (minus the $10,000 bonus). Let's put that in the �like' column. 

Let's, though, look at the real winners and losers from a policy like this: 

Winner #1: Facebook Employees

As long as the cost of relocation, including rent increases, is less than the $10,000 that the company is offering, then employees win with shorter commutes, lower transportation costs, and the charms of Foster City, Newark, and, if you're lucky, Woodside. Then again, if you live in Woodside, $10,000 probably doesn't even cover the cost of groundskeeping. 

Winner #2: Facebook
Let's do a little math. Facebook made $2.59 billion in revenue last year. It employs 12,000 people. Each employee represents $215,000 in annual revenue. If a $10,000 one-time payment keeps employees happy, loyal, and productive, then it's a bargain. 

Winner #3: Landlords
Several million people live within Facebook's magical 10-mile radius. The handful of Facebook employees who take advantage of this deal and decide to scootch in are hardly going to upset the valley rental market all by themselves. But there's something fundamentally perverse, and economically inefficient, about a wealthy company offering wealthy employees even more money so that they can cope with an insane housing market that the company helped create in the first place. Taken to its logical extension � whereby all Silicon Valley firms start offering these incentives � all rents will go higher and landlords will get richer. That's because it's a lot easier to print bonus checks than it is to build housing � especially if cities aren't encouraging it. 

Neutral Parties: Cities
If you're a city in the 10-mile radius, you don't care what Facebook does, because you don't collect more taxes when rents go up.

Losers: Everyone Else
If you're not a Facebook employee, you're livid, because you now have richer competition for rental units. 

(Before we go any further, let's acknowledge the real losers here: cartographers. Clearly none of brilliant folks at Facebook has considered that drawing a circumference around a point is the worst possible way to prescribe a commute shed -- especially when the resulting circle is bisected by a body of water called the San Francisco Bay. A subtler map, assigning bonuses to employees who live along transit lines, or at least freeways and major roads, would have made a ton more sense. As it is, you could sail in from the Farallons more quickly than you can cross the Dunbarton Bridge on most mornings.)

Tech firms too often seem blind to the civic problems that surround them, especially when it comes to housing. Companies in Silicon Valley and, more recently, in Los Angeles have built fortunes partly on the allure of their respective locations, but they've done little to support their host cities or even to lobby for policies that would benefit them and everyone else. Exhibit A, as I wrote in another publication, is the failure of Santa Monica's Silicon Beach crowd to even notice when the city was actively reducing its housing capacity. 

At least Facebook is acknowledging the problem. But it's pursuing the wrong solution. Or, rather, it's pursuing a self-interested solution rather than a civic-minded solution. It kind of reminds you of those private buses that pick up Google employees. They've been a big hit. 

These are companies that like instant solutions. If you want to build a widget these days, you don't need to spend months to design it, prototype it, and find a factory to produce it. You just whip up some code. if you want to address the biggest crisis in the country's biggest state, you write some checks. At some point, the laws of economics are going to catch up with today's high-flying tech firms. Stock prices are going to fall, and profit margins are going to even out. Maybe someday people will go back to old-fashioned socializing.

The point is, companies like Facebook aren't gong to be able to throw money at their problems. They're going to have to acknowledge that they're connected to other entities, they're going to have to cooperate with their neighbors, corporate and otherwise, and they're going to have to reach agreements that serve the common good. They will, in short, discover what governance, policy, and democracy is all about.

By that point, they may discover what most progressive planners already know: The way to solve a housing crisis is, amazingly, to build more housing. Build denser housing. Build housing near transit. Build housing near jobs. I don't think Facebook is entirely ignorant of this reality. In fact, I'm sure it has residential neighbors who are far more ignorant than the company ever is. But, so far, firms that consider a 3-by-5-inch screen to be their most valuable pieces of real estate have proven pretty ham-fisted when it comes to real real estate. 

Maybe now is the time for tech firms to put innovation aside and learn the old-fashioned art of policymaking.