What’s Missing From Apple’s $2.5 Billion Housing Plan

On Monday, Apple announced a $2.5 billion pledge to finance housing initiatives in California. Deployed in partnership with the state, its plan is designed to improve both “affordability and availability” in California communities that have struggled to meet residents’ needs.  

State and business leaders applauded the tech giant for its philanthropic foray, which follows similar moves by Google, Facebook, and Microsoft on the West Coast. But housing experts and advocates are cautious about how much the company’s voluntary investment can do to budge the fundamental barriers to housing construction in the state.

For one, zoning restrictions and opposition from neighborhood groups may prevent developers from seeing through bold plans to expand housing, even once they’re given the sites to build.

“It’s really, really good to have money, and it’s really, really good to have land, but you have to get all the approvals to make housing a reality,” said Leslye Corsiglia, the executive director of the affordable housing organization, Silicon Valley @ Home. “Until we can get the community to understand the need for more housing; we’ll be fighting an uphill battle.”

Most of Apple’s investment will effectively turn the company into a housing lender. The company will offer $1 billion in credit to the state and other developers to build very low to moderate-income housing. Another $1 billion will provide mortgage financing and down-payment assistance to first-time homebuyers, in tandem with the state government. The remaining $500 million will be spread across more local efforts, including dedicating land that Apple already owns in San Jose to building affordable housing, creating a Bay Area-specific housing fund, and supporting homelessness initiatives in Silicon Valley.

California Governor Gavin Newsom commended the company’s initiative, which was crafted in partnership with state officials. Newsom has set a goal of building 3.5 million units of housing by 2025; Apple’s is now the largest investment in housing among private companies that have recently pledged their assistance. “This unparalleled financial commitment to affordable housing, and the innovative strategies at the heart of this initiative, are proof that Apple is serious about solving this issue. I hope other companies follow their lead,” Newsom said in a statement.

Todd David, the executive director at the San Francisco Housing Action Coalition, said that the plan to supply $1 billion in loans to the state and other developers could prove useful in circumstances where officials can’t move public dollars quickly enough to purchase land for affordable housing. “Private funds have the ability to be faster and more flexible when opportunities come up,” he said.

The news of Apple’s investment comes after years of inaction by the iPhone maker to address regional housing pressures that it and other large Silicon Valley employers have exacerbated. As Apple, Google, Facebook, and other tech titans have turned into the richest companies in the world, the vast wealth they’ve brought to the San Francisco Bay Area has not been spread evenly. Highly paid workers pay top dollar for increasingly constrained housing supplies, while the construction of new housing has slowed to a snail’s pace due to construction costs, zoning barriers, and NIMBY-ish neighborhood resistance. In San Francisco, Oakland, San Jose, and some smaller Bay Area communities, a lack of low- and moderately priced accommodations is pushing out longtime residents and exacerbating homelessness, a pattern also seen in Los Angeles, San Diego, and other sought-after coastal cities.  

But Apple has been singled out as a uniquely visible contributor to the problem. It houses 12,000 corporate employees at its 175-acre “Spaceship” campus in Cupertino, which opened in 2017 with no connections to public transit lines or additional employee housing. Its approach contrasts with Google, which has a similarly sized real estate portfolio in the region but has incorporated housing and car-free transportation options into its new developments in San Jose. Facebook also has plans to house 35,000 employees in its upcoming campus in Menlo Park.

And Apple follows its Silicon Valley peers with its investment plan. In June, Google made a $1 billion commitment to open some of its land holdings to affordable housing developers. Last month, Facebook pledged the same amount to produce new units for teachers, police officers, and other middle-class workers, which followed the creation of a separate $500 million affordable housing fund by the Chan-Zuckerberg Initiative, the philanthropy founded by Facebook CEO Mark Zuckerberg and his wife, Priscilla Chan, earlier this year.  

But some housing experts and advocates say that the largest barrier to housing is not money, but political will. Pulling the right policy levers to transform those funds into more supply may prove challenging for Apple, even with the state’s support.

“A one-time investment is good, but we’re going to have this problem for a long time,” said Corisiglia. “It’s going to take a lot.”

Kate Vershov Downing, a former planning commissioner in Palo Alto who now sits on the board of the California Renters Legal Advocacy and Education Fund, said that the Bay Area’s housing problems are a result of “artificial scarcity.”

“Our housing crisis exists because almost all the land zoned for housing in Silicon Valley is zoned for single family housing only,” she wrote in an email. For example, in Palo Alto, only three percent of residential land is zoned for multi-family dwellings—the sort of higher-density development that affordable housing developers generally pursue.

Apple’s state-wide affordable housing investments are meant to jumpstart shovel-ready projects on surplus land; the company wouldn’t comment on whether it would nudge zoning rules or pressure lawmakers to expand that surplus.

That challenge is clear in San Jose, where Apple has pledged to commit about $300 million worth of land it already owns to new affordable housing construction. But the North San Jose property is currently zoned for commercial projects, and when the company first bought the space, San Jose Mayor Sam Liccardo says he expected Apple would fill it with research and development offices. Changing the land use regulations and getting approval to build will be an involved process, Liccardo said.

“We haven’t been able to build any housing in North San Jose in several years because of a legal settlement with some surrounding cities,” he said. The city is behind on its own goals to build 32,000 housing units in North San Jose, 20 percent of them affordable, in part because of the “red tape that’s choking development,” Liccardo said, referring to the neighboring City of Santa Clara’s resistance to building on their border.

Facebook’s housing plan, which was announced in October, included a similar pledge to Apple’s: It’s freeing up more than $225 million worth of land in its headquarters city of Menlo Park, where it says it will help build 1,500 units of affordable housing. But Facebook’s plot is already zoned for residential development, potentially streamlining the development process.

Liccardo says while he’s open to rezoning Apple’s newly earmarked 80 acres of land to accommodate homes, he would rather see the company build both dwellings and office space on the site. “We are certainly open to converting in very limited circumstances,” he said. “But I think what we’ll see emerge from this is that Apple will bring forward a Master Plan to build housing and jobs.”

Local advocates hope that the city embraces as much residential development as possible. “If Apple’s willing to step up and say, let’s use all this land in North San Jose—that’s well-situated for building affordable and work-force housing—it could be a huge opportunity for the city,” said Jeffrey Buchanan, the policy director of a local economic advocacy group, Working Partnerships.

In addition to expanding supply, Apple’s plan emphasizes assisting individuals looking to buy their first homes through mortgage financing and down payment assistance. In its announcement, Apple said it would work with California’s housing authority to target its aid at the “missing middle,” or the ”essential service personnel, school employees and veterans” who have been priced out of the neighborhoods they serve and who would most benefit from this kind of program.

But Salim Furth, an urban economist at George Mason’s Mercatus Center, worries that this fund may only exacerbate some of the problems fueling the housing crisis—creating a small group of winners who can afford to settle down, while leaving renters and anyone else who doesn’t receive financing help behind. “There’s an aspect of rearranging the deck chairs on the Titanic here,” he said. “You’re boosting demand artificially and telling people they should spend even more of their money on housing.”

He, too, believes that policy change is the most critical lever to increase supply. But, he adds, if you are going to make a private investment of $2.5 billion, “do it all on the supply side.”

Some critics take issue with the premise of this form of corporate philanthropy, however large. In a statement on Monday, Vermont Senator and Democratic presidential candidate Bernie Sanders ripped Apple’s pledge as a diversion from larger taxation issues. “Apple’s announcement that it is entering the real estate lending business is an effort to distract from the fact that it has helped create California’s housing crisis—all while raking in $800 million of taxpayer subsidies, and keeping a quarter trillion dollars of profit offshore, in order to avoid paying billions of dollars in taxes,” he said.

Last year, Apple made headlines for capitalizing on President Trump’s tax reforms with plans to repatriate some $285 billion of those offshore monies that Sanders referenced. It has also earned attention for its years-long battle to recoup millions in property taxes from Santa Clara County, where it is the largest property owner, and for strongly opposing an employee “head tax” proposed by the city of Cupertino to fund transportation initiatives, which was eventually shelved. Similarly, Facebook made its big housing pledge right as CEO Mark Zuckerberg was set to testify before Congress about a spate of regulatory and governance concerns related to the company. And last year, Amazon managed to overturn a Seattle “head tax” that would have raised $47 million annually to fund housing measures, opting to donate $8 million to fight homelessness instead.

Silicon Valley’s largest employers taking a stand on affordable housing could push local governments to reform some of the structural barriers in the way of production. The Chan-Zuckerberg investment came paired with initiatives that “preserve and expand housing” and strengthen tenant protections; though Apple’s plan doesn’t have a built-in policy arm, the company says it plans to hold governance committee meetings with the state to keep it on track.

But no one-time investment alone can change the structural roadblocks that zoning and NIMBYism present to housing. “If a company really wanted to make a difference with respect to housing, they'd put money towards supporting local and state level politicians who believe that the path to affordability and environmental sustainability lies in building housing next to existing job centers,” Downing said. “They'd also back propositions and bills that promise to do the same.”