(CN) – Apple committed $2.5 billion to address the housing affordability crisis in California, the company announced Monday morning, becoming the latest Silicon Valley titan to join the housing fray.
Apple will create a $1 billion housing investment fund, which the company touts as the first of its kind, while contributing another $1 billion to first-time buyer mortgage assistance and opening up Apple-owned parcels in the Bay Area to affordable housing development.
“Before the world knew the name Silicon Valley, and long before we carried technology in our pockets, Apple called this region home, and we feel a profound civic responsibility to ensure it remains a vibrant place where people can live, have a family and contribute to the community,” said Apple CEO Tim Cook in a statement issued Monday.
Other Silicon Valley-based companies have also pledged outsize sums to help ease the housing crunch, with Google promising $1 billion this past June and Facebook also signing up for a $1 billion investment last month.
The San Francisco Bay Area and Silicon Valley in particular have some of the highest housing costs in the country, which make it difficult for both low- and middle-income earners to afford housing. The lack of housing affordability has exacerbated the homelessness crisis in the Bay Area and other parts of California. Furthermore, it has plunged individuals and families into poverty as a large percentage of Californians allocate at least half of their monthly income to housing.
For renters, about 30% of California residents dedicate 50% or more of their monthly income to keeping a roof over their head, according to a recent study by the California Budget and Policy Center. Approximately 54% of renters in the state are considered cost-burdened, in that they spend at least 30% of monthly income on rent.
Housing costs have led to a net loss in population for the Bay Area specifically and California in general, according to Redfin, while homeownership rates are in decline.
California Governor Gavin Newsom welcomed Apple’s investment Monday, saying he hopes more companies follow the example set by three of Silicon Valley’s major corporations.
Apple’s proposal is different from Google and Facebook in that it is donating $2 billion to the state, rather than acting as lenders to potential affordable housing developers themselves.
Many affordable housing advocates hailed the infusion of cash dedicated to addressing the problem into the state coffers.
“I don’t think one corporation is going to solve the problem,” said Leslye Corsiglia, executive director for Silicon Valley at Home, an affordable housing advocacy organization based in San Jose. “But it’s nice to have Apple at the table, particularly to the extent that it encourages other companies.”
Apple’s plan figures to free up money that can be lent to affordable housing developers, along with $1 billion available for mortgage assistance, meaning some of the middle-income individuals and families priced out of the Bay Area might be able to gain footing in the brutal housing market.
While a cash infusion is helpful, many barriers remain, including local zoning issues, a lack of political will and communities that are hostile to the prospect of affordable housing developments in their neighborhood.
“But money and land certainly helps,” Corsiglia said.
Apple will also donate several parcels of land worth an estimated $300 million in north San Jose for prospective developers to install projects.
Newsom campaigned on bringing housing costs down for middle-class Californians, while helping solve the high levels of homelessness rampant throughout the state.
Critics of companies like Apple, Facebook and Google say the companies are responsible for the spike in housing costs, bringing high paying jobs to communities lacking the housing stock to accommodate the influx of employees.
“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,” said Sen. Bernie Sanders, who is running for president.
California has added about 308 housing units for every 1,000 new residents, according to the McKinsey Global Institute.
Lawmakers have offered various solutions.
Republican legislators typically focus on environmental laws and other restrictive regulations that make building new housing difficult, saying such onerous demands on developers have suppressed supply.
Those on the Democratic side tend to focus on unscrupulous landlords evicting tenants and jacking up rent to take advantage of the high housing prices.
The Legislature passed a statewide cap on rent in September, with proponents saying it will curb price-gouging and critics claiming it will dissuade developers and keep the housing supply too low.