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Amazon headquarters finalists: Some say winning would come at too high a price

  • In sprucing up their Amazon bids, cities will need to take an honest look at whether housing stock and public transportation are up to the HQ2 challenge.
  • The poorest in these bidder cities are likely to feel the biggest impact, as Amazon employees accelerate neighborhood gentrification and price out existing residents.
  • Another concern, experts say, is simply making sure that in their eagerness to win Amazon's favor, cities don't overcommit on incentives that favor the tech company over their town.
People walk past the signature glass spheres under construction at the Amazon corporate headquarters on June 16, 2017 in Seattle.
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People walk past the signature glass spheres under construction at the Amazon corporate headquarters on June 16, 2017 in Seattle.

Landing Amazon's $5 billion new headquarters and its 50,000 tax-paying workers would be quite the coup. And possibly quite the headache.

Officials and civic organizers in some of the 20 cities now vying to win Amazon's choice for its second headquarters are sounding alarms that accommodating this tech talent invasion could put a big strain on local residents already grappling with crawling commutes and high housing prices.

In Nashville, citizens concerned about how a new Amazon headquarters might exacerbate already significant housing issues were blunt about how well-paid tech workers could drive up both the prices for rental units and homes alike.

"We have a housing crisis now and all this would do is throw gasoline on the fire," says John Summers, a former city council member who now leads the Coalition for Nashville Neighborhoods. "We cannot build affordable housing to replace what's being lost by the rapid gentrification in all of our inner-city neighborhoods."

Some even don't even seem to mind if Amazon picks another suitor. Just days after Denver made the finals, Colorado Governor John Hickenlooper told the City Club of Denver "I'm not going to cry," according to The Denver Post, if CEO Bezos didn't choose the Mile High City,

While Hickenlooper later clarified that he was excitedly pursuing the headquarters because he felt it was the right thing for the city and state, he allowed that some citizens would feel "a sense of relief if they choose somewhere else because there are a lot of challenges and lot of hard work we will be avoiding."

In sprucing up their Amazon bids for billionaire CEO Jeff Bezos, cities ranging from Atlanta to New York will need to take an honest look at whether housing stock and public transportation — both critical to a winning bid — are up to the HQ2 challenge.

While cities such as Boston and New York are well-known for their efficient public transit systems, both suffer from aging infrastructure and struggle to keep up with existing demand.

Boston has been trying to find a solution for its growing traffic problems in part by efforts to link its commuter rail lines, says Barry Bluestone, professor of public policy at Northeastern University in Boston. "Our town has the talent and the excitement (to win the bid), but we have to find a way to move these new workers," he says.

That's a concern shared even by fans of the Washington, D.C., area's three finalist bidders. Richard Bedrick, a graduate student studying real estate development at the University of Maryland at College Park, says that while he is excited D.C., northern Virginia and Montgomery County, Md., are all in the running, the traffic implications of a win make him pause.

"D.C. has enough (traffic) as it is," says Bedrick.

Those sentiments are echoed among some in finalists hubs such as Miami, Raleigh, N.C., and in particular Los Angeles, which already is notorious for its gridlock.

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And then there's the influx of people that come with Amazon's second national headquarters.

Business owner Mina Lee grew up in Montgomery County, home of wealthy D.C. suburbs such as Bethesda, and says she is "super excited" and about the "great opportunity" of hosting HQ2. But at the same time she is concerned that a flood of new young workers and their families could cause overcrowding in schools.

"You're starting to see, I think, resistance and push-back to this continual grow, grow, grow, grow at any cost," says Nashville neighborhoods advocate Summers.

Poorest may take biggest HQ2 hit

The poorest in these bidder cities are likely to feel the biggest impact of HQ2, as Amazon employees boasting six-figure salaries accelerate neighborhood gentrification and price out existing residents.

For example, Denver's mild weather and ravishing outdoors has helped spur a multi-year business and population boom. But gentrification in many of the city's neighborhoods has become a sore spot as single-family bungalows are replaced by high-density townhouses for younger, wealthier residents.

"People here are enthusiastic about the benefits (of Amazon's HQ2), but those economic benefits often miss our most vulnerable citizens," says Daniel Brisson, executive director of the Burnes Center on Poverty and Homelessness at the University of Denver.

A homeless woman walks on the shadowed side of the street as she heads to the Denver Rescue Mission shelter downtown. Some critics say Denver's booming economy is leaving behind the city's most vulnerable residents, a trend they predict would accelerate if the city was chosen as the site of a new Amazon headquarters. (Photo: Trevor Hughes, USA TODAY)

Housing clearly will be one, and some cities are already behind when it comes to housing stock. Bluestone has been helping to assemble the Greater Boston Housing Report Card for 15 years. The latest score notes that even without HQ2, "Boston needs a minimum of 160,000 more housing units by 2030, and we're not producing that at the required rate."

Such statistics indicate that the winning city must brace for "two tales, one about winners and one about losers," says Javier Vivas, director of economic research for Realtor.com.

"These things push up home values based on increased demand, which is great some some folks, but it's not great news for existing residents hoping to get into the housing market who aren't on Amazon salaries," he says.

Smaller less developed markets, such as Raleigh and Columbus, are likely to better cope with 50,000 new tech workers than larger, housing-constrained cities such as Denver, Boston and New York, Vivas adds.

The prospect of HQ2 coming to the City of Angels led resident Lisa Connolly to write a pointed letter of warning to the Los Angeles Times.

"Amazon's cannibalization of Seattle's real estate market … would exacerbate an already unsustainable situation," she wrote. "If we want Los Angeles to become the next San Francisco, this is a surefire and irreversible way to accelerate the process."

Another concern, experts say, is simply making sure that in their eagerness to win Amazon's favor, cities don't overcommit on incentives that favor the tech company over their town.

"It's possible for a city to overpay for (Amazon's HQ2)," says Adam Ozimek, a senior economist with Moody's. While the details of many bid remain secret, reports indicate that such incentives can range from around $100 million from Denver to $7 billion from Newark, N.J.

"You give too great an economic incentive and the tax burden simply goes up for everyone else," says Ozimek.

Seattle as guinea pig

A street near Amazon headquarters in downtown Seattle, where cranes dot the sky as new office buildings, condos and apartments are built.

In fact, looking at Amazon's impact in its current headquarters city is a good way for the 20 cities battling for HQ2 to be catch a glimpse — for better and for worse — of their own futures.

The many positives include helping boost Seattle's economy, creating new businesses, boosting property values and energizing an area previously known for its parking lots and warehouses.

But Amazon's presence hasn't been all roses, says Jeffrey Shulman, professor of marketing at the University of Washington. For starters, he cautions that real estate speculators eager to flip lots and properties will descend on the HQ2 winner, making it difficult for lower-income families to stay put.

That sort of change then steamrolls into neighborhood makeovers, where yoga studios and coffee shops suddenly replace laundromats and bars to accommodate a wealthier clientele.

Two more side effects of the HQ2 win will be a boom in construction, as evidenced by Seattle's now perpetually crane-filled skyline, and a growing war for talent that may leave other area businesses high and dry.

"In Seattle, you're seeing some residents feeling that their communities are vanishing, people who now feel like strangers in their own hometown," says Shulman, who studies Amazon's impact on the city.

That some won't be happy with the result either way is a given, says economist Ozimek.

"People would complain in a literal utopia," he says with a laugh. "There will be lots of cities looking at Seattle and, hearing their complaints, will go, 'Are you kidding me?'"