The Amazon dilemma

Winning the company’s warehouse lottery would bring jobs, but could worsen Sacramento region’s housing crunch

Dreams of turning Sacramento into a “world class city” recently led local leaders into a worldwide bidding war, launching virtual tours and coordinated media events in an effort to land Amazon’s new headquarters.

While jumping into the fanfare put Sacramento on a national stage, some are wondering if getting in bed with Amazon would cause the city more harm than good.

Representatives for the capital region began wooing Amazon’s $5 billion campus and 50,000 connected jobs in mid-October, culminating in a Kumbaya press conference starring Sacramento Mayor Darrell Steinberg, Roseville Mayor Susan Rohan and Sacramento Kings owner Vivek Ranadivé in front of the Golden 1 Center.

That same week, Ranadivé was interviewed about Sacramento’s prospects on CNBC. “Housing costs are a quarter of what they would be in the Bay Area,” Ranadivé said of Sacramento.

Ranadivé’s reference to housing prices was an inadvertent reminder of the warning from some Seattle neighborhoods. Last year, Aaron Terrazas, a senior economist at Zillow, told the Seattle Times that what renters call “the Amazon effect” is real: Rental rates in some quarters of the Emerald City shot up between 11 and 24 percent after the company’s first headquarters was anchored there. Terrazas said Zillow’s data indicated Amazon’s workforce played a role in the escalations.

That’s a concern to housing advocates in Sacramento, which has experienced some of the highest year-to-year rent increases in the nation, according to multiple studies. Those increases coincided with the rise of “super commuters” who moved to Sacramento to escape Bay Area prices, thus pushing local prices up through supply and demand.

“There is still a huge need [for affordable housing],” said Jovana Fajardo, director for Sacramento’s chapter of Alliance of Californians for Community Empowerment. “We’re seeing lots of tenants get rent increases. We literally have people calling our office every day and we’re just hearing story after story.”

ACCE has been leading a grassroots campaign to bring rent control to the city. Back in July, more than 30 people lined up at City Hall—some with tears in their eyes—to implore council members to support rent control in Sacramento before more working-class residents are displaced.

While acknowledging a crisis, Steinberg has expressed “serious concerns” about passing rent control, even as he’s publicly campaigned to land Amazon in a city with an estimated 2 percent rental vacancy rate.

Fajardo told SN&R this week that city leaders “haven’t been receptive at all” on rent control. “They’ve been very open about working with Sacramento Housing Alliance on the affordable housing piece,” Fajardo said. “But every conversation that’s been started has been ’except rent control’—that’s not on the table.”

Another concern about the Amazon pitch involves possible public subsidies. A recent analysis by Axios found that the bidding war between cities could result in Amazon getting as much as $10 billion in tax breaks and incentives. That seemingly puts the city of Sacramento, which is already subsidizing the Golden 1 Center, at a huge disadvantage.

Questions about the regional bid were redirected to the Greater Economic Council of Sacramento, a public-private partnership led by area CEOs.

The economic council’s proposal identified 12 sites in the region suitable for a campus. While the council is not publicly releasing the details of its proposal, spokeswoman Michelle Willard said its leaders worked directly with economic development directors for every city involved in the pitch.

“Fifty-thousand jobs would have a huge influence on the communities in the region and really change the economic landscape,” Willard said.

Craig Powell, whose organization Eye on Sacramento sued the city in 2014 over arena subsidies, agreed that Amazon could bring a mighty stimulus to the region. In an email, Powell said he’s personally supportive for now of the effort to land the giant, and that Eye on Sacramento will defer commenting on incentives and subsidies until it sees the details.

Nevertheless, Powell remains skeptical that the tax breaks and sweeteners around the Golden 1 Center are paying off the way city leaders claim.

“We stopped giving any credence to their estimations of the economic impact of the arena after they put out a preposterous ‘study’ a few years ago that claimed that building it would increase local economic activity by $11.5 billion,” he wrote.