There's an ugly standoff going on in Seattle. Anxiety is in the air, the housing market is nuts. Hundreds of people are moving to Seattle each week. They're attracted by Amazon and other booming tech jobs here, and the homeless population is growing, with tents popping up across the city. Housing has become scarce and expensive. Local authorities say they don't have the money to deal with the problem, so the city has been considering something called a head tax
on big businesses. Then on May two, Amazon, Seattle's largest employer, decided to play hardball. Amazon employees more than forty people at its headquarters and said it was halting its expansion plans in the city pending the vote on the head tax. Amazon's move provoked an outpouring of rage on both sides. Construction workers tested the tax outside Amazon's headquarters. Meanwhile, homeowners
are divided, with tensions running high. It led to a showdown at a meeting several city council members hosted later that day. I'm a lifelong Democrat, I have never been so fed up and disgusted and embarrassed for my city. All Right, we do not trust you anymore. You have the most regressive tax structure in our city, which is in a state with the most regressive tax structure in the entire country. So who are you gonna take the money from. I'll tell you say, we need five billion.
That's a pretty conservative estment. Five billions how much Jeff Bezos made in ten minutes when Amanon announced they bought Whole Foods. We're gonna tax that mother. On Monday, the city council had to decide whether or not to move ahead with this controversial new tax. Hi, I'm Brad Stone and I'm Karen Wise. And this week on Decrypted, we're taking a look at Seattle, which just found itself pitted against one of the world's largest companies run by the
world's richest man. The growth of Amazon and other tech companies has created a lot of high paying jobs here, but it's also contributed to soaring rents and home prices. Recent studies linked the lack of affordable housing to an increase in the homeless population. As tech clubs around the world grapple with these unintended consequences of the tech boom, can Seattle, Washington paved the way stay Last week, I sat down with someone who's been following this story for
a long time. Her name is Erica C. Barnett. She's a long time city hall reporter and now writes a progressive blog see is for Crank. I came out here for a job at Seattle Weekly, and um, I came out here in the middle of the summer, and it was the most beautiful place I'd ever seen in my life. Eric has been living in Seattle for close to twenty years. I couldn't believe, you know, the mountains and the water and just you know, the beautiful hills and the neighborhoods
and just everything about it was so beautiful. And I agree, it is gorgeous, rainy, but gorgeous. That's part of what drew me here too. But the city has changed a lot since Erica first moved here. I lived in Ballard when I moved here, and and I left because it was so sleepy. And look at Ballard now, it's completely different. Seattle is the fastest growing housing market in the US, and home prices have gone up ab in the past year,
and they did the same in the previous year. The median cost of a single family home is almost eight hundred and twenty thousand dollars a lot of that growth has come from the tech boom. Amazon was founded here in Today it's an eight hundred billion dollar company with more than five hundred thousand employees worldwide. Microsoft, Expedia, Zillo are also based in the area, and Google, Facebook, Uber. So many tech companies have opened up large offices in
Seattle too. I know some people hate it. It feels a little more anonymous than it used to, and it also um just feels like there are a lot of people coming here that only plan to be here for a year or two, you know, and that does kind of impact the way that your interactions are with people. One economist I spoke to said that every new tech job creates about four to five new non tech jobs. Some of that non tech work is for professionals like lawyers and doctors, but the bulk of it is not
think Uber drivers and plumbers. In boomtowns like Seattle, wages generally go up across the board, but cities don't add enough housing supply to keep up with the growing demand. That makes cities way less affordable. The economist said. Seattle is an extreme example of what's happening in other tech hubs like the Bay Area and in Austin. Yeah, Karen, it really reminds me of the of the same exact
dynamic that's going on here in San Francisco. You know, cities competed so hard to be the home to these tech companies, and now they are realizing that there there are some drawbacks from having these high growth companies in their myths. It's interesting Seattle is actually doing a better job than the Bay Area of building new housing, but even that isn't keeping up with the growing population here.
Such an emotional issue for people, you know, and it's worth noting that, you know, these are both heavily democratic cities, and so you ask most people in Seattle or in San Francisco, and they're intellectually in favor of more housing
or more affordable housing. But then when it comes to their neighborhoods, or putting high density apartment buildings with affordable housing units below marker rate units in their neighborhoods, or even along kind of transport you know, public transportation lines, and you know, you get a kind of quiet resistance to it. And and even I would say modest things like adding a backyard cottage or allowing a single family home to be a duplex, not even building, you know,
low rise, multi family things are very contentious. The city in Seattle is currently debating something that would resone just six percent of single family neighborhoods to allow that type of kind of more basic development, and that I'm sure will be very contentious when it actually comes up to a vote. When people say that we're becoming San Francisco, they're not wrong. I think that is exactly where we're headed. Seattle has seen a surge in homelessness. There are so
many contributing factors. The opioid crisis, a lack of mental health re sources, but also rising rent is probably part of it. There are as many as four locations in the city where people are living in tents or makeshift shelters, and at times that has been a source of friction with residents. People are torn between having compassion and being frustrated with what seems like the city's inability to help.
Here's Erika again. When you go to other cities, and I travel quite a lot, and um, you just don't see anything like what's in Seattle. I mean, I was in Houston recently, and Houston is a much less expensive city. They have very different economic issues than we do. But I mean, you just don't see any tents outside, and so I think when people are going to other cities are comparing Seattle to what Seattle was like even twenty or ten years ago. It's shocking and the fact that
there are tents everywhere is absolutely unacceptable. But Seattle is an unusual bind. That's because the Washington State constitution forbids income tax. That means the city is unusually dependent on property and sales taxes. As a result, people with less money spend a bigger share of the income on taxes. So the city council came up with the idea of a head tax, where businesses making more than twenty million dollars in annual revenue would pay up to five per employee.
The city wants to use the money to build more public and low income housing and to boost services for the homeless. How does this relate to Amazon. I think people see Amazon, rightly or wrongly, as like our golden goose kind of our modern Boeing. Amazon would be the company most affected by the head tax. Amazon chose to grow in the city, not in the suburbs, and it
just dominates here. The Seattle Times did an amazing analysis last year and found that Amazon occupies more office space in the city than the next forty employers combined, and
it's building even more. I think people see Amazon as, you know, this economic force that's driving jobs at striving growth, that's driving their home prices up, because a lot of the kind of split in the city right now is between homeowners who are seeing you know, their meet their home values go up so and then on the other hand, renters who feel like they're being left out. In September, Amazon announced plans to build a second headquarters, which kind
of freaked the city out. Just the whole idea that Amazon could decide to move jobs away from Seattle or at least grow elsewhere. That might partly explain the shock when Amazon announced it was halting construction planning on a new office tower until it sees the outcome of the vote on the head tax. To the head tax would be a new tax on large employers in Seattle to help fund wholelessness programs. Amazon does not like it at all, so much so that they are halting construction on this
seventeen story building in downtown Seattle. Let me tell you about this head tax. The plan that would applies to Karen. The relationship between Amazon and Seattle, it reminds me of like a bad romantic relationship. Seattle is having a hard time with Amazon, but it doesn't want Amazon to go and date any body else. Yes, they're definitely kind of
codependent in a weird way right now. So Amazon is bringing a lot of jobs, a lot of revenue into the city, but it's also just creating an obvious burden on city services. I mean, it's the head tax a good way of addressing that. Yeah, the head tax is very interesting because it risks slowing down the job growth if you listen to what the company is saying, and we may not put as many new jobs here. So that's one way to manage the growth is just to
actually slow it down. And it also tries to solve a little bit on the housing supply side because it does go to fund new affordable housing, but it doesn't touch that huge issue about zoning and where you're gonna put new housing, and that is the thing that has just really stifled new development in the Bay Area, in Seattle and other kind of booming tech cities too. So the h Q two search was announced last year, but
the whole dispute this year on the head tax. It just makes me think that Amazon was awfully farcet sited uh in trying to find another city. Did they foresee all this? Yeah, I mean there's no doubt that the pressures on the city have been growing a lot, and particularly in the past couple of years. I mean, they have to imagine there were own recruiters here trouble about concerns about the housing stock here and the and the ability even for a high paid engineer to find to
find something. And they they have said, you know, I think the most talent thing I've heard out of them is Jeff Wilkie, the executive, at a conference in Seattle last fall, said something to the effect of, I love Seattle. It's been fabulous for me and my family, but not everyone wants to live here, and we are growing at a rate where we really need to be able to find a place to work for anyone that we can get.
Not everyone enjoys those rainy winters. So what what should Amazon apply in terms of the lessons of its long tangled relationship with the city of Seattle. What should it apply to the search for another city? To host its
second headquarters. Amazon was really it for a really long time in Seattle, and I suspect probably they have regrets about that because they didn't help the city get ahead of this problem really, and so when they're talking to new places, they're really trying to understand how how is this city going to accommodate all of these kind of housing needs and the transportation needs, and all of the additional burden on the infrastructure that comes with really building
as we've talked about, not just the headquarters for these employees, but then all of the additional auxiliary work rights. And cities can also learn from Amazon's experience in Seattle and know that if they win HQ two, they're getting a big, powerful company. They're getting a lot of jobs, but they're also going to be dealing with some political issues that
are very hard to predict. Yes, I mean, Amazon has shown it can play hardball, and so if I were a city, I'd be a little nervous at the same time. Next up, strong reactions he roughed on all sides. After Amazon pauses its expansion plants in Seattle until it knows the outcome of the head tax vote. Amazon statement hit around midday on May two, Amazon has stopped construction on a new office building in Seattle, where its current headquarters are. This comes after the city proposed a new tax on
top business. Since then, things have been moving really fast. The tax has become a polarizing issue. The construction workers union has come out against it, but services sector unions are supporting it. Some residents are happy that the city is pushing back on Amazon, which let's remember, is the second largest company in the world run by the wealthiest man in the world, but other residents don't trust the city to spend the new money wisely. Emotions came to
a head later that night. Hundreds of people packed into a Methodist church where what was supposed to be a town hall meeting but instead and evolved into just inventing a rage m It's refreshing to see ordinary citizens revolting against this lousy city council. This clause a religious organization that tells us how we're supposed to think, what we're supposed to do with our money, what we're supped to
do with our plastic bags. We cannot be trusted homeowners shouto down the council members, saying the money they pay them. Property taxes have been spent unwisely. And if you've lived here for a few years and you've seen this city government take on affordability by bulldozing all the backyards and ballard and putting up nine dred thousand dollar condos, you might start to think maybe they should just kind of deal with water, sewer, garbage, police, fireman, libraries, and parks
and get out of the rest of this step. Because it's you're it's not. But other people told the council they couldn't afford taxes to go up even more because I know that as a middle class worker in the city, I'm a future in the You should be homeless myself, because that's the way our city is going. Our middle class is not able to afford our houses, our rents were not able to afford any of it. All of you here wants to live in a in a happy life with Erica was there. She saw people struggling with
how to deal with the city's growth. And I think there's a weird sort of brain split where like, we like the economic growth and we like the fact that home prices are rising, but we don't like the fact that those people need places to live. They're living in town homes and apartments that you know, or we're maybe built where a single family house was bulldozed. A lot of residents invented about the way tents and makeshift housing
was affecting their neighborhoods. They're sick of seeing tents everywhere. There is a perception that there are needles everywhere, but they're just they're upset about about the issue of homelessness and UM the way it's being handled UM Council. I recognize that there's a crisis of homelessness in Seattle, and I generally support red a new and services to address that crisis. But whatever we do, it's going to take time, and in the meantime, we're going to continue to have
encampments all over the city. And the impact that those encampments are having on their immediate neighbors is really tangible and problematic, and I think it's driving a lot of the frustration and hostility and the anger that you see tonight. So at times the dialogue totally broke down. I see, Okay, So blaming poor people for what's going on is like blaming Syrian refugees for Isis. Amazon As isis In any case, I wish you would act more like kindergarteners than like
over entitled rich white people pay. Yeah, you know, I've been to about a million of these meetings before, and I'm you know, I'm not like a shrinking flower. I don't get upset. But it felt I mean, you know, people are going to make fun of me for this, but it felt scary. Um, it felt like, you know, people were going to rush the state. Okay, so today is Tuesday. Yesterday, on Monday afternoon, the Seattle City Council
voted on the controversial head tax. Please call the roll on the passage of the amended bill O. Brian Swant, Bagshaw, Gonzalez, her Bold, John one waras Mosqueta I President Harold A. Nine in favor, none opposed it. Okay, so now we have a resolution which basically embodies the spending plans just one moment here and so please read that into the record. The vote came after a weekend of frantic negotiations. Basically, the mayor said she might veto of five per head
tax if the council passed it. So after all this back and forth, they got it down to two seventy five dollars per employee, and then the city council passed it nine to zero. Right, So for now the standoff is over what lesson to other cities like Mountain View, which was weighing a similar Google tax. What do they take from this episode? It's interesting. I mean I think clearly you learn it's hugely divisive and a risky thing to do, and it's hard to know now you know,
how it will affect growth in the city. Will people pull back or is there already enough good job and and enough of a cluster of tech work here that people Amazon and others will continuing hiring here. Everybody's wondering how this impacts the search for h Q two, and I don't know. Some of the candidate cities sent letters to Seattle encouraging the council to resist the pressure from Amazon. What does this impact the HQ two search? Yeah, I mean, if I were a city, I think that this shows
shows two things. It shows that a city can put some onus on Amazon, or cities have can have the political will to do that. But it also shows that Amazon plays hardball, and that's it's a reality. I had a guest in town this weekend from Germany, and this made the news in Germany. So I think it's not even just HQ two, but it's all their global expansion plans. People are watching this, watching to see what they'll do and how to play out. So now Seattle has a
two seventy five dollar per employee head tax. Does it solve Seattle's problems? And when you talk about the congestion in the city, the ever increasing price of housing, what does this do? Yeah, so this is I think one thing that definitely will help is this does build more housing, specifically affordable housing. And there was a lot of back and forth over how much should go to services versus construction, and the end about two thirds of the new revenue
will go to building new units. But we're talking fewer than a thousand units, and I believe that the current affordable housing gap is something like fourteen thousand units in the county. So it's it's a improvement, but not a huge one. And is it possible that this head tax slows down Seattle growth? That that is the big question. Will it slow down this kind of crazy increase in in jobs and high paying jobs that are coming here. And I spoke with one of the council members who
co sponsored the legislation, Michae O'Brien. I spoke with him last week and he said, you know, I don't think it's going to slow down the growth here. I think we've got enough momentum here that will keep Amazon on others continuing to come. But if it does slow down the growth, maybe that's okay. Maybe that's what we need to catch your breath a little bit. And that's it for this week's episode of Decrypted. Thanks for listening. Do the issues we talked about today apply to the city
you live in? We want to know how the growth of the tech industry has affected you. Send us an email. Our address is Decrypted at Bloomberg dot net or I'm on Twitter at pay wy Wise and I'm at brad Stowe. If you enjoy the show, please spread the word with your friends and consider leaving us a rating and a review. It really helps us find new listeners. This episode was produced by Pia Gattari and tofor Foreheads. Francesca Leave is the head of Bloomberg Podcast. We'll see you next week.