Photo: Robert Clark

Housing Amazon’s proposed second headquarters (HQ2) means a city must have the ability to house up to 50,000 Amazon employees, as well as ample warehouse space — about 8 million square feet of room to store the various goods purchased daily on the online retailer’s website.

The level of employment growth that Amazon’s HQ2 is expected to bring would put stress on a city’s housing market. And not every city in the running is equipped equally to absorb this growth, according to a recent study by the research group the Brookings Institution.

For its study, Brookings focused solely on the 19 US finalists, as it did not have sufficient data on the Toronto market. It found that generally the cities fell into one of four categories based on the characteristics of its housing stock: high priced and hard to build, recently gentrifying, stable and growth friendly, and lastly, more capacity with older housing stock.

Boston, MA, Los Angeles, CA, Miami, FL, Washington, DC and New York City fell into the “high priced and hard to build” category — Newark, NJ, which is part of the NYC metro area, was not included in this category, says Brookings.

“Not only are prices and rents high, the local governments in these metros have zoning and other land use regulations that make developing new housing and commercial real estate time-consuming and difficult,” Brookings says in the report.

Still, if a city wants HQ2 bad enough, they might be willing to bend the rules or alter them to accommodate Amazon.

Several of the “smaller” metros on Amazon’s shortlist fall into the “recently gentrifying” category. These markets are seeing home price growth that is straining the wallets of its residents. Denver, CO, Nashville, TN, Austin, TX and Raleigh, NC fall into this category.

“Amazon’s new HQ would make noticeable ripples in the largest cities but for smaller metros, the effect could be more like a tidal wave,” Brookings says.

Atlanta, GA, Chicago, IL, Columbus, OH and Dallas, TX, have generally “stable and growth friendly” housing markets. In other words, their markets could handle a spike in population growth without an increase in housing prices.

“This group offers the highest likelihood of absorbing HQ2 with relatively minimal disruption to the existing housing market,” Brookings notes.

The final group of cities — Newark, NJ, Indianapolis, IN, Philadelphia, PA and Pittsburgh, PA — fall into the “more capacity and older stock” category. These markets are characteristically “softer” and have higher vacancy rates compared to the other HQ2 contenders.

However, a good portion of these markets’ vacant housing stock is “older and poor quality” and would not be up to the Amazon employee standards.

“Workers accustomed to foosball tables and espresso machines in the office will expect no less at home,” Brookings says.

Meantime, nearly all of the city’s on Amazon’s shortlist are battling against gentrification in some neighborhoods. Local governments are grappling with how to keep housing costs down while welcoming new, more affluent residents to their neighborhoods. Some areas have enacted “inclusionary zoning” and Airbnb restrictions to help curtail price spikes.

“As the 20 finalists negotiate with Amazon over the next year, local policymakers should be asking themselves – and their constituents – whether the benefits of HQ2 will outweigh the economic and social costs,” Brookings cautions.

Click here to read the entire report.

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