The good news about Amazon coming to Washington is that it will add 25,000 high-paying jobs and provide a boost to Washington’s tech and innovation ecosystem.
The bad news is that if, as a region, we don’t use this opportunity to invest in much-needed transportation infrastructure and build more housing, then all we will get out of HQ2 is higher rents and housing prices and longer commutes, which in the long run will end up driving many more than 25,000 other jobs out of the region. That, after all, is what happened in Seattle, and led Amazon to create a second headquarters in the first place.
(Obligatory disclaimer: The Washington Post is owned by Jeffrey P. Bezos, Amazon’s billionaire chief executive.)
Happily, Amazon will bring along some money with which to meet those challenges, which is why cities and states across the country were tripping over themselves to offer financial incentives to a company that surely doesn’t need them. As critics point out, this is the sort of counterproductive competition that governments shouldn’t get into, but as long as others did, it would have been irrational to stand on principle and opt out.
Gov. Ralph Northam (D) and his team are to be congratulated for putting together a reasonable well-structured package. The $22,000 for each job created should be fully paid back in extra tax revenue within four years, when the payments are due, while the promised investments in transportation and education are worth doing even without Amazon. As for Maryland and the District, they should consider themselves the lucky losers: by Virginia’s own analysis, they will get about a third of Amazon employees as taxpaying residents, along with a fair share of the indirect jobs, without having to provide any incentives.
My own rough back-of-the-envelope calculation is that, once Amazon’s decade-long move is complete, Amazon’s 25,000 headquarters jobs, paying an average of $150,000 each, will indirectly generate 37,500 additional jobs throughout in the region, for a total gain of more than 60,000. That should translate into an additional $6.5 billion in regional income, and $650 million more in tax revenue for state and local governments. If a third of that revenue each year were earmarked for transportation, housing and educational infrastructure, that would allow regional governments to borrow an extra $2.5 billion for such projects, some of which could generate their own revenue or attract additional private investment.
So how should we invest it?
Amazon’s impact will be felt throughout the region, where a good number of Amazon employees will live and many “indirect” jobs will be created.
In that respect, the first priority should be to expand commuter rail service in Maryland and Virginia — service that is already stretched as far as it can go, constrained by existing tracks, bridges and stations. One urgent need will be to operate some trains through the District and on to job centers in the other state. That would require major investments at Union Station and on the Civil War-era Long Bridge across the Potomac. With upgraded service, Amazon workers in Crystal City, which has an inadequate commuter station, could commute from bedroom towns stretching from Frederick, Md., to Fredericksburg, Va.
Metrorail is near its peak-hour capacity on lines north and west of the city. The quickest and most cost-effective way to add capacity is to expand existing stations to handle eight-car trains at rush hour. Metro should expedite construction of a second station at Rosslyn for better flow through its tunnel under the Potomac by untangling the Orange and Silver lines from the Blue Line, which serves Crystal City and (in three years) Potomac Yard.
Lots of people around Seattle, San Francisco and New York get to work by water ferries, and the Potomac offers Washington the same possibilities if we could establish regular high-speed service from Georgetown south to Mount Vernon in Virginia and Fort Washington in Maryland, with a half dozen stops along the way. One stop could be at the newly named National Landing, from which passengers could travel by elevated, automated monorail (just like Seattle!) to Reagan National Airport, Potomac Yard, Crystal City and Pentagon City. A regional ferry authority could be created to construct the terminals and license a private boat operator to provide the service.
For highway congestion, transportation planners tell me the best fix is to complete a network of uninterrupted toll lanes connecting the Beltway, I-95 North and South and I-270. All would have dynamic pricing, free travel for car pools and — here’s the big payoff — make it possible for Metro to offer fast and reliable express bus service from the outer suburbs to downtown and major job centers. As Virginians have discovered, such fast-moving toll lanes not only improve life for the commuters who use them, but also for those driving alongside. The toll revenue could be used to construct additional lanes, most urgently on the Beltway’s American Legion Bridge.
And while we are on it: If the Washington region wants to be taken seriously as a world-class tech hub, it should figure out how to keep schools and businesses open when there are a few inches of snow. A region that can’t figure out how to use mid-20th-century technology to clear roads, train tracks and bike paths is unlikely to generate the cutting-edge technology of the 21st century.
The region already has a housing shortage, with rents and housing prices rising faster than incomes. According to a report by the Urban Institute, a quarter of renters in the region, along with 10 percent of homeowners, have to devote more than 50 percent of their income to housing costs. And among those who find more affordable housing in the outer suburbs, a quarter are forced to commute 45 minutes or more each way. Without an increase in the right kind of housing at the right price in the right locations, the addition of 60,000 jobs to a fully employed region will only make all those things worse.
The biggest problem is overly restrictive zoning and drawn-out approval processes that discourage development.
The Urban Institute and the Greater Washington Partnership, representing the region’s top business leaders, have begun to work with local officials to set housing production goals for each jurisdiction that, collectively, would be sufficient to meet the region’s demand for an additional 250,000 housing units by 2025. They also are putting together a tool kit of policy ideas that cities and counties can use to better meet demand: accelerated approval processes, incentives or requirements for low-income units in all developments, housing trust funds and community land trusts to acquire parcels for development, zoning that permits higher density around subway stops.
While all those sound like good ideas, experience suggests they won’t be able to overcome the forces of neighborhood preservation and the not-in-my-backyard-ism that exist in many communities. In the District, where strong demand has led to gentrification of many neighborhoods, there is already political pushback against any development that displaces more low-income residents. And the new county executive in Montgomery County, channeling concerns about overcrowded schools and clogged roads, opposes new construction in most neighborhoods.
Rather than trying to overcome such resistance, a better strategy might be to direct public investment to places like Anacostia in the District, Prince George’s County in Maryland and Prince William and Stafford counties in Virginia, where underutilized land is cheaper and available, transportation infrastructure exists and is underused and the political climate is favorable. The three states could jump-start housing development by providing the infrastructure for neighborhoods and a more favorable regulatory environment in which to build them. Such inducements are sure to lure developers and residents.
Imagine, for example, a newly created agency that has sufficient seed funding and bonding authority to buy up a large tract of underdeveloped land convenient to a metro stop, commuter train station or highway exit. With the land in hand, the agency could build a state-of-the-art elementary school, a library, a bus station with a parking garage and a recreation center surrounded by playgrounds and playing fields.
It could partner with a private developer to build an old-fashioned neighborhood retail district with a movie theater, supermarket, medical building with plenty of on-street parking and space for a weekly farmers market. The developer might be required to lease at least half the smaller storefronts to independent retailers who would provide the services that residents most need and value — not only the retailers who will pay the highest rents.
Around the town center, one area could be rezoned for only two- and three-story townhouses with basement apartments and small back terraces. Another area would be zoned exclusively for four-story “loft” buildings with hipster apartments and coffee shops and health clubs on the first floor. Another could be zoned for small two- and three-bedroom houses with front porches on tiny lots. Sidewalks, sewers and water lines could be installed as necessary, while the entire community could be wired for high-speed broadband. Every few blocks, the agency could create a public playground or pocket park or victory garden.
A special tax lien would be put on every property that will allow the government to recoup its infrastructure investments when properties are sold.
Although there are plenty of private companies that know how to do such large-scale, mixed-use developments, they are devilishly difficult to pull off. Assembling the land, obtaining the government permits and securing the patient financing often doom such ambitious projects before they can take off. But a public development agency with broad powers and some subsidies could overcome such challenges and provide the catalyst for private investment and development. And where developers have the instinct to maximize their returns by creating charmless high-rise jungles with lots of office space and chain retailers (Crystal City, Rosslyn and the Nationals Park area come to mind), a public agency could be charged with creating vibrant and enduring neighborhoods with the scale and character that people prefer.
This more muscular approach to economic development and urban planning went out of fashion 50 years ago, but is used successfully in other countries. It may be the only way to overcome market failures and parochial interests that have led to housing shortages in Washington and other booming regions.
Years ago, I got myself in some trouble with local college presidents by writing that Washington’s economy was held back by the lack of a truly world-class university. I lamented that Virginia Tech was located in rural Blacksburg, in the southwestern part of the state, where its potential for economic spinoff was pretty much wasted.
Now, thanks to Amazon, that potential will finally be realized. The initial plan is to locate a $1 billion satellite campus at Potomac Yard, with room for 500 graduate students, research labs and spinoff companies. But my guess is that, before long, Virginia Tech’s footprint will expand well beyond that for the simple reason that students and faculty will prefer it and private capital will encourage it. The prospect of Tech’s arrival in Washington is already spurring competitive investment from Washington’s other universities. George Mason University, where I teach, also took the opportunity recently to announce plans for a new School of Computing at its Arlington campus. By increasing the density of the higher-ed sector, this campus of Virginia Tech will boost the fortunes of all the region’s universities.
It’s important to keep all of this in perspective. While 25,000 thousand jobs is nothing to sneeze at, as the D.C. Policy Center pointed out in an excellent recent analysis, it’s less than the 34,000 the region has added, on average, every year since 2000. Even if Amazon had not come,many of those jobs probably would have been created.
Still, the quest for HQ2, along with the bid for the Olympics and the restructuring of Metro’s financing and governance, has taken regional awareness and cooperation to new levels. If Amazon’s arrival can spur even deeper collaboration on housing and transportation, that — not the jobs — may prove to be the most significant impact of all.
Pearlstein is a Post business and economics columnist. He is also Robinson Professor of Public Affairs at George Mason University. His new book, “Can American Capitalism Survive?,” was published this fall by St. Martin’s Press.