You are here
What Amazon's new headquarters could mean for rents
[NEW YORK] When Amazon announced in January that Nashville, Tennessee, had made the list of 20 finalists being considered for its second North American headquarters, city leaders cheered. They saw the project as the next step in Nashville's transformation from country-music capital into a regional and even national economic force.
To some locals, Amazon represented something else: more people, more traffic and, most of all, higher rents in a city where a rising share of residents were already struggling to afford a place to live.
"With the onslaught of new people, with the onslaught of higher-income earners, I just think it's going to further exacerbate what's already a crisis situation," said Paulette Coleman, a local affordable-housing advocate.
Mr Coleman has reason to worry. A new analysis from the real estate site Zillow estimates that rents in Nashville would rise 3.3 per cent per year if the Tennessee capital landed the Amazon campus, almost four times as fast as currently projected. After a decade, that could translate into Nashville residents paying US$400 more per month in extra rent because of the project.
Other cities could also see big increases if Amazon picks them. Monthly rents in Boston and Los Angeles could jump by even larger amounts in dollar terms - albeit from a higher starting point - reflecting a shortfall in rental housing construction. Denver - like Nashville, a midsize city that has seen brisk population growth in recent years - could see its already rapid rate of rent increases hit nearly 6 per cent per year, triple the overall rate of inflation.
Zillow cautions that its estimates are rough, based on a simple model that looks at how rents in each city have responded to past influxes of workers. If the cities respond differently to Amazon's arrival - for example, by building more housing - the effect on rents could be smaller than Zillow's model estimates.
But there are also reasons to think Zillow's analysis could understate Amazon's potential effect. The model looks only at the effect of the jobs that the new campus is expected to create directly. If Amazon's presence draws other businesses to the area, rents could rise even faster.