In Microsoft’s Hometown of Redmond, WA, Just 22% of Homes Are Affordable to Its Own Engineers—The Company’s Affordable Housing Pledge Could Help Change That

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In Microsoft’s Hometown of Redmond, WA, Just 22% of Homes Are Affordable to Its Own Engineers—The Company’s Affordable Housing Pledge Could Help Change That

Microsoft’s $500 million commitment to affordable housing could help ease the Seattle area’s affordability crisis and make way for more diverse communities.

When Microsoft announced its $500 million commitment to affordable housing at the beginning of the year, the company acknowledged that even tech workers in the Seattle area can have a hard time purchasing a home. That’s especially true in Seattle’s Eastside suburbs where Microsoft is headquartered: Less than 25 percent of homes for sale in Redmond, Bellevue and Sammamish are affordable on an average Microsoft software engineer’s salary and less than 11 percent are affordable on a local median income.

Below is a breakdown of affordability in cities throughout King County, with the cities that will receive Microsoft’s initial investment in middle-income housing bolded. The list is ranked by the share of homes affordable on a median King County income, from largest to smallest.

City Median list price of homes for sale (1/1/2018 – 3/10/2019) Median monthly mortgage payment on homes for sale Share of homes for sale affordable on the average base salary for a Microsoft engineer in the Seattle area (1/1/2018 – 3/10/2019) Share of homes for sale affordable on the median King County household income (1/1/2018 – 3/10/2019) Drive time to Microsoft HQ in Redmond, WA (mins) (from Walk Score Travel Time API)
Federal Way $369,950 $1,824 89.8% 68.4% 45
SeaTac $385,900 $1,902 86.3% 62.5% 29
Auburn $399,950 $1,972 87.3% 55.8% 39
Enumclaw $405,950 $2,001 78.3% 55.5% 60*
Des Moines $400,000 $1,972 80.8% 55.0% 35
Tukwila $399,950 $1,972 87.9% 54.9% 25
Covington $420,000 $2,070 83.7% 51.8% 45
Kent $424,990 $2,095 84.7% 49.2% 31
Burien $449,000 $2,213 79.7% 43.7% 30
Renton $498,000 $2,455 67.2% 33.6% 21
Black Diamond $499,950 $2,464 73.1% 25.0% 54
Bothell $695,000 $3,426 38.4% 25.0% 20
Maple Valley $499,950 $2,464 65.7% 23.6% 47
Shoreline $599,000 $2,953 48.1% 17.9% 25
Kirkland $788,500 $3,887 28.4% 17.3% 14
Kenmore $679,870 $3,351 33.3% 16.5% 26
Newcastle $800,000 $3,944 23.3% 14.2% 23
Issaquah $750,248 $3,698 29.6% 14.2% 22
Seattle $695,000 $3,426 34.9% 13.4% 16
North Bend $662,350 $3,265 36.8% 11.9% 39
Lake Forest Park $675,000 $3,327 31.7% 11.6% 30
Woodinville $850,000 $4,190 20.3% 11.2% 22
Redmond $849,500 $4,188 21.7% 10.6% 6
Bellevue $904,013 $4,456 19.2% 9.2% 12
Snoqualmie $696,668 $3,434 30.6% 8.7% 37
Sammamish $939,000 $4,629 15.0% 6.9% 21
Duvall $649,000 $3,199 35.9% 6.6% 31
Carnation $670,000 $3,303 36.6% 5.7% 32
Mercer Island $1,650,000 $8,134 8.9% 4.2% 24
Normandy Park $722,500 $3,562 27.4% 3.4% 36

*According to Google maps

Nearly half of Microsoft’s $500 million commitment is directed at developing middle-income housing, starting in Seattle’s eastern suburbs, a move that could make homes in Microsoft’s backyard more affordable to its own employees.

The price of a typical home in the Seattle area has more than doubled in the last seven years. In contrast, the median household income in the Seattle area rose about 15 percent from 2012 to 2017 (the last year for which numbers are available). Home prices rising faster than wages is contributing to an affordability problem throughout most of the Seattle area, where it has gotten more and more difficult for low- and middle-income residents to afford housing, especially housing that’s close to where they work.

The affordability gap is partly due to local tech companies’ growth. They’re adding high-paying jobs and bringing skilled workers and immense prosperity to the area. As a result, many parts of Seattle and its suburbs that were once affordable are no longer within reach for most middle-class residents. Microsoft’s affordable housing pledge was made partly to address its role in the issue. The commitment consists of $25 million in donations to programs combating homelessness in the area, $250 million in market-rate loans to build affordable housing for low-income families and $225 million in below-market-rate loans to develop middle-income housing (targeted toward those earning $62,000 to $124,000 per year).

The loans for middle-income housing will initially focus on Redmond, Bellevue, Kirkland, Issaquah, Sammamish and Renton. As you can see in the table above, in five of the six cities where Microsoft is directing its investment in middle-income housing, less than 30 percent of homes for sale are affordable on the typical salary for a software development engineer at Microsoft—and less than 20 percent are affordable for households earning the median income for King County. Note that a higher share of homes are affordable on a single Microsoft software engineer salary than the median household income for all of King County.

To come up with the share of homes affordable on a median King County income, we used the annual median household income for King County, which was $83,571 in 2017 (the most recent year for which the data is available). For the share of homes affordable to the typical Microsoft software engineer in Seattle, we used the Glassdoor average base salary of $116,494. The portion of homes affordable for each category is based on the general rule that homeowners should spend no more than 30 percent of their monthly gross income on housing and assumes a 20 percent down payment, a mortgage interest rate of 4.37% (the average for February 2019) and a 1.125% property tax rate.

Pressure on the Eastside Housing Market is Rising as Tech Companies Increase Their Presence

The Eastside suburbs are more accessible to Microsoft engineers than to the general King County population. But most of them—especially Redmond, Bellevue and Sammamish—are on the high end in terms of list prices and monthly mortgage payments, and they may be poised to become even more expensive, thanks to Amazon and Facebook potentially adding thousands of employees in the Eastside suburbs.

Kathi Kelly-Billings, a Redfin agent who specializes in the Eastside, said many of her homebuying clients work for tech companies such as Microsoft and Amazon. “Homebuyers these days are savvy. They’re mindful of their money and watch the real estate market closely. In some ways, affordability is personal and subjective,” she said. “Some of my clients on the Eastside, both single- and double-income families, end up buying at a lower price point than what they are approved for because they don’t want to max out their monthly expenditure. And some choose to make a longer commute to a more affordable city, like Bothell, to get a larger home for the same amount of money. But most of my clients who work for large tech companies are able to afford a home somewhere in the greater Seattle area.”

Microsoft’s loans, particularly those made with an eye toward developing middle-income housing, could help alleviate some of the pressure on the Eastside suburbs. Although Microsoft’s commitment is unlikely to push down home prices in the Seattle area, it could help mitigate the rise of prices and add inventory.

“Tech companies have to work really hard—usually by increasing salary and benefit packages—to attract workers with in-demand skills like software engineers, machine learning scientists and executives,” said Redfin chief economist Daryl Fairweather. “But these sought-after job candidates also care about being able to find housing and seek out communities with good access to education, healthcare and other amenities that require all different types of professionals, like teachers, nurses and non-profit employees, who aren’t officially part of the tech workforce. Microsoft is making a long-term bet that investing in the livability of communities where Microsoft employees live will pay dividends far into the future.

If Microsoft’s commitment is successful in catalyzing the construction of low-income housing throughout the Seattle area, it could also help curb socio-economic segregation. Cities in southern King County like SeaTac and Federal Way tend to have lower median incomes and lower-priced homes. Loans to build houses across King County, not just in low-income areas that already have relatively inexpensive options, could contribute to more affordable housing in historically high-priced areas like the city of Seattle and the Eastside suburbs. Income diversity in cities and neighborhoods can lead to greater economic mobility for residents.

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