Microsoft Corp., King County Housing Authority (KCHA) and King County on Thursday announced a combined $245 million investment to protect 1,029 units of affordable rental housing throughout King County.
The partnership comes in the form of a 15-year, $60 million loan from Microsoft to KCHA at below-market interest rates, combined with $20 million in low-interest debt and additional credit enhancements provided by King County, and $140 million in bonds issued by KCHA. This investment marks a significant milestone for Microsoft’s $500 million commitment announced in January 2019 to advance affordable housing solutions in the Puget Sound region.
Microsoft’s investment will help finance KCHA’s acquisition of five residential apartment complexes in Kirkland, Bellevue and Federal Way, ensuring rents will remain affordable long term and allowing over 3,000 low- and middle-income people to remain in their communities. Because of their location, these affordable properties were at high risk of experiencing rapidly escalating rents or redevelopment as higher-cost housing.
“We are committed to maintaining and bolstering strong, vibrant communities here in the greater Puget Sound region,” said Jane Broom, senior director of Microsoft Philanthropies. “Thriving communities include safe, reliable and affordable housing options for people at all income levels. To do this, we all need to come together to not only build more housing options, but also to preserve what already exists.”
The investment provides the key piece of financing that allows KCHA to acquire the five properties and stabilize rents. Future rent increases can be driven by the cost to operate the property rather than by market pricing, and over time rents are expected to be well below rents in the surrounding market. It is estimated that over a 30-year period the cumulative rents charged at these complexes will save renters over $450 million in housing costs compared with what would have been charged if these properties had remained in for-profit ownership and priced at market rents.
“We have extraordinary partners in Microsoft and King County Housing Authority as we collaborate to secure housing opportunities for more than 1,000 low-to-moderate-income individuals and families in East and South King County,” said King County Executive Dow Constantine. “Our combined investment makes this housing affordable not just now, but for generations to come.”
This partnership is an example of how the public and private sectors can work together to help address community issues. This initiative effectively partners corporate financing with efforts to preserve an adequate supply of affordable housing. The impact of this investment is immediate, with value added in the form of increasing affordability over time.
Local studies estimate King County has lost at least 36,000 affordable rental units in the last decade as rents increased by 43%.
“Across the Puget Sound region, people with lower and even middle incomes have been forced to move due to rising housing costs,” said KCHA Executive Director Stephen Norman. “This partnership preserves unsubsidized middle-market housing for moderate- and lower-wage earners. We believe this investment, which requires a good corporate partner to make the numbers work, will ultimately help stabilize rents and safeguard more than 3,000 existing tenants from being priced out of their homes.”
Ensuring a healthy community: The need for affordable housing
Puget Sound is the sixth most expensive region in the country, and despite a 21% increase in jobs since 2011, the increase in housing units rose by only 13%. This problem is even more pronounced in the smaller cities surrounding Seattle than it is in Seattle itself.
To help address this affordable housing crisis, Microsoft’s $500 million commitment included $225 million in loans at below-market-rate returns — such as KCHA has received — to inject capital to catalyze the preservation and construction of middle-income housing in the eastside of King County. The commitment also afforded an additional $250 million in loans at market-rate returns to support low-income housing across the entire Puget Sound region, and $25 million in philanthropic grants to address homelessness throughout the greater Seattle region. In June 2019, Plymouth Housing, a nonprofit that operates permanent supportive residences for individuals struggling with homelessness, received a $5 million donation from Microsoft, the second grant awarded.
KCHA, an independent municipal corporation established under state law, assists more than 20,000 households in the Seattle metropolitan region on a daily basis. The Authority administers rental housing assistance, develops and manages affordable housing, and works closely with community stakeholders to address local priorities such as ending homelessness, improving educational outcomes for the region’s low-income youth, and assuring that disabled and elderly households can live with dignity. KCHA is also a national leader in the preservation of affordable workforce housing.
Microsoft (Nasdaq “MSFT” @microsoft) enables digital transformation for the era of an intelligent cloud and an intelligent edge. Its mission is to empower every person and every organization on the planet to achieve more.