The Amazon Tax: Higher Rents

The NYT had an interesting column on the impact that the location of Amazon’s new headquarters would have on rents in the finalist cities. The column reports projections from Zillow on how much more the median rents would rise over the next decade due to the presence of Amazon.

Topping the list is Los Angeles, where Zillow projected that the median monthly rent will be $740 higher in 2028 if Amazon puts its second headquarters there. This means that the median renter in the city will be paying an Amazon tax, in the form of higher rents, of almost $9,000 a year for the privilege of having Jeff Bezos company located in her city.

If Bezos chooses Denver, the median tenant will be paying an extra $720 a month, or $8,600 a year to enjoy Amazon’s presence. Bostonians would have to pay $485 a month or $5,800 a year to have Amazon as a neighbor.

While this analysis is very speculative, it shows how many residents of the city “winning” the Amazon location game show could be big losers. This is especially true if the city’s secret concession package costs large amounts of future tax revenue and/or commits the city to large Amazon-specific subsidies.

The point about the location of businesses and the cost of housing is an issue that comes up in other contexts as well. For example, the explosion of the financial sector in New York has sent rents through the roof there. This likely means that New Yorkers who do not derive their income directly or indirectly from the industry lose from its presence. (That would not be the case for property owners.)

It is worth noting that the piece reports Amazon says it contributed $40 million to support affordable housing in Seattle. If a new unit costs on average $200,000, this means Amazon’s contribution was sufficient to build 200 units.

This column originally appeared on Beat the Press.

Dean Baker is the senior economist at the Center for Economic and Policy Research in Washington, DC.