Seattle offers lessons in the dark side of the tech industry boom

SEATTLE — The first thing Chris Caculitan mentions, when asked how the Emerald City has changed in the years since he grew up here, is the tech companies. They’re everywhere now.

Local media refer to the Pacific Northwest city’s recent tech-fuelled economic boom as the “second gold rush” to hit town.

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But that wealth hasn’t lifted all boats, as Caculitan, 28, has seen first-hand. Caculitan, who studied social work at Seattle University, works for the Low-Income Housing Institute, a Seattle non-profit. Born in the Philippines, Caculitan immigrated to Seattle as a child. The support his working-class family received from the government and community members influenced his career choice, he said. “I kind of saw what that struggle was like, so I wanted to make it a career, helping those who needed more.”

As money poured into Seattle in recent years, some of Caculitan’s family and friends have been forced out. That will sound familiar to many Vancouverites, particularly renters. But in Seattle, even longtime homeowners with full-time jobs have had their property taxes soar beyond what they’re able to pay, forcing them to leave town.

Caculitan manages one of the “tiny house villages” that the City of Seattle has supported in recent years in response to the city’s increasing homelessness. He works at the village in South Lake Union, a rapidly changing neighbourhood, home to expensive residential highrises and some of the city’s — and the world’s — largest tech companies.

Chris Caculitan, a special projects manager for the Low Income Housing Institute, a Seattle non-profit housing provider, in the Lake Union Village, one of the city’s “tiny house villages” for formerly homeless people. Dan Fumano / PNG

The village, which was an underutilized city-owned parking lot until last year, is home for 28 previously homeless Seattleites living in 22 wooden sheds. The homes are less than 100 sq. ft. each, but the “villagers” are happy to have a locking door and a roof that keeps out the rain.

The day before Caculitan gave The Vancouver Sun a tour of the village this month, a different Seattle was on display a six-minute Uber ride away, in a downtown hotel ballroom.

‘The opportunities are immense’

There was no shortage of optimism among government officials and business leaders from B.C., Washington and Oregon, gathered for the Cascadia Innovation Corridor Conference. The governor of Washington and premier of B.C. sat together on stage discussing big goals they share as “allies,” and the mayors of Vancouver and Seattle met to discuss their cities’ shared opportunities. There was much talk of how the Cascadia “mega-region” of 10 million people can be a bigger global competitor than any of its three urban centres — Portland, Seattle and Vancouver — could be on their own.

Brad Smith, president of Microsoft, told the crowd his trillion-dollar company has “been so excited to see Vancouver increasingly take off.”

“We at Microsoft have been so enthusiastic about our development centre in Vancouver,” said Smith, adding that “it’s not surprising” so many Seattle-based tech companies are “moving north to Vancouver.”

Microsoft isn’t the only Washington giant growing in Vancouver. When Seattle-based online retailer Amazon unveiled plans last year to create 3,000 jobs in Vancouver in a 416,000-square-foot complex being built on top of the old Canada Post facility on West Georgia, Prime Minister Justin Trudeau was there for the announcement.

B.C.’s leaders have worked for years to boost the province’s tech sector. Government officials often talk about boosting the “innovation economy” as a way to produce high-paying jobs, generate tax revenue, and help move the economy away from dependence on resource-based industries and towards a more climate-friendly future.

Hours after Microsoft’s Smith sang the praises of Vancouver and Surrey, Premier John Horgan and Wash Gov. Jay Inslee took to the same stage.

“The tech sector has certainly developed here, and then as it blossoms into British Columbia, we see synergies between the two jurisdictions that are compelling to investors,” Horgan said. “The opportunities are immense.”

Some of B.C.’s traditional industries, such as forestry, are struggling, but the province’s technology sector has been setting records for revenue and job numbers. The latest government numbers show more than 114,200 people are employed in B.C.’s high-technology sector, with $31 billion in revenue in 2017, a 6.9 per cent increase over the previous year.

Sitting in the governor’s Seattle offices, Horgan listed Metro Vancouver’s advantages in competing for top companies and talent from the U.S. and abroad: an educated population, top research universities, good health care, multicultural cities, order and stability.

And as U.S. immigration has tightened under President Donald Trump. it has become harder for American companies to bring in top international talent. But a Seattle-based company with a Vancouver office can attract foreign recruits to its northern outpost. That, Horgan said, represents “a competitive advantage for us.”

The B.C. government wants, Horgan said, to “focus on lifting wages. We don’t want to be the lowest common denominator.”

That touches on one of B.C.’s competitive advantages in the tech industry: cheap labour — or at least relatively cheap. In 2017, when cities around North America made pitches to Amazon seeking to host its second headquarters, Vancouver’s application highlighted: “We have the lowest wages of all North American tech hubs.”

Vancouver’s bid, which drew criticism locally for boasting about its low-earning tech workers, cited an average salary for a software engineer in Vancouver as US$60,107 compared to $92,380 in Atlanta and $113,906 in Seattle. That means while a Vancouver software engineer’s average salary was almost half that of a Seattle counterpart, it’s still 65 per cent higher than Metro Vancouver’s average market income. By some estimates, the wage gap between tech workers and other occupations is even wider in Seattle.

‘North-south’ connections

With the federal election days away, Vancouver Mayor Kennedy Stewart said he hasn’t heard anything on the campaign trail about promoting economic co-operation and development in Cascadia.

“I haven’t heard it mentioned once,” Stewart said after the Cascadia conference. “It would be my job to make this Cascadia corridor idea clearer to the feds. The province and John Horgan are all over this. … But whoever wins the federal election, I think one of the things that I’ll be talking to them about is that we’ve got to take this more seriously.”

“I’m a passionately proud Canadian,” Horgan said, “but I see there are obstacles because our east-west linkages often times get in the way of expanding our north-south relationship. … Ottawa is 3,000 miles away from British Columbia physically, and sometimes, it feels like they’re a couple of light years away. So we have more in common north-south, quite often, than we do east-west.”

As a former NDP MP representing Burnaby, Stewart knows about that distance between B.C. and Ottawa. His first term was under Stephen Harper’s Conservatives and his second under Justin Trudeau’s Liberals, and both parties, he said, seemed “Ottawa-centric” and “out of touch” with the West Coast.

International companies are “looking at us in a serious way, and I don’t think we’re ready for that,” Stewart said. “I’m getting ready for it, but we have to have a real conversation as a community about what we want this city to be. Because I think the opportunities are there, but it’s just we’ve got to make sure we take the right ones.”

Dark side of the boom?

Leaders on both sides of the border acknowledge concerns about the dark side of the boom.

Metro Vancouver has grappled for years with a housing affordability and homelessness crisis. But the Seattle-King County area, with a similar overall population, has almost four times as many homeless people, including many full-time workers and families with children. Researchers have found Seattle’s recent surge in homelessness is not linked to increases in either population or poverty in the region, but instead to rising housing costs and wealth inequality.

Vancouver’s chief planner, Gil Kelley, made a prediction on the subject of local wealth inequality in 2017, when he presented the city’s new 10-year housing strategy to the previous mayor and council.

Kelley, who’d arrived in Vancouver a year earlier from San Francisco, where he was director of citywide planning, said both cities faced housing challenges, but there were notable differences. One key element of San Francisco’s housing crisis, “that hasn’t quite hit Vancouver yet, but likely will, with its growing high-tech economy, was the growing wage gap between high-technology workers and regular folks in San Francisco,” Kelley said.

Vancouver had high housing prices but not very high wages, and its housing affordability woes were instead largely driven by a “very extreme level of speculative investment in real estate,” he said.

To deal with Vancouver’s near-zero rental vacancy rate, Kelley’s housing strategy sought to boost construction of rental housing, a direction broadly supported by the current mayor and council.

Over the past decade, 77 per cent of homes built in Vancouver were condos and houses. Only 17 per cent were market rental homes and five per cent were social housing. That includes the uptick in rental housing in recent years, as Vancouver adopted policies to encourage private-sector apartment construction.

It’s a dramatically different picture from Seattle, where the “one saving grace has been the immense amount of apartment construction,” said a University of Washington professor, Margaret O’Mara.

Policies in Seattle have been welcoming for big rental projects, while Vancouver developers have long complained their city’s onerous approval process threatens the viability of such projects. A Seattle planning official recently gave a presentation to a room full of Vancouver developers, The Province reported in August, that “elicited envious sighs when he talked about approving a proposed Seattle apartment tower in about a year.”

Vancouver developers — many increasingly active in Seattle — point to Seattle’s rental construction boom and say Vancouver must build its way out of its own housing crisis. While Vancouver’s rental vacancy rate remains below one per cent, Seattle’s vacancy rate is around 10 per cent, and rents in some Seattle neighbourhoods have started to drop.

But while Seattle’s rental supply increase has helped, somewhat, to ease the tight market, those apartments are still too expensive for many locals. And the fact that thousands of Seattleites are homeless while one in 10 apartments sit empty suggests a rental construction boom is not, on its own, the solution to the housing crisis.

“It’s market-rate housing, it’s meeting the tech workers’ needs, not the needs of a lower-income population,” O’Mara said. “That’s been the knock on Seattle.”

In the years since Kelley’s 2017 presentation, government interventions such as Vancouver’s empty homes tax and B.C.’s speculation tax have been credited with helping cool the housing market.

In that context, it makes sense that a large enough influx of new people earning far above median local incomes could potentially undo the recent efforts to moderate the housing market, said Trevor Barnes, a professor of geography at the University of B.C.

San Francisco and Seattle provide examples of what a tech gold rush can do “if it gets big enough,” Barnes said. Vancouver’s tech industry, he said, “is not big enough, I think, at the moment to have that kind of effect, but it is a fast-growing sector, so I don’t know how long it’s going to be before the tide turns.”

Canada also has many locally born and bred tech companies, many of which have criticized the federal government for failing to give priority to the country’s homegrown digital economy. This month, more than 100 Canadian tech CEOs signed an open letter to the leaders of the federal Liberals, Conservatives, NDP and Greens, urging them to “develop economic policies that advance innovative Canadian companies,” claiming “Canada’s productivity is lagging.”

There are concerns, too, about foreign tech companies coming here to exploit our comparatively cheap labour and take home most of the benefit.

“Of course, that’s the story of B.C., historically,” Barnes said. “Foreign companies that have come in to exploit resources here, lumber and minerals. … Maybe this is another version of that. Except it’s our talent that’s being exploited.”

It’s up to our governments, Barnes said, to ensure enough of that prosperity benefits regular Canadians, and not only a small number of tech executives in the U.S. He isn’t sure those governments are up to the task, noting “it’s certainly not been a major issue in the federal election.”

‘A bucket of ice cream’

B.C. Finance Minister Carole James is aware of concerns around upward pressure on housing prices. Indeed, she said, she hears “directly from the tech sector about the importance of creating affordable housing options to attract and maintain skilled workers.”

“Good jobs and affordable communities go hand-in-hand and we are committed to delivering both,” James said in an emailed statement. “Our government has made tech and innovation a priority for economic growth across the province, from Surrey to Victoria to Kelowna, because we recognize British Columbia’s potential to be a global hub of innovation … My ministry continually monitors the housing market, and so far I am cautiously optimistic the measures implemented by our government are beginning to bear results, with strong indications that moderation and stability are returning to B.C.’s housing market.”

Amazon’s presence in Seattle is especially large as that’s where it is headquartered. But even if Vancouver becomes home to a number of branch offices for tech companies, it could be enough to bring unintended consequences, Stewart said, adding it could actually “be more of a risk because the company has less of a connection with the community.”

Microsoft touted its deep connection with the Seattle when, earlier this year, it announced an unprecedented commitment of US$500 million in loans and grants to support middle- and low-income housing in the area.

Of course, Stewart said, his cautious approach doesn’t mean he doesn’t want economic growth and job creation in Vancouver.

“These opportunities might be the best that ever happen to us. We just have to be able to evaluate this, as a community,” Stewart said. “What can we learn from Seattle and San Francisco? What’s happened to them, both good and bad?”

“I like a bowl of ice cream. But I don’t want to eat a bucket of ice cream. And I think that’s what this kind of growth can be: It can have detrimental effects if you get too much of a good thing all at once.”

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