Seattle offers lessons in the dark side of the tech industry boom – Vancouver Sun

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. Theyre everywhere now.

Local media refer to the Pacific Northwest citys recent tech-fuelled economic boom as the second gold rush to hit town.

But that wealth hasnt 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 Caculitans 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 theyre 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 citys increasing homelessness. He works at the village in South Lake Union, a rapidly changing neighbourhood, home to expensive residential highrises and some of the citys and the worlds 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 citys 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.

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 its not surprising so many Seattle-based tech companies are moving north to Vancouver.

Microsoft isnt 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 provinces 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 Microsofts 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 provinces 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 governors Seattle offices, Horgan listed Metro Vancouvers 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 dont 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, Vancouvers application highlighted: We have the lowest wages of all North American tech hubs.

Vancouvers 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 engineers average salary was almost half that of a Seattle counterpart, its still 65 per cent higher than Metro Vancouvers average market income. By some estimates, the wage gap between tech workers and other occupations is even wider in Seattle.

With the federal election days away, Vancouver Mayor Kennedy Stewart said he hasnt heard anything on the campaign trail about promoting economic co-operation and development in Cascadia.

I havent 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 Ill be talking to them about is that weve got to take this more seriously.

Im 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 theyre a couple of light years away. So we have more in common north-south, quite often, than we do east-west.

B.C. Premier John Horgan in the Seattle offices of Washington Gov. Jay Inslee.See Notes / Direction / PNG

As a former NDP MP representing Burnaby, Stewart knows about that distance between B.C. and Ottawa. His first term was under Stephen Harpers Conservatives and his second under Justin Trudeaus 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 dont think were ready for that, Stewart said. Im 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 its just weve got to make sure we take the right ones.

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 Seattles 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.

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

Kelley, whod 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 Franciscos housing crisis, that hasnt 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.

Gil Kelley, general manager of planning, urban design, and sustainability, at Vancouver City Hall.Arlen Redekop / PNG

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 Vancouvers near-zero rental vacancy rate, Kelleys 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.

Its 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 OMara.

Policies in Seattle have been welcoming for big rental projects, while Vancouver developers have long complained their citys 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 Seattles rental construction boom and say Vancouver must build its way out of its own housing crisis. While Vancouvers rental vacancy rate remains below one per cent, Seattles vacancy rate is around 10 per cent, and rents in some Seattle neighbourhoods have started to drop.

But while Seattles 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.

Its market-rate housing, its meeting the tech workers needs, not the needs of a lower-income population, OMara said. Thats been the knock on Seattle.

Downtown Seattle.Dan Fumano / PNG

In the years since Kelleys 2017 presentation, government interventions such as Vancouvers 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. Vancouvers 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 dont know how long its 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 countrys 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 Canadas 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, thats 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 its our talent thats being exploited.

Its 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 isnt sure those governments are up to the task, noting its certainly not been a major issue in the federal election.

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 Columbias 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.

Amazons presence in Seattle is especially large as thats 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 doesnt mean he doesnt 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? Whats happened to them, both good and bad?

I like a bowl of ice cream. But I dont want to eat a bucket of ice cream. And I think thats what this kind of growth can be: It can have detrimental effects if you get too much of a good thing all at once.

dfumano@postmedia.com

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Seattle offers lessons in the dark side of the tech industry boom - Vancouver Sun