In November 2018, Amazon announced that Long Island City, New York, and National Landing, Virginia, would be the joint home for its second headquarters—a project dubbed “HQ2.” The announcement came after a fourteen-month bidding process that drew proposals from cities and states around the country and attracted nationwide media attention, in part because Amazon promised 25,000 jobs to whoever hosted the new headquarters.
Municipalities went to great lengths to win the bid, with many offering billions of dollars in subsidies. A city in Georgia even offered to rename itself “Amazon” if it won the chance to host the new headquarters. One publication called it a “Jeff Bezos prosperity bomb.”
At the end of the “HQ2 Sweepstakes,” Long Island City, a neighborhood on the western edge of Queens, New York, emerged victorious. Polls showed that almost 60 percent of New Yorkers supported the project. And yet, while a great deal of work had gone into winning the bid and many residents of the city embraced Amazon’s arrival, the project came under intense scrutiny as soon as it was announced. Tax credits promised to Amazon and concerns about transparency during the bidding process led to understandable anger from community activists who had been left out of the secretive process. Then, in February, after the criticism had worn on for several months, Amazon had a change of heart: they decided that Long Island City would no longer host HQ2.
While critics of the deal cheered its collapse, closer inspection reveals that it left many local stakeholders feeling bitter. Long Island City lost out on 25,000 relatively high-skill, high-paying jobs. Local shops, bars, restaurants, and bodegas lost 25,000 potential clients, whose demand for goods and services would have driven demand for labor across various industries and skill sets in Long Island City. And, of course, Amazon lost a chance to build a headquarters in New York—home to one of the most diverse and dynamic workforces in the world and a missed opportunity to establish a powerful east coast presence in the metropolitan area with the largest GDP in the country. And New York—uniquely positioned to demand more from corporations owing to its dynamic workforce and desirability—lost the chance to show the country that attracting business need not be a race to the bottom.
There are few silver linings to this episode except this one: public and private sector leaders around the country can learn from the failure. Nearby low-income communities, like the Queensbridge public housing project, were broadly supportive of Amazon’s arrival. The residents of Queensbridge had sensible concerns, of course. Would there be opportunities for employment at all skill levels at the new HQ2? How would Amazon’s arrival affect nearby rent prices? But even with those concerns, community leaders like April Simpson, president of the Queensbridge Houses Tenant Association, expressed openness to the idea of Amazon moving in next door.
Protestors rally against Amazon and the company’s plans to move their second headquarters to the Long Island City neighborhood of Queens, at New York City Hall, in New York City. Source: Drew Angerer/Getty Images
That openness could have been better taken advantage of by Amazon and its powerful proponents, including New York Governor Andrew Cuomo, New York Mayor Bill de Blasio, and the congressional representative from the district. In fact, these political leaders could have used Long Island City and the new headquarters as a model of inclusive urban development—one that allowed Amazon to achieve its goals and helped Long Island City along the way. In particular, Amazon could have helped New York City’s residents in three key areas.
Housing
Critics of the Amazon move pointed to one of its unintended consequences: that the planned takeover of the Long Island City waterfront site near Anable Basin meant the end of development projects already planned for that area. The area was set to host 5,000 new apartments, a new school for 700 students, and over 300,000 square feet of creative production and light manufacturing space. As a part of the New York’s Mandatory Inclusionary Housing policy, 1,250 of those apartments would have been set aside for affordable housing. Replacing all of that with a new, gleaming corporate headquarters made for an easy talking point for critics.
The City Council and the state’s Public Authorities Control Board could have helped here. The construction of Amazon’s headquarters should have been contingent on mixed-income housing development and pricing protections for communities already experiencing housing shortages. The concerns about new neighbors moving in, driving up housing prices, and taking what’s left of the housing stock are real, and the City Council and the state’s Public Authorities Control Board should have done more here.
Amazon, too, should have taken proactive steps. For instance, they could have followed the Microsoft playbook. In 2018, Microsoft executives first began exploring the idea of making a meaningful investment in Seattle housing. They were responding to a Puget Sound-area housing crisis, but the timing wasn’t accidental: Microsoft was expanding its own headquarters in Redmond by 8,000 workers, and they anticipated the criticism from those already concerned about the area’s limited housing stock.
Microsoft’s 2019 proposal made headlines: they invested $500 million in a workforce housing fund. That was a bigger dollar amount than the whole state of Washington had put into its effort on housing, and it was modeled on a similar program in Silicon Valley. There were and still are some open questions about the proposal—How much of an impact will it really have? Will their housing trust fund model work as intended?—but it showed a level of corporate commitment to local housing that is laudable. It also demonstrated that Microsoft executives weren’t deaf to the problems of affordable housing in the Puget Sound region—and that they were willing to put dollars against those concerns.
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Education and Workforce Development
One of the criticisms lobbed at the Amazon proposal was the allegation that the 25,000 jobs it was bringing to New York City wouldn’t go to people who needed the jobs most—lower-income individuals struggling with unemployment.
There are fair criticisms to make of Amazon’s record on employment issues—including the fact that, even though it pays its full-time workers a minimum wage, it conveniently doesn’t do the same for subcontractors. But the idea that 25,000 new jobs wouldn’t help people on the margins was considered a falsehood by the residents of public housing facilities located near Amazon’s proposed HQ2 headquarters. Championing their view wasn’t done forcefully enough by Amazon and by supporters like Governor Cuomo and Representative Carolyn Maloney (D).
For one thing, the 25,000 number only captured the jobs Amazon would create directly. By one calculation, there would be 67,000 new jobs created “indirectly”—and that includes middle- and lower-income positions. In the context of New York’s strong unions, rising minimum wage, and paid sick leave requirements, Amazon’s arrival could have helped a number of people across the economic spectrum.
But the idea that Amazon was just bringing in high-income jobs for the privileged few was a talking point that stuck. Amazon also didn’t help matters in how it approached its promised investments in workforce and development. In its proposal, it offered only $15 million in workforce development and training for the community of Queensbridge. And it doesn’t take much math to deduce that, to a company of Amazon’s size and scale, $15 million is a paltry sum, even more so when you consider the $3 billion in tax credits and incentives Amazon was set to receive from both the city of New York and the state of New York.
Amazon’s proponents in the city should have spoken up for more investment in workforce development at the time the deal was being worked out, or even after the deal came under scrutiny.
Amazon’s proponents in the city should have spoken up for more investment in workforce development at the time the deal was being worked out, or even after the deal came under scrutiny. And they could have pointed to other private sector companies making substantial commitments to training local workforces. JP Morgan, for example, has made a commitment of $100 million to the city of Detroit; and in 2018, Boeing announced a $300 million multi-year effort for its workers and local communities.
Numbers matter—and they matter especially when Amazon is on the receiving end of billions in tax credits from city and state residents. Amazon and its proponents failed to demonstrate a real commitment to local workforce development by not including local hiring guarantees and workforce development programs accessible to lower-income residents. Local residents and business leaders insist they were making progress on local job training and hiring, but those efforts were not publicized by Amazon’s now-absent political supporters. Had Amazon proactively added such guarantees, they could have taken some of the bark and bite out of their critics, and more importantly, they could have made an impact on one issue that matters to every single New Yorker.
Local Sourcing Preferences
Among the affirmative steps that Amazon could have taken in developing its HQ2 plan is a commitment to local sourcing—in the design and construction of its proposed HQ2 campus, in the hiring of workers, even in the decisions it made about where food for its HQ2 cafeterias would come from.
Local sourcing preferences tend to be tools used by city and state governments to give preference to local contractors, but they can also be powerful tools that multinational companies can use to show their commitment to the places in which they have a physical presence. The idea is simple: if a city government is constructing a new building, then it ought to give preference to local contractors. This benefits the local tax base, local growth, and local hiring. Furthermore, these programs ensure that development and construction benefit the people already living where the development happens—and the ones who are paying the taxes to fund the projects in the first place. In Amazon’s case, that would have meant sourcing from nearby neighborhoods and communities, rather than importing from outside the city or state.
Amazon could have announced—and Governor Cuomo and his allies might have demanded—that the corporation would only work with local suppliers for the materials of the construction of its new campus. It could have decreed that a certain percentage of its workforce would have to come from workers who lived in the city itself. Better yet, it could have done this without being asked to by the city—not because it was required to by law, but as a show of good faith to the local community. For a company of Amazon’s scale, it would have been possible to incentivize local suppliers and manufacturers to produce the things it needs—and thus demonstrate its commitment to city officials and local activists.
A Failure of Leadership on All Sides
Much of the opposition to Amazon centered, and rightfully so, on the company itself: its market concentration, political power, and unequal labor practices. Whether it’s the HQ2 “sweepstakes” that forced cities to divulge proprietary data or Amazon seeking billions in tax credits while paying no corporate taxes, many of Amazon’s business practices are disturbing.
But Amazon’s market power won’t change because a few vocal critics torpedoed plans for a headquarters in Long Island City. For that, we will need congressional representatives who take antitrust enforcement seriously, who see it as part of their responsibility to rein in the power of monopolies like Amazon, Facebook, and Google. Because they’ve been absent in that duty, market consolidation in America has driven record inequality—no more so than in New York’s 12th congressional district, where Long Island City is located, and which is both the wealthiest and second-most-unequal district in America.
Among the more shameful displays was politicians who supported Amazon’s HQ2 when it was convenient—and then immediately flipped their positions when the company was criticized.
That’s why it was all the more important for future political leaders to work with a newcomer like Amazon and take steps to address problems of inequality and gentrification rather than cheering an announcement from the sidelines and then shrinking in the face of criticism from it. Politicians should have stepped up when the controversy first started rather than disappear: among the more shameful displays was politicians who supported Amazon’s HQ2 when it was convenient—and then immediately flipped their positions when the company was criticized. If 25,000 jobs were as important as many of these officials said they were in their first statements, then they ought to have fought for a better deal, instead of simply issuing regretful tweets and statements after the fact.
Politicians who now lament the loss of Amazon’s HQ2 could have, in other words, operated from a place of strength from the start of negotiations with the corporate giant. Amazon chose New York because it represents one of the finest examples of an “agglomeration economy”—a term that speaks to the benefits that come when firms and people are located near one another. The city isn’t just another up-and-coming metropolis vying for jobs—New York is the most diverse urban population in the country, the seat of the nation’s economic power, and a community of unmatched vibrancy and dynamism. These were the very things that drew Amazon to New York in the first place, which is why New York has the unique obligation to lead in creating more inclusive prosperity when opportunities like a corporate relocation arise. Yet, in spite of all that, political leaders who supported the project in New York failed to use that clout and those characteristics to demand more from Amazon.
The Path Forward
CEOs of other companies could learn from this case as well. If Amazon should take anything away from this botched process, it’s this: when it enters a new community, it isn’t enough to just promise thousands of jobs and assume everything will be okay. It—and other companies like it—will have to do more. They can put the concerns of the community front-and-center, and by focusing on tangible problems like housing, workforce development, and local sourcing, Amazon could have—and could still—demonstrate a model of inclusive development that both improves its bottom line and lifts up the cities it seeks to join.
It’s not too late for Amazon and other corporate leaders around the country to take inclusive development seriously.
Amazon’s HQ2 was a test—can we work together to secure economic growth while making credible commitments that the benefits will be shared fairly? Those 25,000 jobs might not be coming to Long Island City after all, but it’s not too late for our political leaders to do better. And it’s not too late for Amazon and other corporate leaders around the country to take inclusive development seriously. Mistakes, it’s said, can be a good teacher. And the mistakes made during this process have a great deal to teach us.
Suraj Patel is a lawyer, activist, and adjunct professor of business ethics at NYU Stern. He recently ran for U.S. Congress as a progressive Democrat in New York’s 12th Congressional District. He is a veteran of both Barack Obama Presidential campaigns and worked as an advance associate for the Obama White House. Born to immigrant parents, his experience as a first-generation American shaped his view of politics and policy at an early age. He graduated Phi Beta Kappa from with a BA from Stanford University, was an Allen Scholar at NYU School of Law, and was a Departmental Scholar at Cambridge University where he completed a Masters in Public Policy focused on evidence-based policy making.
Vikas Patel is currently preparing to pursue a PhD in economics. His main interests are: monetary and fiscal policy, international finance, international political economy, and complexity economics. He is a member of the Young Scholars Initiative at the Institute for New Economic Thinking.
Lessons in the Wake of Amazon’s Failed HQ2
In November 2018, Amazon announced that Long Island City, New York, and National Landing, Virginia, would be the joint home for its second headquarters—a project dubbed “HQ2.” The announcement came after a fourteen-month bidding process that drew proposals from cities and states around the country and attracted nationwide media attention, in part because Amazon promised 25,000 jobs to whoever hosted the new headquarters.
Municipalities went to great lengths to win the bid, with many offering billions of dollars in subsidies. A city in Georgia even offered to rename itself “Amazon” if it won the chance to host the new headquarters. One publication called it a “Jeff Bezos prosperity bomb.”
At the end of the “HQ2 Sweepstakes,” Long Island City, a neighborhood on the western edge of Queens, New York, emerged victorious. Polls showed that almost 60 percent of New Yorkers supported the project. And yet, while a great deal of work had gone into winning the bid and many residents of the city embraced Amazon’s arrival, the project came under intense scrutiny as soon as it was announced. Tax credits promised to Amazon and concerns about transparency during the bidding process led to understandable anger from community activists who had been left out of the secretive process. Then, in February, after the criticism had worn on for several months, Amazon had a change of heart: they decided that Long Island City would no longer host HQ2.
While critics of the deal cheered its collapse, closer inspection reveals that it left many local stakeholders feeling bitter. Long Island City lost out on 25,000 relatively high-skill, high-paying jobs. Local shops, bars, restaurants, and bodegas lost 25,000 potential clients, whose demand for goods and services would have driven demand for labor across various industries and skill sets in Long Island City. And, of course, Amazon lost a chance to build a headquarters in New York—home to one of the most diverse and dynamic workforces in the world and a missed opportunity to establish a powerful east coast presence in the metropolitan area with the largest GDP in the country. And New York—uniquely positioned to demand more from corporations owing to its dynamic workforce and desirability—lost the chance to show the country that attracting business need not be a race to the bottom.
There are few silver linings to this episode except this one: public and private sector leaders around the country can learn from the failure. Nearby low-income communities, like the Queensbridge public housing project, were broadly supportive of Amazon’s arrival. The residents of Queensbridge had sensible concerns, of course. Would there be opportunities for employment at all skill levels at the new HQ2? How would Amazon’s arrival affect nearby rent prices? But even with those concerns, community leaders like April Simpson, president of the Queensbridge Houses Tenant Association, expressed openness to the idea of Amazon moving in next door.
That openness could have been better taken advantage of by Amazon and its powerful proponents, including New York Governor Andrew Cuomo, New York Mayor Bill de Blasio, and the congressional representative from the district. In fact, these political leaders could have used Long Island City and the new headquarters as a model of inclusive urban development—one that allowed Amazon to achieve its goals and helped Long Island City along the way. In particular, Amazon could have helped New York City’s residents in three key areas.
Housing
Critics of the Amazon move pointed to one of its unintended consequences: that the planned takeover of the Long Island City waterfront site near Anable Basin meant the end of development projects already planned for that area. The area was set to host 5,000 new apartments, a new school for 700 students, and over 300,000 square feet of creative production and light manufacturing space. As a part of the New York’s Mandatory Inclusionary Housing policy, 1,250 of those apartments would have been set aside for affordable housing. Replacing all of that with a new, gleaming corporate headquarters made for an easy talking point for critics.
The City Council and the state’s Public Authorities Control Board could have helped here. The construction of Amazon’s headquarters should have been contingent on mixed-income housing development and pricing protections for communities already experiencing housing shortages. The concerns about new neighbors moving in, driving up housing prices, and taking what’s left of the housing stock are real, and the City Council and the state’s Public Authorities Control Board should have done more here.
Amazon, too, should have taken proactive steps. For instance, they could have followed the Microsoft playbook. In 2018, Microsoft executives first began exploring the idea of making a meaningful investment in Seattle housing. They were responding to a Puget Sound-area housing crisis, but the timing wasn’t accidental: Microsoft was expanding its own headquarters in Redmond by 8,000 workers, and they anticipated the criticism from those already concerned about the area’s limited housing stock.
Microsoft’s 2019 proposal made headlines: they invested $500 million in a workforce housing fund. That was a bigger dollar amount than the whole state of Washington had put into its effort on housing, and it was modeled on a similar program in Silicon Valley. There were and still are some open questions about the proposal—How much of an impact will it really have? Will their housing trust fund model work as intended?—but it showed a level of corporate commitment to local housing that is laudable. It also demonstrated that Microsoft executives weren’t deaf to the problems of affordable housing in the Puget Sound region—and that they were willing to put dollars against those concerns.
Sign up for updates.
Education and Workforce Development
One of the criticisms lobbed at the Amazon proposal was the allegation that the 25,000 jobs it was bringing to New York City wouldn’t go to people who needed the jobs most—lower-income individuals struggling with unemployment.
There are fair criticisms to make of Amazon’s record on employment issues—including the fact that, even though it pays its full-time workers a minimum wage, it conveniently doesn’t do the same for subcontractors. But the idea that 25,000 new jobs wouldn’t help people on the margins was considered a falsehood by the residents of public housing facilities located near Amazon’s proposed HQ2 headquarters. Championing their view wasn’t done forcefully enough by Amazon and by supporters like Governor Cuomo and Representative Carolyn Maloney (D).
For one thing, the 25,000 number only captured the jobs Amazon would create directly. By one calculation, there would be 67,000 new jobs created “indirectly”—and that includes middle- and lower-income positions. In the context of New York’s strong unions, rising minimum wage, and paid sick leave requirements, Amazon’s arrival could have helped a number of people across the economic spectrum.
But the idea that Amazon was just bringing in high-income jobs for the privileged few was a talking point that stuck. Amazon also didn’t help matters in how it approached its promised investments in workforce and development. In its proposal, it offered only $15 million in workforce development and training for the community of Queensbridge. And it doesn’t take much math to deduce that, to a company of Amazon’s size and scale, $15 million is a paltry sum, even more so when you consider the $3 billion in tax credits and incentives Amazon was set to receive from both the city of New York and the state of New York.
Amazon’s proponents in the city should have spoken up for more investment in workforce development at the time the deal was being worked out, or even after the deal came under scrutiny. And they could have pointed to other private sector companies making substantial commitments to training local workforces. JP Morgan, for example, has made a commitment of $100 million to the city of Detroit; and in 2018, Boeing announced a $300 million multi-year effort for its workers and local communities.
Numbers matter—and they matter especially when Amazon is on the receiving end of billions in tax credits from city and state residents. Amazon and its proponents failed to demonstrate a real commitment to local workforce development by not including local hiring guarantees and workforce development programs accessible to lower-income residents. Local residents and business leaders insist they were making progress on local job training and hiring, but those efforts were not publicized by Amazon’s now-absent political supporters. Had Amazon proactively added such guarantees, they could have taken some of the bark and bite out of their critics, and more importantly, they could have made an impact on one issue that matters to every single New Yorker.
Local Sourcing Preferences
Among the affirmative steps that Amazon could have taken in developing its HQ2 plan is a commitment to local sourcing—in the design and construction of its proposed HQ2 campus, in the hiring of workers, even in the decisions it made about where food for its HQ2 cafeterias would come from.
Local sourcing preferences tend to be tools used by city and state governments to give preference to local contractors, but they can also be powerful tools that multinational companies can use to show their commitment to the places in which they have a physical presence. The idea is simple: if a city government is constructing a new building, then it ought to give preference to local contractors. This benefits the local tax base, local growth, and local hiring. Furthermore, these programs ensure that development and construction benefit the people already living where the development happens—and the ones who are paying the taxes to fund the projects in the first place. In Amazon’s case, that would have meant sourcing from nearby neighborhoods and communities, rather than importing from outside the city or state.
Amazon could have announced—and Governor Cuomo and his allies might have demanded—that the corporation would only work with local suppliers for the materials of the construction of its new campus. It could have decreed that a certain percentage of its workforce would have to come from workers who lived in the city itself. Better yet, it could have done this without being asked to by the city—not because it was required to by law, but as a show of good faith to the local community. For a company of Amazon’s scale, it would have been possible to incentivize local suppliers and manufacturers to produce the things it needs—and thus demonstrate its commitment to city officials and local activists.
A Failure of Leadership on All Sides
Much of the opposition to Amazon centered, and rightfully so, on the company itself: its market concentration, political power, and unequal labor practices. Whether it’s the HQ2 “sweepstakes” that forced cities to divulge proprietary data or Amazon seeking billions in tax credits while paying no corporate taxes, many of Amazon’s business practices are disturbing.
But Amazon’s market power won’t change because a few vocal critics torpedoed plans for a headquarters in Long Island City. For that, we will need congressional representatives who take antitrust enforcement seriously, who see it as part of their responsibility to rein in the power of monopolies like Amazon, Facebook, and Google. Because they’ve been absent in that duty, market consolidation in America has driven record inequality—no more so than in New York’s 12th congressional district, where Long Island City is located, and which is both the wealthiest and second-most-unequal district in America.
That’s why it was all the more important for future political leaders to work with a newcomer like Amazon and take steps to address problems of inequality and gentrification rather than cheering an announcement from the sidelines and then shrinking in the face of criticism from it. Politicians should have stepped up when the controversy first started rather than disappear: among the more shameful displays was politicians who supported Amazon’s HQ2 when it was convenient—and then immediately flipped their positions when the company was criticized. If 25,000 jobs were as important as many of these officials said they were in their first statements, then they ought to have fought for a better deal, instead of simply issuing regretful tweets and statements after the fact.
Politicians who now lament the loss of Amazon’s HQ2 could have, in other words, operated from a place of strength from the start of negotiations with the corporate giant. Amazon chose New York because it represents one of the finest examples of an “agglomeration economy”—a term that speaks to the benefits that come when firms and people are located near one another. The city isn’t just another up-and-coming metropolis vying for jobs—New York is the most diverse urban population in the country, the seat of the nation’s economic power, and a community of unmatched vibrancy and dynamism. These were the very things that drew Amazon to New York in the first place, which is why New York has the unique obligation to lead in creating more inclusive prosperity when opportunities like a corporate relocation arise. Yet, in spite of all that, political leaders who supported the project in New York failed to use that clout and those characteristics to demand more from Amazon.
The Path Forward
CEOs of other companies could learn from this case as well. If Amazon should take anything away from this botched process, it’s this: when it enters a new community, it isn’t enough to just promise thousands of jobs and assume everything will be okay. It—and other companies like it—will have to do more. They can put the concerns of the community front-and-center, and by focusing on tangible problems like housing, workforce development, and local sourcing, Amazon could have—and could still—demonstrate a model of inclusive development that both improves its bottom line and lifts up the cities it seeks to join.
Amazon’s HQ2 was a test—can we work together to secure economic growth while making credible commitments that the benefits will be shared fairly? Those 25,000 jobs might not be coming to Long Island City after all, but it’s not too late for our political leaders to do better. And it’s not too late for Amazon and other corporate leaders around the country to take inclusive development seriously. Mistakes, it’s said, can be a good teacher. And the mistakes made during this process have a great deal to teach us.
Tags: new york city, amazon, affordable housing