Joseph: Tech Firms Could Help Tackle the City’s Housing Challenges

With both a booming tech sector and unaffordable housing, Dublin is emblematic of many capital cities in the Global North.

While the tech sector, led by the likes of Google, Facebook and Microsoft, and a burgeoning start-up scene grows, the housing sector struggles.

Housing of all tenures is at a premium, and housing costs claim an ever-growing chunk of the incomes of those lucky enough to have a roof of their own.

The tech boom is understandably presented as a good-news story. Politicians and media gush over its role in Dublin’s economic resurgence, while the housing crisis is condemned as a blight on the city.

The two are rarely mentioned in the same breath. But they are intertwined.

Intuitively, it seems a good thing to nurture the growth of the tech sector: it provides jobs, some tax receipts, and, from a spatial perspective, it has played a key role in the urban regeneration of the Docklands.

However, beyond these immediate benefits, the wider urban impact of the tech sector’s growth is a hotly contested space. Research on “spillover benefits” – benefits that “spill over” to people not directly involved in the tech sector – is particularly ambivalent.

Optimists argue that policies – sympathetic corporate-tax regimes for instance – to attract tech firms are justified because the benefits from tech-growth spill over to those not directly employed in the sector.

On this view, the local economy benefits in term of jobs created, educational attainment, and even poverty reduction brought about by the proliferation of tech firms in a city.

The “multiplier effect” of tech growth in cities, whereby for every job created in the tech industry several other jobs are created in the local economy, is cited as a particularly powerful argument. Spillover benefits make tech growth particularly appealing to policymakers, as they address wider economic challenges such as unemployment and low wages.

More pessimistic analyses suggest that untethered growth of the tech sector in a city leads to a two-speed economy. This analysis characterises sector growth as insular, with low-waged service workers employed to service affluent workers whose rising wages inflate the cost of living for all.

Pessimists point out that large, successful, high-growth cities tend to have marked rates of economic segregation, with tech hubs like Dublin exhibiting this more markedly than more economically diverse cities.

The urban studies theorist Richard Florida has popularised this pessimistic view, and his research finds that the share of tech jobs is positively associated with income inequality. In other words, the higher the share of tech jobs in a city, the more unequal it tends to be.

For pessimists, the rub is that a technology-driven economy greatly favours a small group of talented and lucky individuals and thus exacerbates economic segregation.

So what’s going on in Dublin?

On a macro level, the tech sector’s contribution to Ireland’s economy is clear. According to the business lobby group IBEC, Ireland’s digital sectors account for about 13 percent of Ireland’s GDP.

Since 2013, the sector has grown at an average of 12 percent per annum. It contributed more than €30 billion to Ireland’s economy in 2017 and, on its current trajectory, will contribute over €44 billion in 2020. So – if you’re looking at the national accounts – a rising tide really does seem to raise all boats.

A World Apart

But at the local level, this tech tide is hemmed in by a dam of high prices.

Take the Docklands, which, despite the high level of apartment-building in recent years, is still only genuinely affordable to those working in the tech sector, thus creating the atmosphere of an affluent ghetto.

Stroll through the south Docklands and it is clear that amenities and housing are geared to serve the tech elite. Rents are expensive, even for Dublin. Asking prices for a two-bed flat in Grand Canal Dock are around €3,000 to €4,000 a month – more than double the average for Dublin of €1,527.

According to the indices of deprivation, the South Docks are a patchwork of small areas that rate as “extremely affluent” or “very affluent”, and areas along neighbouring Pearse Street that are “disadvantaged” and “very disadvantaged”.

Tech firms are, indirectly, setting rents in these areas through the wages they pay, with the result that most of the city is locked out of the benefits of one of Dublin’s great success stories of urban regeneration.

So, at a macroeconomic level the benefits of tech-sector growth are being felt. But when you drill down with a closer look at what is going on on the ground, these wider benefits are failing to spill over in a meaningful way.

What Next?

Housing affordability is a complex issue, and the tech sector is no more to blame than “the government” or “developers”. There are many moving parts to housing and treating it as a simple issue, looking for silver-bullet solutions, overlooks this complexity to the detriment of coming up with effective solutions.

Nevertheless, one of the many things that need to be done to deal with the affordability challenge is for tech firms to take more of an interest in their local economy.

A lot of these firms have sold Dublin as a cool place to live to attract employees. Now, having commodified it as such, they can play their part in keeping it economically diverse rather than homogenising it into a playground for the well-paid.

Other cities are waking up to the connection between tech growth, inequality, and housing.

In North Bayshore in Silicon Valley, city officials are offering tech firms a sizeable density bonus if they build apartments themselves, nudging them to help deal with the increased demand placed on housing by the presence of tech firms.

These firms seem keen to do so. Google now has a large house-building arm in Silicon Valley as it recognises that the company does not operate in a vacuum, and must itself build houses to counter the upward pressure on rents and spaces that it has brought about.

North Bayshore has increased the proportion of affordable housing required in new developments to ensure that homes built by tech firms don’t just serve their well-paid employees, but also locals who are not riding the tech wave.

This specific mechanism – tech firms building houses with a high proportion of affordable units – is a great example of ensuring that those macro-level benefits of tech-sector growth spill over at a local level, while improving the relationship between the wider city and the tech sector.

To stop further segregation of the affluent, and to tackle the city’s housing challenges, we need to take steps to ensure that the undoubted benefits from tech growth that accrue to the national economy do trickle down, that the benefits are seen on streets and in neighbourhoods.

This means ensuring affordable housing is part of the plan as the tech sector continues to grow in Dublin. It means firms looking at the impact they’re having locally, and using that as one of their performance indicators.

Most of all, though, it means bringing these firms to the table to talk about how they, too, can help the city address its housing crisis. With all the innovation going on in the Docklands, isn’t it time for it to spill over into housing?