Google recently announced plans to contribute $86 million into a Low Income Housing Tax Credit (LIHTC), which will assist with funding 480 low-income housing units throughout the Midwest and West Coast.
Through the Low Income Housing Tax Credit program, which will be managed by U.S. Bancorp Community Development Corporation, builders and developers will receive tax credits when creating homes for low-income families and for senior citizens. While the tax credit is certainly welcome news to builders and developers, some are wondering why Google might want to get involved with the real estate industry.
While the answer to this question is one that only Google executives can answer, one clear explanation is simply because the company can afford to do it. With Google being worth more than $30 billion in terms of short-term investments and cash, the company has plenty of funds to dedicate toward additional investments. Clearly, shareholders don’t like to see a company sitting on piles of cash that can be used to help expand the company even further. As such, Google has been trying to determine what to do with the cash for some time now. With that in mind, the decision to investigate in real estate doesn’t seem to be so unusual. Furthermore, investing in housing for low-income families and senior citizens fits nicely within the company’s informal motto of “Don’t be Evil.”
“In recent years there has been a void in affordable housing investment,” said Google treasurer Brent Callinicos in a recent press statement. “Our investment with USBCDC allows us to further our goal of providing relief to people who otherwise may not have access to quality housing.”
Currently, the developments being planned through USBCDC include:
- Waukegan, Illinois (located outside of Chicago)
- Apple Valley, Minnesota (a Twin cities suburb)
- Des Moines, Iowa
- Milwaukee, Wisconsin
- Fontana, California
- Palm Springs, California
- Salinas, California
The stability of the markets included in the program vary greatly, with Des Moines being quite stable to the shaky market of Salinas. As such, this program could potentially help spur real estate development as well as investment in these markets. In addition, since the homes are to be modest rental units rather than condos, the new units are not likely to contribute to the high vacancy rates seen in many of the cities that are currently struggling. Furthermore, the housing developments in these areas will help to boost jobs in areas where employment opportunities are greatly needed. So, while Google’s involvement in the market may seem a bit strange, it is likely to be a win-win situation for the company as well as for the economy as a whole.
About the Author: Brian Kinkade is a broker and team lead with Brokers Guild – Cherry Creek Ltd, one of Denver’s fastest growing full service Denver real estate firm. Brian’s team of Internet savvy agents service the Denver Metro area while specializing in Denver luxury homes, Colorado equestrain property and International real estate.