Google and Facebook are building the ultimate perk: housing

Real estate prices are soaring in Silicon Valley. Now, the two tech giants are addressing the problem by becoming homebuilders, giving rise to a new kind of factory town. Will other big companies follow their lead?

Silicon Valley is ground zero for atypical employee benefits. At Facebook in Menlo Park, Calif., employees ride communal bicycles between buildings and eat for free at more than 24 restaurants. No matter where you sit, you’re never far from a “microkitchen,” with all-you-can-consume sodas and snacks. And don’t forget the massages and haircuts — all gratis.

But there’s one perk Silicon Valley hasn’t offered employees: their own apartments. And that’s about to change. This summer, both Facebook and Google proposed multimillion-dollar projects to build self-contained towns near their headquarters — towns complete with grocery stores, shops, cafes, movie theaters, gyms, and hundreds of apartments.

In doing so, these two tech behemoths could transform what it means to live and work in Silicon Valley, one of the most expensive housing markets in the U.S., and simultaneously alter the traditional relationship between employer and employee across the tech sector. Since Facebook and Google are industry standard-bearers, tech companies in other big cities where rents are skyrocketing and commutes are horrible — from Seattle to Boston to Washington — may soon be expected to offer workers two-bedroom apartments with views, within easy walking distance of their office.

Think of it as the “the company town disrupted.” That’s how Allison Arieff, editorial director of the urban planning think tank SPUR, described what Facebook and Google are proposing.

“The lengths companies will go to attract the best and brightest are unprecedented. Many new employees have the expectation that their employer will compensate them extremely well but will also operate private transportation shuttles to get them to work; feed them three organic, chef-prepared meals a day; and provide them with onsite services, ranging from haircuts to doggie day care to doctor appointments,” wrote Arieff in an article for ArchitectureBoston. “It is not surprising then, in hot markets that accompany the healthiest economic ecosystems, that housing might be seen as the ultimate amenity. It certainly is becoming an obstacle, if not the biggest obstacle, to hiring in these locations.”

Indeed, lots of other tech companies are struggling to attract talent to areas where too many workers are competing for too few houses. One reason Amazon is searching for a second headquarters is the squeeze it has put on Seattle, where the rise in home prices topped the nation this summer. Real estate values are skyrocketing in Silicon Valley, too. The Mercury News in San Jose, California, recently reported that the median price of a single-family home in Santa Clara County, which is home to both Google and Apple, hit $1.05 million in August. That’s a 14.6 percent jump over the previous year. Apartments aren’t any less expensive. Monthly rent for a typical one-bedroom in Menlo Park runs $3,300. According to a recent poll, those prices are alarming Californians. Half of them said they are considering moving due to the steep cost of living.

And, as Arieff points out, real estate is on the minds of tech executives. Jim Morgensen, vice president of Global Workplace Services for LinkedIn, told the Boston Society of Architects that “[h]ousing affordability has become a critical issue companies are facing in the Bay Area in terms of their ability to attract and retain talent, and as an employer, we need to support the creation of additional housing near jobs and transit.”

Of course, the factory town isn’t a new concept. Mill towns and other company towns proliferated across the U.S. and Europe during the Industrial Revolution and into the early 20th century. During that period, notes Arieff, companies began to become “more paternalistic, providing not just jobs but housing, healthcare, schools, libraries, churches, and stores. This generosity was less altruistic than strategic: Companies could improve working conditions while deterring workers from activism and unionization.”

For its part, Facebook said in July that it’s trying to address fast-growing problems — a dearth of homes and overburdened transportation infrastructure — in Silicon Valley, and acting because local governments are slow to address the issues. “The region’s failure to continue to invest in our transportation infrastructure alongside growth has led to congestion and delay,” John Tenanes, Facebook’s head of real estate, wrote in a blog post. The new development, which Facebook has dubbed the Willow Campus, will create the kind of housing density necessary to accommodate the area’s growth.

In its current form, Facebook’s planned community (Wired magazine called it Facebookville) would include 1.75 million square feet of new office space, 1,500 housing units, a 112,500-square-foot hotel, a cultural center, new transit hub, two new parks, and 125,000 square feet of retail space, including a small grocery store, pharmacy and other stores.

Google’s plans are no less ambitions. Several miles south, the search giant already spent at least $800 million this year buying at least 45 commercial properties near its headquarters that could house 11,000 new employees. In San Jose, the company is also buying up commercial land downtown for a new campus that could eventually become home to 20,000 more workers.

This year, Google paid around $30 million to provide 300 units of modular housing for employees at NASA’s Ames Research Center, next to the company’s headquarters in Mountain View, California. Additionally, NASA is building another 1,900 rental apartments at Ames, giving first dibs to NASA employees, students studying at Ames, and Googlers.

While these new kinds of company towns could be a boon to workers and communities struggling with rapid growth, they could also further extend an already long day for many tech employees in a part of the world that often fetishizes long hours at work or in front of a computer. As Wired writer Nitasha Tiku recently put it, “Silicon Valley’s sense of self-worth is deeply tied to the idea that hard work is a prerequisite for success.” She was writing about a recent Twitter debate over the merits of working smart versus working long hours.

So, onsite housing might seem like a great perk, but it could also further blur that line between work and personal time. Employees who previously got up at 7 a.m. to make it into the office by 9 a.m. might find themselves starting earlier. Similarly, those who might leave by 5 to beat the traffic might instead find themselves working until 6 or beyond, as their front door is just a short walk across campus.

Google and Facebook, however, have pitched on-campus housing as a benefit for employees seeking a better work-life balance, and not an attempt to extract even longer hours out of the workday. They’ve said housing would help alleviate commuter traffic, helping the neighborhood. “Working with the community, our goal for the Willow Campus is to create an integrated, mixed-use village that will provide much needed services, housing and transit solutions as well as office space,” Facebook’s Tenanes writes.

For tech workers, these kinds of developments may not just ease the financial stress of real estate in Silicon Valley, but also the emotional strain from home buying, which often leads to intense bidding wars. One couple, Sarah, 33, and Dave, 37, spent two years searching for a house in the Bay Area. Despite being armed with $160,000 cash, and later with $300,000 after the startup where Dave works went public, they were outbid on two of the three houses for which they put in offers — in one case, by $100,000 on a house that needed foundation repairs.

The couple recently closed on a 1970s-era house originally listed for $1.25 million, offering $1.3 million. The seller agreed, but only if they’d come up to $1.35 million. And that’s for a house that needs new floors plus a new kitchen.

“Cover letters are standard for your offer package,” Sarah said. “You write these very emotionally charged cover letters that speak to your life and your family. You’re trying to connect with the seller, but they usually just go with the top-dollar offer.”

CXO Magazine is a new publication founded at Northeastern University to chart the ideas, events, and people shaping the future of work. Learn more.