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There have been an awful lot of unwarranted victory laps in the last few days by opponents of New York’s Amazon HQ2 subsidy deal. They point to the new lease Amazon has signed for office space on the West Side of Manhattan and ask, What would have been the point of giving Amazon $3 billion when it was going to do it for free all along?
For the record, I didn’t favor the Amazon subsidy deal, either. I thought its costs would have outstripped its benefits. But I still realize that what we’re getting now is not at all what we would have gotten if the deal had gone through. This is a lease for about 300,000 square feet in an existing building to support 1,500 jobs in Manhattan. Under the subsidy proposal, Amazon intended to develop approximately 4 million square feet of new office space in Queens. It would have had to create 25,000 jobs to unlock the full subsidy package.
As I wrote last November, the best arguments for the now-dead subsidy package had to do with its Queens location. New York policy-makers have long had a goal of fostering office clusters outside the Manhattan core. This is desirable in part because it makes better use of existing subway capacity: Shifting jobs to Queens means fewer commuters trying to cram onto already full trains to Manhattan in the morning, and more commuters reverse-commuting from Manhattan to Queens on trains with plenty of space. It also does something at the margin to increase job opportunities in communities farther removed from Manhattan, though because New York is already quite dense and transit-rich, this may be less important than it would be in other regions (jobs are still available to Queens residents even if the jobs are in Manhattan; they just involve a somewhat longer commute.)
Policy-makers have also had a goal of developing a technology cluster that would raise New York’s profile as a tech hub compared to Silicon Valley’s. Of course, the city already has quite a few tech jobs (Google’s own growth plans involve about as many employees in New York as Amazon was promising to bring to its “headquarters” campus), but a physically distinct Queens campus — close to the new Cornell Tech campus on Roosevelt Island that is another pillar of New York’s tech push — would have served as a signal that we were building a cluster intended to grow well beyond Amazon. The hope was that future firms would want to locate near Amazon and wouldn’t require similar incentive packages once Amazon had made Queens a hot place to do tech business.
Amazon’s choice to take incremental office space in Manhattan doesn’t do any of this. The company was always going to need a substantial number of workers here; it just doesn’t necessarily need 25,000 of them, and it doesn’t need them to be in Queens.
Which, again, is okay with me. This isn’t the 1980s, and the city’s primary economic challenge is a lack of affordable housing, not a lack of quality employment. In fact, without offsetting housing growth, a new office development like the proposed Amazon campus might not even have done much to generate net job growth. Instead, the incremental Amazon workers could just bid up the rents for existing housing supply, increasing the cost of living and encouraging other companies to shift their location choices away from New York. (This is why the argument that Amazon’s proposed subsidy package would produce benefits outweighing its costs by 9 to 1 was unsupported: Amazon boosters counted the gross growth in employment and tax receipts it would have generated when the net number would have looked very different.)
But I still understand why public opinion about Amazon subsidies (very mixed) was a lot different than what you would have thought from reading Twitter and the press (extremely negative). The subsidy package would have created something that would have been an economic driver and a point of pride for Queens. Instead, Amazon will be just another office tenant in Manhattan. It’s not the same thing.