Company Towns 2.0: Has Any Utopian Corporate Community Succeeded?

Silicon Valley corporations like Facebook and Google are reviving the notion of a “company town.” For decades, Silicon Valley has been single-minded in a pursuit of wealth via technology. The minting of tech millionaires has driven real estate out of reach for many not caught in the thrall of stock options and IPOs. Constructing housing in this environment seems a way to add capacity that benefits all. But there’s a likely far darker outcome.

Company towns have a checkered past. Began in the mid 19th century by industrialists operating various businesses in remote locations, company towns served a purpose in providing housing for workers in places without housing or basic social infrastructure. We’re talking about mining and lumber operations as well as isolated manufacturing. Over time, the industries they served expanded – two were even chocolate producers Hershey and the UK’s Cadbury.

But most company towns got a bad rap because industrialists used them to not only supply housing, but to control workers. For example, many company towns simultaneously fired and evicted workers wanting to organize labor unions to improve poor working conditions. Also, town owners were seen as double-dippers as they also owned all the shops which had a habit of selling overpriced merchandise to isolated workers without a choice.

Pullman workers leaving the factory for their company home

The most infamous example for Americans was railroad car maker Pullman. In 1883, there was a severe depression that caused Pullman car orders to quickly drop. To weather the storm, Pullman lowered workers’ salaries but kept shop prices and workers’ rents the same, squeezing them from every angle. In 1894 there was a strike that ultimately resulted in the Illinois Supreme Court dubbing Pullman “un-American” and forcing him to divest the town. Today, it’s a neighborhood of Chicago.

After Pullman, company towns were refashioned to avoid the “paternalism” of company control. This happened because the concept of a company town remained valid. Providing housing for workers where there were few, if any, options while offering a standard of living they would typically be unable to attain.

Company towns died during the Great Depression, with the coup de grâce delivered by FDR’s New Deal and its minimum wage guarantee. At their height company towns housed three percent of the US population. Nearly a century after the Great Depression and its resulting mandate for a minimum wage, are we back to needing company towns? Have we learned our lessons?

The New Company Town

Many have noted in the Silicon Valley examples that corporations have a lot of money they can spend on things municipalities used to. Of course, unsaid is one big reason municipal spending hasn’t kept pace with progress — corporate tax avoidance. In fact when you search for “Google tax avoidance,” their own search engine returns over four million hits, while “Facebook tax avoidance” nets nearly seven million. In fact, nearly all of tech’s household names return hundreds of thousands or millions of hits for tax avoidance.

Are companies using monies from avoided taxes to purchase large swaths of land for corporate expansion veneered with the self-described “good deed” of worker rental housing?

Silicon Valley knows all about the “casino philosophy” whose goal is to keep gamblers at the tables as long as possible. Corporate campuses with concierge services, onsite medical care, unlimited free food, and even nap stations all combine to keep salaried workers on the job as long as they can stand it. Surrounding the campus with housing eliminates commute time that can then be spent at work. As the Eagles noted of the Hotel California, “You can check-out any time you like, but you can never leave.”

The original company towns got into trouble for their outsized control of workers who couldn’t afford to live elsewhere. While six-figure salaries are a starting point at tech companies and stock options are joked as being dispensed from a roll, housing is more difficult to find than a job. When your home and job are intertwined, professional mobility is stifled in much the same way as the union organizers of the original company towns

For cash-starved municipalities, other dangers appear. The privately owned company town becomes more politically powerful as their corporate reach encompasses more and more acres. How long before Facebook’s Menlo Park home adopts the motto, “What’s good for Facebook is good for Menlo Park”?

Of course more benevolent company towns are possible. Corporations could purchase and lease lands near their corporate campuses to unconnected REITs who would build, manage and maintain apartment buildings away from corporate influence. They’d still wield the political power of the land, but not the control of the people living on it. Better yet, corporations could buy land and build for sale homes whose resale prices would be tied in perpetuity to overall inflation instead of more dynamic housing fluctuations.

The obvious solution of increasing wages to keep step with housing is perhaps the worst option. That would exacerbate the income inequality already prevalent between tech and non-tech workers which would further price the lower incomed out of the market.

Another dimension of inequality is seen in the resulting swift gentrification from these new company towns’ locations. Even in lily-white Silicon Valley, there are pockets of minority neighborhoods whose (underpaid) work keeps white collar workers protected, educated, worked-out and caffeinated. It’s these areas that are targeted for redevelopment.

 

Why am I Babbling About Silicon Valley And Company Towns in Dallas?

Since the Recession, Dallas real estate has flown out of reach for many, with affordability continuing to worsen. Since Dallas city government seems unable or unwilling to spur development of affordable homes or any real revival of Southern Dallas, do we look to flush corporate employers to fill the gap?

North Texas submitted multiple locations to woo Amazon’s HQ2 project to bring 50,000 well-paying jobs to the area in addition to an untold comet-trail of relocating businesses wanting to be close to Amazon. If it wins, what else will Dallas get?  How beholden will Dallas be to Amazon’s and its courtesan’s whims?

In May 2018, Seattle City Council unanimously levied a $275-per-employee tax on corporations with annual revenues over $20 million. The revenues were earmarked for homeless programs (as tech grew, so did homelessness). A month later, after a ferocious and well-funded campaign, the city council reversed itself, voting to repeal the tax by a 7-2 margin. According to an article in The Atlantic, Amazon was an outsized player in the drama to repeal the tax. But Amazon was not alone, the city’s newspaper ran seven editorials against the tax and even the Seattle Chamber of Commerce paid for anti-city council ads. What began as a tax on the wealthiest corporations morphed into a referendum to replace the city council with those more business-friendly.

Business controlling government.

In all the reporting on Amazon’s HQ2 selection, I’ve never heard municipalities list what they want Amazon to do for them. All that’s reported is how municipalities are tripping over themselves to give an enormous, immensely powerful and profitable business billions in freebies and tax breaks. Gifts that will come from the coffers of resident taxes and a resulting city government pushed to do more with less.

Whoever “wins” HQ2 will become a de facto company town with all the political power and threat that entails. Of course those giving away the store will be long gone before the do hits the fan. Does this sound anything like a certain pension problem? Cue the Eagles

We are all just prisoners here, of our own device
And in the master’s chambers
They gathered for the feast
They stab it with their steely knives
But they just can’t kill the beast

 

Remember:  High-rises, HOAs and renovation are my beat. But I also appreciate modern and historical architecture balanced against the YIMBY movement. In 2016 and 2017, the National Association of Real Estate Editors recognized my writing with two Bronze (2016, 2017) and two Silver (2016, 2017) awards.  Have a story to tell or a marriage proposal to make?  Shoot me an email sharewithjon@candysdirt.com. Be sure to look for me on Facebook and Twitter. You won’t find me, but you’re welcome to look.

 

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