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Free Enterprise Can Do it – Facebook to Start Building Homes

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To shore up city support [a plan for 6,500 new employees in Menlo Park, CA], Facebook earlier this month made an unusual pledge for a tech company. It would build at least 1,500 units of housing, meant not specifically for Facebook employees, but for the general public.

Concerns about Silicon Valley’s housing shortage are turning the world’s leading social media company into an apartment developer.

Fast-growing Facebook Inc. is in the midst of a push to expand its headquarters complex in its hometown of Menlo Park, Calif., a plan for 6,500 new employees that has rankled some locals frustrated with crowding.

So in an effort to shore up city support, Facebook earlier this month made an unusual pledge for a tech company. It would build at least 1,500 units of housing, meant not specifically for Facebook employees, but for the general public.

The novel move is a gesture intended to address a growing frustration in the region: too many workers, too few homes.

Under the plan, 15% of the units would be reserved for low- or middle-income families, and the company is offering numerous other benefits for the city, including millions of dollars to study and improve transportation. It is unclear whether Facebook or a third party would develop the buildings, which are located on a site that is currently a set of industrial buildings owned by Facebook. The timing, too, is uncertain.

Other tech giants are likely watching closely. Google Inc. has voiced support for allowing housing on numerous sites it owns in its hometown of Mountain View, Calif., though it has no detailed plans for those sites.

By all accounts, the imbalance of extraordinary job creation and severe housing shortages in Silicon Valley and San Francisco to the north is only poised to grow in coming years.

The area—San Francisco, San Mateo County and Santa Clara County—added more than 380,000 jobs between 2010 and 2015, according to the California Employment Development Department, dramatically outpacing the production of new housing. Builders got permits for just 58,000 units in the same period, according to the U.S. Census Bureau.

Rents and home prices have soared as a result. Many workers have to commute from distant exurbs, while at least one community is pondering subsidizing housing for teachers.

Housing Gap San Francisco

The lack of housing is driven partly by incentives. Cities tend to favor commercial development over residential because offices generate more tax revenue than apartments, and don’t require additional spending on costly services like schools.

But the region also lacks the infrastructure to rapidly increase its population—roads are already clogged and mass transit networks are limited. Further complicating matters is a strong not-in-my-backyard sentiment among homeowners who don’t want their small towns to rapidly transform into busy cities.

Facebook’s intended expansion of its headquarters has stoked controversy despite the housing push. The plans call for a 1.1 million-square-foot expansion of its office complex, drawing ire from the neighboring city of East Palo Alto as well as a coalition of residents who say they are concerned the influx of so many jobs without more housing will only exacerbate problems faced today.

“We’re on the verge of transforming this area into a superrich, exclusive series of company towns,” said Steve Schmidt, a former Menlo Park mayor and member of the group that is opposing Facebook’s expansion. “We want a more orderly and balanced kind of growth.”

Mr. Schmidt said Facebook’s plans for housing would help some, but it would take years to be built, and meanwhile the jobs-housing imbalance is only slated to grow. For instance, Facebook plans to add more office buildings on the same property where it is planning the housing—a development that would come after the office buildings currently under review in Menlo Park.

“What we’d like to see is that the housing be built first,” Mr. Schmidt said.

Still, city officials are supportive of the Facebook initiative. Ray Mueller, a member of the Menlo Park City Council, said the housing wouldn’t fix all the region’s housing problems, but the offer is an important step.

“If other corporations stepped forward, it would help make a big dent,” he said.

Write to Eliot Brown at eliot.brown@wsj.com

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Name: Smith Young

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