The Economics of “Don’t Be Evil”

Google co-founder, Sergey Brin, is personally trying to live up to Google’s informal corporate motto “don’t be evil” by buying and renovating property in Los Altos, California and sometimes renting it back out at below market rates.  He’s doing this by pumping millions of dollars into a firm called “Passerelle.”

“The firm […] says on its website that it approaches real-estate development ‘from a socioeconomic perspective,’ and its investment analysis ‘weighs financial returns as well as social and environmental benefit.'”

I love the idea of a company paying attention to something other than the bottom line.  Apparently Passerelle temporarily lowered rent for some tenants while road construction was affecting their businesses — the perfect example of a landlord working with businesses to help them succeed rather than trying to squeeze every last cent out of them.

I’m wondering about the consequences of renting out below market rates, however.  It sounds good on paper, but if the rent is below the going rate, Passerelle is favoring certain businesses while denying space to others willing to pay more.  If, in theory, a free market determines the fair price,  how does Passerelle determine its rates?  Is it 80% of the highest offer?  If 80% is fair, then why not 60%.  Why not 40%?

How does Passerelle determine “social benefit”?  What kinds of businesses is it freezing out?  What happens if two businesses that Passerelle wants to help both want the same space?  And what can the citizens of Los Altos do if they don’t agree with Paserelle’s policies?

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