Low-Rise Appeal Unsuccessful

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Our appeal of the Department of Planning and Development’s (DPD) determination of non-significance (DNS) on legislation affecting low-rise zones was unsuccessful (you can read the whole decision here: W-14-001 DECISION_00001). The Hearing Examiner ruled on the narrow issue of whether DPD had made a mistake by not considering the impact of the proposal’s reduction of housing capacity through reducing density in low-rise zones. She determined that they did not.

The examiner agreed that the proposal does reduce the number of potential housing units, because the number of units in legislation from 2010 would “push the total capacity beyond” what DPD expected. Essentially, the current proposal is aimed at allowing fewer units of housing, and accomplishes this by tweaking FAR calculations, meaning buildings will be the same height and size, but have fewer units. However, the Examiner found that DPD didn’t make any procedural errors. The DNS was reasonable considering the available tools DPD was using to determine potential impacts.

While this is a setback to our efforts to stop the legislation, it doesn’t mean that the changes will go into effect. The proposal will have to go through hearings at the City Council and be signed by the mayor. We’ll continue to make the case that this is no time to be reducing density, a sure way to reduce housing supply and increase housing prices. Already microhousing has been a casualty of the Council’s tendency to bargain away housing capacity to quell the complaints of angry neighbors. We can’t afford to lose more housing supply.

What  did accomplish with the appeal?

  • We delayed the passage of legislation for a year–when Councilmember Clark first proposed the legislation, she wanted it passed quickly, in the first quarter of 2014. It’s unlikely that this legislation will take effect–if it passes–until well into 2015. That means many projects will vest under the better code before this legislation could be enacted.
  • We revealed how DPD planners think–During the appeal the City’s defense was largely based on the idea that the City giveth density, and the City taketh density away. Planners at DPD looked at the innovative ways builders and designers were getting more people into the low-rise zones and decided that it didn’t fit their predicted outcome. Their lawyer, Bill Mills, stated that if the City accidentally creates too many housing units, then they can undo that decision.
  • We bought more time to make our case–We were spread pretty thin with micorhousing and linkage fees. Holding up the legislation meant not having to wage another battle on another front at the same time we were contending with other legislative issues. Now we can put more energy and time into making our case against what amounts to a downzone.
  • Tried something new–it’s usually the neighborhood groups that appeal our projects, not developers appealing a non-project SEPA decision. These appeals almost always fail because the standard is very high. Also, most of this work has become almost boiler plate; so many years and so many decisions have made the work of SEPA time consuming and routine. But this is new ground, and using the appeal process to slow down bad legislation may be an important technique to get projects vested since the City Council seems impervious lately to the facts.

We’re not giving up, and the appeal, while unsuccessful, shows we can and will make our case whenever and wherever we can that Seattle needs more housing choice, not less.

Linkage Tax: Some Encouraging Words

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I’ve been trying to school my colleagues to express their thoughts about the performance of Councilmembers forcefully, clearly, and often. When a City Councilmember does something that is against our interest we should point it out, even if it seems aggressive and critical. The truth is that public officials need to be criticized, it’s part of their job description and it’s part of ours as engaged participants in the process. I sometimes get criticized myself for being “too hard” on Councilmembers. That’s nonsense. They can take it, and if they can’t they should probably find another line of work. However, the same goes for praise, and I am very impressed with the comments and votes of Councilmembers Sally Bagshaw and Tom Rasmussen on their colleague Mike O’Brien’s misdirected and illegal “linkage tax.”

I’ve been very critical of both Councilmember Bagshaw and Rasmussen, especially on small-lot legislation. Councilmember Bagshaw spoke in favor of noticing requirements that would bollix up the completion of single-family homes, adding costs but not stopping their construction. And Councilmember Rasmussen, well, has caught my ire on a variety of issues, not the least of which is his support of an impact fee, a policy that would be disastrous as it is unnecessary.

However, both Bagshaw and Rasmussen voted “no” on Councilmember O’Brien’s linkage tax. They also offered ameliorative amendments that would have slowed the process down and made it more inclusive. And Bagshaw spoke about the very real legal problems with the proposed new tax for housing. She also called for more collaboration and less vilification of developers. For his part, Councilmember Rasmussen spoke knowingly of the difficulty small builders have making ends meet or covering costs and payroll as they build housing. His words were sympathetic to the many, many small builders who are making a living building housing.

Taken together these comments and votes mean that, finally, there is some doubt on Council about charging ahead with Councilmember O’Brien’s scheme to score political points as Seattle’s Housing Robin Hood. We’ve also heard the Mayor won’t concur with the resolution. This means that finally, after taking very damaging votes on small-lot legislation and microhousing, the Council seems to be understanding that as the effort to tax and fee new develop grows, small business and renters are the ones that will get hit the hardest. The winners in O’Brien’s linkage scheme are non-profit housing developers, and the losers, sadly, are people trying to find a decent and affordable place to live.

I’ll write more about the fallout of yesterday’s vote as we learn about it, but the good news is that at least two Councilmembers not only raised doubts, but finally voted “no” on legislation that will, as we’ve pointed out again and again, make things worse.

 

 

 

A Tax for Housing? OK, Sure!

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Ok. I give up. Let’s tax ourselves for housing. After all, housing is essential for job and population growth. We should support more of a good thing, right? But here’s the deal, the tax should be legal, equally assessed, and the revenues generated ought to solve our greatest housing need, housing for poor families. And here’s a spoiler alert: we already have a tax just like that.

First, a word about taxes. Taxes have three intended outcomes: redistributing wealth, affecting economic behavior, and generating revenue. Councilmember O’Brien’s linkage tax intends to do all three. But it doesn’t do the first thing because it subsidizes housing that is already in abundant supply, not at the expense of the rich but at the expense of other renters. Second, his tax would boost costs of housing, raise rents, and reduce supply. Hardly a recipe to encourage building of housing, an economic activity we want more of. And revenue? We’ve already shown that the Mutlifamily Tax Exemption could match housing production under O’Briens tax scheme. The Money O’Brien’s tax would raise wouldn’t match existing, legal and fair tools we already have.

What would work?

If we need 70,000 units in the next 20 years that would be 3,500 units per year. If we guessed that about a quarter of those needed to be built with an average cost of $250,000 per unit (with a 33 percent subsidy, or 82,500 per unit) that would be 875 units for a total of $72,187,500 a year. The full cost would be leveraged with other funding sources like the Housing Trust Fund and the Low Income Housing Tax Credit Program.

If this cost was divided evenly across Seattle’s roughly 350,000 households that would be about $206.25 per household per year, or about $17.18 per month. (Oddly, when I do the math and divide the $72 million by Seattle’s total assessed property value of about $123 million and then multiply by the median house value, $350,000, I get a total about about $204 in tax. This is typically how a tax like this would be assessed, the total budget needed divided by property values. But someone should check my math).

A legal way to assess this tax would be using Washington State’s property tax system which requires taxing property equally. O’Brien’s tax proposal is illegal because it taxes property unconstitutionally — government can’t tax one property more than another without violating the Constitution’s uniformity clause (Article VII, Section 1). His tax has other legal hurdles too.

And O’Brien is kind of a sideways Robin Hood, stealing from renters earning 60 to 80 percent to help other renters at 60 to 80 percent of AMI. That’s because O’Brien’s tax doesn’t help the poor at all by taking from the rich, it just raises the rents of some renters to supposedly help other renters. Rich people and single-family property owners, and developers really pay nothing.

However a tax across households would spread the responsibility for creating new housing evenly among everyone. And the tax wouldn’t be onerous ($16 per month or about 50 cents a day!) and could even be income adjusted. O’Brien’s tax is regressive, penalizing newcomers to our city, ironically, to help newcomers. Why not just skip the tax and and allow more housing ?

Finally, the new tax will raise millions in revenue-but for what? O’Brien’s tax isn’t connected to any plan for housing. At least the proposal I’m offering has a number hooked to growth targets. And all the dollars his tax collects will have to managed and processed by a City bureaucracy that will turn each dollar into 85 or 75 cents. Wouldn’t it be better to use the MFTE program create subsidized units that are already being built in market rate projects? Over 15 years, the MFTE program created 15,000 units of housing without having to buy land, ramp up financing, or displace anyone.

The truth is that there is a housing tax with a broad base that generates millions of dollars for housing. It’s called the housing levy and its legal and we’re all paying it right now. The levy created over 1,600 units over three years. That’s below the rate that I suggested we might need which would be more like 2,400 in three years; but boosting the levy by a third and expanding MFTE would certainly get us there.

So, yes, let’s tax and spend for housing. But let’s be smart and legal about it. And why not use tools we already have, the MFTE for workforce housing and the levy for housing for poor families. The levy money can be matched and even doubled by other sources. If Councilmember O’Brien wants to be Robin Hood, he needs to figure out who the rich and the poor really are and tax accordingly. His proposal does nothing but lower rents for a few at the expense of  many other renters.

Microhousing: Politico Story Reminds Us What We Lost

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Politico, an online journal of national politics, has a story about microhousing that extensively chronicles it’s rise and fall. What the story conveys, too, is that Seattle was the national leader in housing innovation — emphasis on the word was.

Portland, Los Angeles, Minneapolis have all come calling, looking to Seattle and asking how to undo their minimum size requirement,” Valdez says. “And here’s Seattle, actively trying to institute one. If this goes through, we’ll no longer be in business.”

“It may just have been too far ahead of its time in Seattle.”

Linkage Tax: Are We Going to San Francisco?

San Francisco was the place to go to be groovy and get some free love. In fact, the city was such a fantastic place with so much innovation it’s growth alarmed the locals. Today, far from being the place where you’d go for a love in and end up living, it’s one of the highest priced cities in the nation. The city has a housing deficit of 100,000 units and a housing subsidy deficit (if all households who needed help with housing got it) of $4,000,000,000. That’s billion. It’s now conventional wisdom that San Francisco turned from the city of love by the Bay, to the home of thousand dollar studios because of overregulation and suppressed housing supply.

Has Seattle learned anything from the San Francisco Death Spiral, the tragic spin caused when the response by public officials to higher rents is inflationary fees and rules? Evidently not. In today’s Planning Land Use and Sustainability (PLUS) Committee Councilmember Mike O’Brien will try to cram through his proposal for a tax on all new development.

This isn’t the answer. What is? Loosening the constraints on all housing supply, both for profit and non-profit subsidized housing. In an article about the San Francisco mess and how to fix it, Edward Glaeser points out some good ideas to get the supply chain moving again, including this idea:

Another change is even more drastic. For decades, Massachusetts has allowed the builders of affordable housing to do an end run around local zoning rules if the locality doesn’t have enough such units. A similar policy in California would prod expensive localities to loosen their rules and impose state-mandated deregulation if they don’t comply.

If San Franciscans are serious about wanting to reduce housing costs, they need to support measures that make a difference, not engage in meaningless protests.

The “meaningless protests” to which Glaeser refers is the blocking of Google buses which has happened in Seattle to Microsoft shuttles. Rather than do this kind of thing, Glaeser suggests, we should be pushing for more housing which means less regulation and costs. The real progressive and groovy thing to do would be to lie down in front of O’Brien’s new tax, blocking it rather than Microsoft shuttles.

Even if Councilmember O’Brien turns his new tax into his Sawant moment, building even subsidized housing is becoming more difficult because of bad zoning decisions, outlawing innovative choices,  and increased costs of operations. A look at San Francisco can be a look ahead at our future or a disaster we were able to avoid. The choice is up to us. We can either be an open loving city, full of gentle people welcoming growth, or we can slam the door in peoples faces with high prices and few housing choices.