Seattle: Whiteness, Taxes, Prices Up, Diversity Down

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There are two seemingly unrelated items in yesterday’s online Seattle Times. First, FYI Guy’s post about the relative whiteness of Seattle compared to other comparable cities in the United States:

Seattle’s “whitening” doesn’t buck just the national trend. It also runs counter to what’s happening in King County as a whole. Outside of Seattle, the county’s white population decreased by 13,500, and now stands at 61.1 percent of the total — a drop of nearly two percentage points in one year.

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FYI Guy isn’t willing to hazard a guess about why this is happening in Seattle. But I am. It’s pretty simple, lack of housing supply for families. Part of what’s happening here is that it’s getting harder and harder to find housing in Seattle for families with children. While that family demographic is diversifying it is also running into a wall of high prices and inappropriate typologies. Families of color are like most families, but there are more families of color now than in the past. So, those families are having to live elsewhere. As we’ve pointed out, the best way to get the city to be diverse is to build more housing and increase housing choices!

But Councilmember O’Brien’s solution is to tax new housing as a way to subsidize housing that people can afford. His idea won’t work because it will simply increase the costs associated with housing. A view that the Seattle Times editorial board shares. Here’s what they wrote yesterday:

In reality, increasing the cost of producing homes could stop some projects from getting built, thus limiting supply and pushing prices higher over time. Prices keep going up because residents are competing with each other for the available housing stock and the city has a limited supply of land.

Rising housing demand stems directly from a boom of new jobs and residents.

Nonetheless, the majority of the City Council has painted new development as a culprit in pricing out people on the lower end of the economic spectrum and that a linkage fee is just one way to get developers to pay their fair share.

Add to this that Councilmember O’Brien wants to use the money he gets from the linkage tax to fund housing for people who earn 60 to 80 percent of Area Median Income (AMI), a level of income that doesn’t need any help with housing.

Councilmember O’Brien casts himself as a champion of social justice, but what he’s really doing is reversing a positive trend of housing construction that is actually creating stable prices for people who earn 60 to 80 percent of AMI and doing nothing for the families of color who are choosing today to live outside the city, either because of price or lack of the right kind of housing or both. Also, it’s important to note that programs like the Multifamily Tax Exemption are creating thousands of units prices for people earning 60 to 80 percent AMI, units that are integrated into market rate buildings.

Yesterday’s Seattle Times shows pretty clearly that impartial observers who aren’t trying to pad their political resumes, play Robin Hood, or ensure their own re-election get it: our city isn’t diversifying, and driving up housing prices by adding costly taxes will only make that worse.

 

Is Seattle Down for the Count on Affordable Housing?

Recently I have begun to envision Seattle housing affordability personified as an overmatched, undersized boxer who has gotten knocked down time and time again, but through sheer grit, courage and resolve continues to get up off the mat and keep fighting. The repeated knock downs represent the series of beatings Seattle housing has taken in the past year, in this particular order: 2013′s small-lot legislation (which cemented single-family neighborhoods as untouchable), 2014′s microhousing legislation (touted as a “compromise” even though it will make new units more expensive), the new linkage fee legislation, and to cap it all off, Sally Clark’s low-rise downzone proposal. Each of those four changes make things worse for housing affordability. The microhousing and linkage fee laws add costs to new developments. This has the double whammy effect of instantly adding to renters’ costs, but also discouraging new development, which adds more costs again by reducing supply and increasing competition over a scarce product. But there is still a fighting chance for Seattle to get back up and be a winner on housing affordability.

The small-lot and low-rise downzone laws skip straight to discouraging development. You feel like you are taking crazy pills when you hear the Council say that this is all in the name of affordability. But the pieces of the puzzle start to come together when you remember that last year we voted to create district elections, where council members will be voted in by their district constituents instead of by the city-at-large. Like gerrymandering, this has the effect of splintering the voting power of urbanists, and giving single-family neighborhoods more power. As such, the Council has done a housing 180 to protect their political careers.

The boxing metaphor I have in my head ends with the boxer getting up off the mat. Housing affordability in Seattle can get up too. We must not resign ourselves to letting Seattle become San Francisco – a gated community for the rich. Today, we must be optimists. Even in this crazy climate, there are signs of hope: Mayor Murray’s housing affordability has a chance to lead to positive outcomes (I am particularly glad to see Alan Durning of Sightline Daily is on the committee). Sally Clark has hinted that maybe, just maybe, it’s silly to keep 65% of the city off-limits to development. And prior to his linkage fee push, Mike O’Brien suggested he wanted to make the land-use code friendlier to Accessory Dwelling Units (ADU’s). An optimist might even say that now is a better time than ever to lay the ground work for a paradigm-shifting housing discussion while we wait for next year’s district elections to come and go. Because once the elections are over, there is a chance a more reasonable discussion about things like up-zoning can take place. So let’s talk about it.

The concept I am most intrigued by is the idea of “gentle density”. This is a coin termed by Vancouver-based urbanist, planner, and overall awesome-guy-I-wish-was-in-Seattle, Bren Toderian. Toderian, and his consultant company, Toderian UrbanWORKS, have given a new name to a very old and successful concept: density done well. What is gentle density, and why is it crucial for Seattle? Gentle density is density that blends in, fits the scale of its surroundings, and best of all, is capable of being a compromise between pro-growth urbanists and slow-growth NIMBY’s. Gentle density is dense low-rise rowhousing in single-family zones. It’s granny flats and ADU’s that take on the appearance of detached homes. It’s duplexes and triplexes.

Now, I am as pro-growth as they come, and I think it’s selfish and classist of neighbors to fight taller structures in their neighborhoods because it’s “out-of-scale.” If I were in charge of the city, new housing, in whatever form, would always trump “neighborhood character.” But. I will also admit that pro-growth advocates in Seattle have recently done a poor job of making NIMBY’s our allies instead of our enemies. Both sides have entrenched themselves and the result has been the supply crisis we face today. A conversation that reaches across the aisle would remind NIMBY’s that due to Seattle’s desirability and strong economy, growth simply can’t be avoided. And it would remind growth advocates that many NIMBY’s would welcome new growth if it was achieved at a less overbearing, more human scale.

And this is exactly why gentle density can be a powerful tool right here in Seattle. If, hypothetically, significant portions of our single-family zones were re-zoned as even just LR-1 (the smallest change possible), and parking requirements were eliminated, there would almost assuredly be an explosion of humanly-scaled, neighborhood-enhancing rowhomes, townhomes and duplexes built in our low-density neighborhoods. It would happen organically, because developers wouldn’t have to rush (while the local economy is white-hot) to cram huge buildings into little slivers of land like they do now. And best of all, even the NIMBY’s would come around to like the new developments. Why? Because who could possibly take issue with this?:

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Or this?:

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If we had neighborhoods full of rowhomes, duplexes, and block housing, we would be creating thousands of housing units for families (currently not happening) and we would take enormous pressure off the rental market, putting the power back in the renters’ hands and dropping rental prices. There would be other benefits: with so many new people in previously sparse neighborhoods, there would be thousands of families putting pressure on the city for great mass transit. And yes, density has historically come before transit.

Can this not be a common-sense middle ground for pro-and slow-growthers to come together? Major increases in density, but done at a human scale that can be architecturally uplifting and neighborhood-unifying. This may sound like a pipe dream given the incredible polarization in this city between supply advocates and opponents. And it’s true, some NIMBY’s really do want nothing more than to pull up the city’s draw bridge to newcomers. But there are also many who are more in opposition to bad design and bigger scale than more density. This position is at least somewhat reasonable, and it is these folks who we have a chance at persuading.

So yes, we are still the fighter who has taken a beating. Blow after blow, in fact. But if we find the resolve to stand up and fight back, we can still be victorious. The city council has made it clear that they won’t take up the fight for us. Therefore it will be up to us citizens, who know how affordability can be achieved, to pressure the city and do the work ourselves. We must demand that they act in the city’s best interest instead of their own. What, specifically, can be done? Simple: email. Tweet. Call. Get the attention of the mayor, as he prepares his housing committee. Let the councilmembers know that positive steps toward real affordability now will earn them your votes next year. Tell them that you support gentle density and all the benefits it brings, including a chance at compromise. Tell them we are ready to have a discussion about changes to our single-family neighborhoods, and that the answer lies in rowhomes, perimeter block housing, ADU’s and other forms of gentle, dense housing. Above all else, never stop fighting.

 

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.