How to HALA? Bring Back the Neighborhood Development Managers!

Sectoritis

I wrote this e-mail to Councilmember Mike O’Brien back in March of 2014. The idea of bringing back the Neighborhood Development Manager (NDM) function has come up again and again in my conversation with neighbors I disagree with. Not just once, but many times. Neighbors are frustrated with what they often see as runaway growth.

When I worked at the Department of Neighborhoods our view was that we could all work together, City, neighbors, and developers, to realize the goals of neighborhood planning. In polls we’ve commissioned we’ve seen that people in the city feel growth is too fast and unplanned. They didn’t feel that way in the 90s because we had plans, 37 of them, and City staff assigned and empowered to fulfill them.

Can we go back? No. But we can bring back the idea that to grow together, we should collaborate on how we grow. We can do it. My plea to restore the NDM function has gone unheard. Perhaps now, with the HALA recommendations, we can get everyone to agree it’s time to bring it back to help sort through and implement the HALA recommendations and neighborhood plans.

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Hello Councilmember O’Brien,

Thanks for being at our breakfast. We obviously will have lots to talk about on the specific legislative issues coming up. However, the discussion has taken me back a few years.

When [Mike] McGinn was first elected I advocated for the restoration of a Neighborhood Development Manager (NDM) function at the Department of Neighborhoods. He didn’t follow through with that whole train of thought.

I think we could get behind a similar City role. Many of our people run into City process that is frustrating and bewildering. As we both know, that isn’t because people at the City are bad, it’s that they don’t have a reference point outside of their silo. Their job is water hook ups, for example, they can’t solve a broader issue that involves other departments or even other property owners.

When Phil Fuji, Sally Clark, and I were NDMs we were empowered to bring departments together along with private developers andneighborhood groups to tackle problems or find mutually beneficial solutions. I think we did a pretty good job.

But it only lasted a couple of years, then [Mayor Greg] Nickels shut it down.

I think a similar role reconstituted somewhere in the City would go a long way toward addressing the points you raised about people worried about change. Builders and developers and neighborhoods might benefit from a problem solver being paid by the City at a wage to try and serve the public good by bringing people together rather than paid advocates or people pushing one side or another.

We were never arbitrators; nor did we have supervisory authority over other department staff. Departments sought us out to do the difficult work of bridging between departments, developers, private businesses, and neighborhoods. The Departments also new they had a charge from Mayor and Council to cooperate with us to get to a solution.

Will this make [the conflict] go away? Probably not. But it sure would be nice to have someone at the City who could play this role again. Frankly, our people don’t have time to romance the neighborhood people and that’s not their skill. And neighborhoods sometimes need someone to talk to that will help them figure out what their options are before they call an attorney or start a petition. 

I remember a tussle with the school district in West Seattle that led to a hearing examiner challenge of a school field renovation. It was really ugly. But everyone was talking and I was able to keep that going because sometimes they’d gripe at me rather than at or about each other. I’m no diplomat; it was the role I played that mattered, and I think we came away with both sides able to work with each other even after an annoying appeal process.

Let me know if you want to talk more about this idea. You know that my patience has run out with the petition signing and litigious gangs of neighbors out their trying to stymie growth (my bias, of course). But you could really fill the leadership void left by Jim Diers if you figured out a way to divert a lot of the angst and frustration into something positive — not a lot of process, but solutions. Maybe we could get back to “how do we grow” rather than “whether we grow” conversations.

Thanks again for doing the challenging job you’ve got to do!

MIZU: The Same Effect as Rent Control?

IMG_0121.JPG

One wonders what government would do without acronyms. Perhaps government programs would end up with catchy brand names like pharmaceuticals or cars. The Multifamily Tax Exemption (MFTE) Program might be called simply Multaxa or Exemptor. The Mayor’s Housing Affordability and Livability Agenda (HALA) Committee has a whole glossary of acronyms at the end of it’s report. How did we manage to writhe out of the noose of linkage taxes? By agreeing to something not in the glossary but called Mandatory Inclusionary Zoning Upzones or MIZUs, incremental upzones across the city for more housing but a mandatory inclusionary requirement that forces a percentage of the project to lock down rents in a mandated percentage of units. This is a compromise, but it will do the opposite of what it’s supposed to do, create affordability.

Inclusionary zoning is a bad idea and is, in the end, a price control that creates inflation when non restricted units have to bear the cost of subsidizing the restricted units. This increase the rents of all other units. It’s why we and the development community have always opposed all forms of mandated inclusionary zoning, including when it is wrung out of a project in exchange for what is already a public benefit, more, new housing.
There is an important article about inclusionary zoning that I have referenced before,  “The Economics of Inclusionary Zoning Reclaimed”: How Effective Are Price Controls?, that decisively shows the inclusionary zoning works just like rent control, creating inflation to fight inflation.

Although the program is legally and economically distinct from rent control, law-and-economics scholars who have analyzed the issue have argued that price controls on a percentage of new housing will have many of the same negative effects as rent control. In one classic article, The Irony of “Inclusionary” Zoning, Yale Law Professor Robert Ellickson argues that inclusionary zoning actually decreases development and makes housing less affordable; thus, it should be called exclusionary rather than inclusionary. The widely accepted view within the law-and-economics literature has been that price controls through inclusionary zoning will have negative, unintended consequences on the housing market.

And in a very detailed agreement called the Statement of Intent for Basic Framework for Mandatory Inclusionary Housing and Commercial Linkage Fee, the City and various parties in the HALA process agree to a series of formulae for how to determine what performance (how many on site units must be created for upzones) and what the fee would be in cases where a project can’t perform. And here’s one of the devils in the details. Many, many projects won’t benefit very much from additional capacity created with additional Floor Area Ratio (FAR). The deal seems to have been written with mostly high and mid rise projects in mind. When considering smaller scale projects the number of units that have rent restrictions starts to consume more and more of the rentable space. What can a developer do? Raise rents in the other units to compensate for the lost revenue, exactly what we have said would happen, and the opposite outcome of what HALA is trying to accomplish. 
And what about 4, 5, and 6 unit for sale, townhouse projects. Based on the first look at the math in the agreement, there is no way to perform by creating a unit a fee must be paid. How is that fee calculated? Hard to tell. But yes, whatever that fee might be, it will be paid for in the form of higher prices for the houses being sold.
However, this is a compromise on our bedrock position and demonstrates that we are willing to give to help address housing issues for people struggling with housing costs. This agreement
  • Is more efficient–O’Brien’s scheme would have taxed new growth and essentially laundered the money through a vast bureaucracy to try to build very pricey units. The dollar he took from the rich to give to the poor would have turned into .50 fast. This way, the private sector delivers units that don’t require expensive transaction charges or prevailing wage labor.
  • Trades value for value–If the math works out right, additional capacity will benefit renters and builders who will be able to deliver more product to meet demand in the market.
  • Pushes the Council–No rezones, no cookie. If the Council listens to its NIMBY constituents they get no new affordable housing.
  • Breaks the “social justice” frame–NIMBYs have long used poverty and affordability as noblisse oblige at best and a shield at worst to demand the status quo. Now non-profit housing advocates will stand shoulder to shoulder with us pushing for rezones.
So is anyone happy about this compromise? No, not really. The City continues socialist style targets for housing instead of allowing the market to meet demand and intervene when there are failures. But this deal and the report transforms the debate — or has the potential to — if the Council leads. Nobody at the City seems to have the ability to do anything that will incentivize creating new housing that doesn’t also carry with it something that they can pitch to angry, NIMBY neighbors as punitive. The agreement forged by HALA is better than the awful, backwards, and unfair linkage tax championed by Councilmember O’Brien. But it replaces something really awful that would destroy our housing economy with something bad that will make it worse. And neighbors don’t see enough blood splattered on the floor either.
What’s ahead yet? Tracking just how all this math will be done. We’ll be watching closely, especially for problems at the low-rise and single family level where most builders make their living.

 

If Zoning is Racist Let’s Start Acting like It

NIMBY Design Review

Much has been written and said about the recommendations of the Mayor’s Housing Affordability and Livability (HALA) Committee. I’m going to write about these comments this week. The first post is this one on race, class, and zoning. The claim has been made that Seattle’s zoning is by its very nature, racist and classest. Efforts by neighbors to fight off new development of housing is protecting that underlying institution, single-family zoning. I suggest that if this is the case (and I think it is), we’re morally obligated to attribute more significance to angry neighbor driven efforts than simply having a “difference of opinion.”

Here’s a good example of what’s been said as it relates to how race and class are part of the discussion of zoning:
According to Alan Durning, Executive Director of Sightline (a green city agenda think tank) and a member of HALA, members of the mayor’s task force (from both social justice and urbanist backgrounds) experienced a break-through moment during a presentation given by a representative from the city’s Race and Social Justice Initiative on redlining in Seattle. “The presenter throws a map up on the screen of the historic red lining in the city of Seattle. And then a map of current population by race and ethnicity. And it’s the same thing,” says Durning. “[the committee was like] ‘oh, right. It’s [segregation] baked into the design of the city.’”
Here’s another one by Erica Barnett:

Our current zoning system, which restricts low-income people to a tiny percentage of the city and preserves two-thirds of the city as exclusive enclaves for mostly wealthy homeowners, has its roots in racism and classism.

That may not be the motivation of current Seattle homeowners who want to preserve these enclaves today, and certainly there are no explicit racial rules or covenants anymore, but any honest single-family neighborhood resident should admit that he or she is the beneficiary of a system built on racist, classist housing policies.

Now, the syllogism is clear, at least to me, in these conclusions. The very nature of zoning is intended to segregate uses from each other (as I’ve pointed out before (over and over again). And this segregation of uses leads to segregation of people. When we built the code, the intention was to keep residential use away from other uses, but also some people away from other people. This lives on today when angry neighbors use zoning to fight off efforts to integrate new housing types and new people into their neighborhoods. Efforts to destroy microhousing is the best example of this.

Therefore, efforts to destroy microhousing by angry neighbors are not inherently racist themselves, they are at least, according to people like Durning and Barnett, using a racist tool to accomplish the outcome they seek. And their efforts paid off? Why? Because the Seattle City Council engaged in a process, presided over by Councilmember Mike O’Brien to dismantle and destroy microhousing.

The end of microhousing as we knew it was a story of angry, entitled, mostly white single-family homeowners, using a racist tool to direct the Seattle City Council to pull the plug on a housing product that is housing thousands of people affordably in our city.

Where is the outrage? Shouldn’t there be marches? Shouldn’t there be protests? Shouldn’t, at least, some outraged petitions be circulated and signed demanding reversal of the decision? How about simply not endorsing Mike O’Brien for reelection and withholding contributions.

Nope.

Here’s Seattle Transit Blog’s endorsement of Councilmember O’Brien:

District 6: Mike O’Brien has been an urbanist favorite on transportation and land use for his entire political career. He is a deep thinker on transit issues, a good presence on the Sound Transit board, and willing to stand up to the SOV lobby to allow others to safely share the road. On land use, we are increasingly concerned about his statements about preserving the ‘character’ of single-family neighborhoods and opposing additional density there. Also troublesome are recent gestures toward needlessly restricting the number of units, or paying for affordable housing by adding costs to new housing supply.

“Well Mike (Seattlites have annoying habit of being over familiar with our elected officials, calling them by their first names, something I wish we’d stop. But I digress), you’ve been aiding and abetting angry neighbors as they use an inherently racist system, zoning, to keep new people out of our city. But you’re such a nice guy and so good on other issues. You’re such a deep thinker on all Mike-OBrien-155x200this (although one wonders why someone holding an MBA still doubts supply and demand) that even though what the neighbors are doing and what you’re doing to help them is is, well, immoral, we’re still going to endorse you. You are our friend.”

That’s how it works in Seattle. A mostly white group of “urbanists” (a term I’ve come to despise) drops a bomb on the discourse about housing by introducing race into the discussion, implying (correctly I think) that there is something vile and wrong and even racist about NIMBY efforts to slow growth. Then these same “urbanists” glad hand the politicians that aided and abetted this nastiness, slap them on the back and give them endorsements and money. Councilmember O’Brien doesn’t even have to stop smiling.

Let me make something really clear here. I find that the introduction of race into the discussion of Seattle’s housing future by people I admire and respect appropriate. However, as a person of color myself and as someone who faces on a regular basis the angry mob of entitled single-family neighbors calling for more restrictive housing policies, I don’t think that simply raising the issue, pointing out the facts, and then discussing race is enough.

Racism is not a difference of opinion. It’s one thing to say, “that building makes me look fat!” It is quite another to bow to that red herring and cover story, and make bad and exclusionary housing policy out of them. And it’s even worse if the underlying system to enact and patrol this exclusionary policy is facilitated and guided by a Councilmember who casts himself as a champion of social justice.

I’ve been outraged a long time. Are you? Are you willing to withhold  your vote, money, and endorsement of Councilmember O’Brien and others who pander to angry neighbors? Will you please ask for your endorsement and money back from him until he acts like a champion of social justice not a zookeeper of the wild animals that some single-family neighbors are becoming. We can’t simply keep throwing meat into the cage especially when the meat is much needed housing units.

Let’s then turn outrage into good outcomes: a better, fairer, affordable, and livable city for everyone. It starts with acting like what we say is as serious as it sounds.

Watch the Rent Control Debate

There was a good deal of coverage of last night’s debate. It took awhile, but embedded above is the whole debate. I had a lot of fun engaging with Councilmembers Sawant and Licata and the audience. For some of us, what looks like a tense and stressful argument is really an exciting battle of ideas and intellectual skill. Did the debate matter though? Some people think there are better things to argue about. I agree. The rent control argument is part legacy for Councilmember Licata and part campaign organizing tool for Councilmember Sawant: It isn’t going to happen here anytime soon since the City is preempted from enacting rent control.

Still, this gave me an opportunity to engage Councilmembers outside of a two minute comment, an office visit, or an e-mail or letter. I hit Councilmember Licata repeatedly on his efforts to undermine the Multifamily Tax Exemption program, a program that works. I paraphrased Margaret Thatcher (something that might have gotten be drowned out by boos had the audience known) when I said that Councilmember Licata would rather have the poor poorer provided the rich were less rich. This is the kind of thinking that could ruin our city. Anyway, take a look and see who you thought got the better of the argument.

A Letter from Stockholm on Rent Control

Stockholm to Seattle Rent Control

(The following was written by a resident of Stockholm as a letter from Stockholm to Seattle. You can watch last week’s rent control debate in it’s entirety here)

Dear Seattle,

I am writing to you because I heard that you are looking at rent control.

Seattle, you need to ask your citizens this: How would citizens like it if they walked into a rental agency and the agent told them to register and come back in 10 years?

KEYs 2014 12 01 Stockholm Housing Queue0001-1

I’m not joking. The image above is a scan of a booklet sent to a rental applicant by Stockholm City Council’s rental housing service. See those numbers on the map? That’s the waiting time for an apartment in years. Yes, years. Look at the inner city – people are waiting for 10-20 years to get a rental apartment, and around 7-8 years in my suburbs. (Red keys = new apartments, green keys = existing apartments).

Stockholm City Council now has an official housing queue, where 1 day waiting = 1 point. To get an apartment you need both money for the rent and enough points to be the first in line. Recently an apartment in inner Stockholm became available. In just 5 days, 2000 people had applied for the apartment. The person who got the apartment had been waiting in the official housing queue since 1989!

Stockholm Letter IMAGE 1

Rent controls reduced my housing supply and promoted a lack of availability in my existing housing stock. This was a surprise because the Swedish Government didn’t cap rents directly- it limited rises to those negotiated between the landlord and tenant associations; based on analysis of costs and apartment ‘utility values’ that described location and apartment quality.

I also noticed landlords started selling off rental apartments to owner-occupiers. Why? The rent control means rental apartments have two sale values simultaneously – a value as a rental apartment, and a higher value as a private condominium. Because rent control lowers a property’s value as a rental apartment, landlords withdrew rental apartments and started selling them at a higher price as private condominiums. This reduced the number of rental apartments available within the existing housing stock. So, if you don’t want to wait you have to save 20% deposit and buy the place you want.

It gets worse. Rent control divided renters into two distinct classes  – ‘first-hand’ contract renters and ‘second-hand’ contract renters. The first hand renters generally enjoy unlimited tenure security and low, rental increases. The ‘second-hand’ contract renters have been reduced to hopping between short term sublet rooms or sublet apartments the first hand renters hold when the first hand renters go on summer vacation, move in with their new partner or move to another city for work. In other words, tenure security was extended for some renters only by reducing it for other renters.

It must be remembered that the social function of profit is to signal to society where more resources need to be invested and provide the incentive for people to invest in accordance with those needs. The higher the profit, the greater the need, and the more powerful the incentive is to meet that need.

Government does have a role to help move things along and speed things up. A stick-and-carrot approach of a land tax on the value of all land (i.e. ignoring the value of buildings) to fund subsidies and co-investments for new apartment construction, and rental relief payments, should be seriously looked at before it is too late. Land value taxation promotes construction, isn’t passed on to renters, and generates increasing revenue as land values increase. Subsidies for new rental apartments also promote construction.

Rising rents and housing affordability do require collective political action. But rent controls are not the answer; they will make the problem even worse because they will destroy housing availability and not build a single new house. Land value taxation and new apartment subsidies are answers.

Seattle, rent controls don’t work – just ask my good friend, San Francisco.

With Love,

Stockholm.

Linked material:

What we do – Hyresgastforeningen
http://www.hyresgastforeningen.se/In_English/Sidor/What-we-do.aspx

“Your rent is basically determined by the ‘utility value’ of your apartment. Utility value means that the rent should be proportionate to the quality and standard of the apartment. We think this is reasonable because it results in fair rents for everyone. The rent should reflect the general value that tenants assign to various characteristics of their housing. This includes things like the size of the apartment, number of rooms, floor plan, standard, condition, the housing environment, the location of the building, local services and the attractiveness of the area.”

Rent Setting in Sweden SABO
http://www.sabo.se/om_sabo/english/Documents/Rent%20setting%20in%20Sweden.pdf
Swede endures 28-year wait for Stockholm flat
http://www.thelocal.se/20130328/46996

Stockholm City Council Housing Service waiting statistics (in Swedish –use Google translate to read)
http://bostad.stockholm.se/statistik/

Swedish Housing Crisis Committee Report (2014)
http://www.bokriskommitten.se/wp-content/uploads/2014/09/Bokriskommitten_eng_web.pdf

Land value taxation- Earthshare Canada
http://www.youtube.com/watch?v=jFQgOy-5Tng

 Land Taxation – Tax Justice Network
http://www.taxjustice.net/cms/upload/pdf/TJF_6-1-1.pdf

Why land value taxes are so popular, yet so rare
http://www.economist.com/blogs/economist-explains/2014/11/economist-explains-0

“Landlords are unable to pass the tax on to tenants, because the supply and demand of rented land is unchanged”