Housing Forum on February 13th

This Thursday, February 13, the Seattle City Council will be hosting an Affordable Workforce Housing Forum at City Hall. You can find all the details, including the agenda, on the Council’s website. You can also sign up there to attend all or part of the forum.

We’ve already covered this topic earlier pointing out that the problem of workforce housing really isn’t a problem at all. In fact, it looks like the City is trying to solve a problem we don’t have using a tool that really won’t work, incentive zoning.

There is no doubt that many people struggle to find a place to live in Seattle that meets their needs. Sometimes what they find isn’t satisfying because of the price. Other times the location could be a better fit for their needs. But anyone who has looked for a new place to live will tell you it’s not fun. The question is where in the housing market is the biggest problem; where are people being forced into unsustainable arrangements that are inconvenient and financially untenable?

The evidence is pretty clear (see the chart above from a King County needs assessment) that the greatest pain being felt in the housing market by consumers is at the lower levels of income (i.e. households that earn less than $42,000 per year). There are a number of reasons for this, but it is pretty hard to argue that we should be taxing new housing in our city to subsidize housing that the market is already producing. What would help all levels of income in the city is more housing production of all types. Right now the City Council is trying to find ways to generate revenue from adding costs to new housing to, ironically, subsidize the increased costs of housing.

We need a new and fresh approach to this discussion. Attend the forum and let the Council know your thoughts.

Seattle Workforce Housing Forum

Thursday, February 13
Seattle City Hall, 600 4th Avenue, 1st Floor, Bertha Knight Landes Room

Noon – 4:30 p.m. – Expert Panel and Stakeholder Engagement Discussion
4:30 – 6:00pm – Informal Gathering with Panelists
6 p.m – 8 p.m. – Public Feedback Session

Join us as we tackle the best ways to meet Seattle’s affordable housing needs!  We’ll hear from national experts about workforce housing production in cities like Seattle, and how we can make the smartest decisions possible going forward.

The forum will include discussions on:

  • Ideas how to Increase the Affordable Housing Supply
  • Seattle’s Current Housing Programs
  • Innovative New Strategies for Workforce Housing
  • National Best Practices in Incentive and Inclusionary Zoning

12 noon – 4:30p.m.
Expert Panel and Stakeholder Engagement Discussion is generally geared toward stakeholders in the housing/development/advocacy field.  After the panels, there will be an informal no-host happy hour at the Polar Bar for further discussion between participants and panelists.

Draft Agenda

6 p.m – 8 p.m.
Public Feedback Session is geared toward the general public

The City is currently evaluating the best methods increase the supply of affordable housing in Seattle by engaging with national experts, consultants, stakeholders, and the public. This forum will help inform City Council’s work going forward. Both events are free, and the public is welcome to attend either or both.

 

Big demand for small homes on small lots

Take a read through this great post by Kaid Benfield on the Ten things planners need to know about the future real estate market. Among other things, Benfield points out that a recent analysis

Suggests that the growth in demand for new housing over the next 30 years will consist primarily of demand for smaller homes on smaller lots, a reversal of the type of demand that fueled sprawl in the late 20th century.

The research Benfield reviews is from a book called Reshaping Metropolitan America, a study that shows a general trend away from larger homes on larger lots and toward more efficient and sustainable use of Demand Graphland in cities. This is data that validates the bedrock principles of Smart Growth Seattle, especially our point that smaller homes are more efficient. We think they also make great neighbors

Hearing Examiner: Design review “would tend to discourage new development.”

Erica Barnett at Publicola reported today on City action on an appeal to last year’s legislation on microhousing. Smart Growth Seattle weighed in on that proposal pointing out that the design review process would add needless costs, time, and process to microhousing development, costs ultimately born by renters who are currently getting good deal from their rent dollars. We asked then, “why subject a good thing like microhousing to a bad process like the current design review regimen?”

Here’s what the hearing examiner had to say about design review in her rejection of the appeal:

 “The evidence fails to show that the proposed legislation would spur new development of micro-housing or congregate residences, compared with what occurs under existing regulation of micro-housing. Clearly, the Appellants fear that this will occur but the record does not demonstrate that this impact would likely occur. If anything, as DPD notes, it would seem more likely that the proposal’s addition of new requirements, such as design review for certain projects which are currently not required to undergo design review, … would tend to discourage new development.”

You might think the we filed the appeal. We didn’t. Ironically it was the opponents of microhousing that filed the appeal which ultimately slowed down the legislation we really didn’t support in the first place. I guess we should be grateful opponents got this decision. The hearing examiner read the legislation and agreed with us: more process and review would keep more projects from moving forward, denying people a great housing option. And the added bonus to this whole thing is the Department of Planning and Development, on the record, admits their own design review process would hinder microhousing! 

You can read all the documents here.

Think housing is expensive? Just wait until it’s affordable.

There is a question haunting Seattle—the question of affordability. Throughout the city many people feel like things in Seattle—especially housing—are too expensive. But what is affordable and what isn’t? And if housing prices are too high for people with certain levels of income, what’s the best way to fix that? And what is the City of Seattle considering now and will it help or make things worse? Is there a better solution?

What is affordable?

Affordability is the quantitative or qualitative measure of a relationship to price. According the government, a person shouldn’t spend more than 30 percent of their gross monthly income on housing. A discount for income is applied to this percentage when considering which people to subsidize. Anybody earning 60 percent or less of Area Median Income (AMI) is considered to have a low enough income to need help with rent. By this measure, a couple in Seattle earning $51,150 (80 percent of AMI), for example, can afford housing costs of $1,198 per month.

The biggest driver of housing policy in Seattle these days is not the more than 3,000 people who sleep outside each night or housing for lower income families but something called “workforce housing.” The City defines workforce housing as housing that is priced affordably (according to the measure described above) for people earning 60 to 80 percent of AMI, or $1,075 to $1,198 for a one-bedroom apartment.

Is workforce housing hard to find?

According to the Consolidated Housing and Community Development Plan released by King County the answer is a clear, “No.” Here’s what that plan says about workforce housing in Seattle:

For those moderate income renters, the supply is much more than adequate in all of the sub-regions . . . 38 to 42 percent of all rental units throughout the County are affordable at the moderate income level (75).

And the plan also finds that,

While there appears to be an adequate supply of rental housing for those at 60 percent AMI and above, there is a very inadequate supply of rental housing for households earning 40 percent of median household income or less (69).

There really isn’t lack of supply of housing for people earning 60 to 80 percent of AMI; the real problem is at lower levels of income.

But here’s what the City Council says about workforce housing:

Many retail and service workers that support Seattle’s economic prosperity have difficulty living in the city where they work. Even nurses, teachers, construction workers and many other middle-wage workers face barriers to living in Seattle. For example, a public school teacher’s starting salary of $42,000 suggests that he or she should not pay more than $1,050 per month (30%) for housing. Yet the average rent in Seattle for a 2 bedroom / 1 bath apartment is $1,466.

The logic of the City Council goes like this. Retail workers have a tough time living here. Teachers have are hard time finding a place to live. The teacher who starts out in his first job at $42,000 per year can’t afford a two-bedroom apartment at $1,466.

Wait. Are we talking about retail workers or teachers? And why does this new teacher need a two-bedroom apartment? Is the Council talking about a teacher with a partner who earns no money, since the figure they cite seems based on the City’s normative standard for a couple earning that much? Recent reports peg the average base pay for teachers at about $49,000 per year.

The strained logic of the Council and their example seem to be motivated by the need to create sympathetic case: a poor teacher who would have to spend roughly 42 percent of gross income on housing for a two-bedroom apartment. But their example seems premised on a couple not a single teacher.

What about a one-bedroom unit for our single teacher? A search of Seattlerents.com for apartments between $900 and $1,000 turns up this unit below at the very top of the results.

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At $900 per month, our teacher would be paying roughly 26 percent of his income on housing. That’s good isn’t it? And it also is anecdotal validation of the King County Data: there is not a lack of supply of housing choices for people earning 60 to 80 percent of Area Median Income. So there does not appear to be a problem with a lack of supply of workforce housing in Seattle.

Is Incentive Zoning a solution looking for a problem, or is it creating one?

The City is currently charging developers in some areas a fee to build housing over and above existing zoning; instead of a “buy one, get one for half price,” the program is a “buy one get the second one for 11 percent more than what you paid for the first one.” The idea behind the fee—called Incentive Zoning—is that developers will collect more rent from additional units, and therefore more profit if they are allowed to build more density than underlying zoning. Why not capture some of that profit to pay for workforce housing?

Notwithstanding the fact that there does not appear to be a lack of options for people earning 60 to 80 percent of AMI is this fee a good idea? Does this policy of charging developers money to build more housing work? Even though we don’t need more workforce housing but more housing for poorer people, does the fee spur more housing development? Is it really an incentive?

Based on one analysis by the Downtown Seattle Association many new projects simply aren’t taking the “incentive” and choosing not to build additional housing.

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Of the 14 projects in this review only two are taking the bonus and the fee that goes with it. Why would developers walk away from all this extra density and extra profits?

In a recent article in the Daily Journal of Commerce Tom Parsons of Holland Development spoke to the issue of why builders don’t see the incentive as, well, an incentive:

Once a structure goes above seven stories, construction materials shift from mostly wood to concrete and other materials that can cost 30 percent more, Parsons said. Developers also must pay for low income housing to reach 125 feet under the South Lake Union rezone, so Parsons said shorter buildings are a better financial choice for these blocks.

“You put all those things together and look at what the market is willing to pay in rent, and the density we can build at base (zoning) is adequate, and it provides the best financial return to our investors,” Parsons said.

The “low income housing” Parsons is referring to is workforce housing, something already being adequately provided by the market. And Parsons doesn’t lay all the blame on the fee, but the fee is part of what tips the scale resulting in less public benefit from more housing and funds for housing.

Based on the numbers it looks like the program which is intended to “incentivize” more building is actually discouraging it. There are risks and costs associated with building more units and the fee simply adds another one. Instead of stoking supply of new market rate housing, and gathering fees from the building of that new housing to help solve housing need, the fee is discouraging market rate supply and not really building very much new subsidized housing either. The fee is making things worse. If we don’t have a problem in workforce housing now we sure will if the City continues to tax new growth and development.

Even if there were a serious lack of housing priced at workforce levels—60 to 80 percent of AMI, the incentive tool probably wouldn’t solve it. Meanwhile lower income people and families struggle to find a place to live and thousands of others sleep outside in the cold every night.

The incentive program part of the housing problem in Seattle reducing housing supply overall by actually discouraging more building. Maybe developers are lying when they say it’s not worth it to take the bonus units they get by paying the fee. But with the risks that are already inherent with building additional height why add more? And whether you believe them or not, evidence shows builders aren’t paying the fee, which means less money to subsidize anything, even the actual problem.

What’s the answer?

The answer is more housing supply. When the market creates a surplus that means lower prices. Add fees, costs and supply will go down and prices will rise. What the fee on new development does is tax a thing we want more of in our city, jobs and people. If we want to encourage more housing we’d reduce the costs and risks associated with building more instead of adding both with fees.

Letting market rate developers build what they can finance will result in more competition between landlords for tenants. More housing means better deals for everyone looking for a place to live. If banks and investors can’t be paid back for lower priced units, housing, or shelter that’s where subsidies or even less regulation are indicated. Making the case for this is going to take more than just one (long) blog post, but we need to challenge the assumptions being issued from City Hall about housing prices and how we can lower them for all levels of income.

Seattle City Council to host housing forum

Next Thursday, February 13th the Seattle City Council will host a forum on “workforce housing.” Workforce housing is typically defined as housing that is “affordable” for people earning between 60 and 80 percent of Area Median Income, about $42,000 to $52,000 in household income for two people. The current normative standard for housing expenses (what you should pay for housing) is 30 percent of gross monthly income.

There is a myriad of problems with the current definition of affordability and how it’s measured.

I’ll be writing more about this topic later this week, but it’s important that supporters of increased housing choices and supply to show up for the evening portion from 6 to 8.