On Public Housing, Food, and Why We Need a Housing Market

I got this question recently in an e-mail: I was wondering what your opinion on public housing is, and if you’ve written a piece on it. I think your insight is very good to have, and I appreciate knowing what you think on the issues. Here’s my answer. 

Here’s a link to one post that might help: https://www.forbes.com/sites/rogervaldez/2017/03/06/in-defense-of-more-housing/
My view is that whatever approach we take to housing, we need more supply when demand goes up. In the big picture, it matters less who or what produces that housing than it gets made and delivered to those who need it.
The problem with non-market approaches is that they inevitably lead to rationing and the decisions about who gets the housing end up falling into the hands and minds of bureaucrats making decisions. The market, through prices, rations housing as well, but does so in a blind way, that is nobody can get ahead in line because of politics etc.
But in both approaches, if housing supply meets demand, the problems of rationing and escalating prices matter less and less. Unfortunately, public officials and bureaucrats complicate the production of housing, both public and private, with way too many rules and regulations. We don’t treat other necessities, say food for example, in the same way. We do regulate food safety, but because the federal government has prioritized affordability, farmers and producers actually get benefits, subsidies, and regulatory relief to make food cheaper. When was the last time you heard that “food prices are skyrocketing!”
Yes, there are a myriad of issues with the way we manage the food market, but high prices are not one of them. Imagine if we payed private developers to produce more housing, subsidized their purchases of land, allowed them to pay less for labor, and even passed legislation protecting the industry from libel and defamation. Again, there are issues with all of these (see the settlement of the ‘pink slime’ lawsuit or the many issues associated with farm labor).
Still, the point is that our priorities around food favor its affordable production. Farmers are generally sympathetic figures, and though there are many social justice, legal, and other issues associated with food production, the system has delivered affordability. In contrast, housing production and operation is seen as a scourge and a profiteering racket. Housing, however, is like any other business and housing producers are human beings like any other set of human beings working in an industry. As I always say, greed is a character trait, not a business model.
Finally, I think we need smart subsidies. Although to make the lager point about supply I sometimes concede that it is a “right” or that the government could produce it and manage it, I think that is a terrible idea. Government is best when it is a referee in the market, not a participant. Government should write the rule book, revise it, and set priorities based on good science and data. But because housing is perhaps the biggest single monthly expense for a household, paid out all at once, it can make people very angry when that expense increases. And at times of population growth, increases in prices are coupled with other issues, problems, and discomfort that are all attributed, often, to the production of housing rather than it’s scarcity. The rule book then just gets longer and longer.
This is a long answer to a simple question, but I think it’s always worth reflecting on why the market should be allowed to produce as much housing as it possibly can. When and where it fails, mostly for people who have less money and a myriad of other challenges, housing should be subsidized, even produced and managed by government. But even for people struggling to get out of poverty, we ought to be considering guaranteed income and vouchers when we can rather than turning over their housing to a system we wouldn’t trust ourselves.
Thanks for the question.
Roger–

Smart Growth Seattle on the Radio: It’s Not a Housing Crisis, it’s a Housing Shortage

I went on the airwaves to talk housing with Bill Radke of KUOW’s The Record and John Fox of the Seattle Displacement Coalition. My main point is not that we are having a housing crisis but that we are having a housing shortage, and that we don’t need to make more affordable housing, we need to make more housing so it will be affordable. Here’s the rundown from the show’s website:

For Fox, keeping affordable housing means halting teardowns of buildings that are already affordable, even if that means losing out on potential new units in the city.

For Valdez, making affordable housing means building a lot more buildings, even if that means tearing down buildings that are currently affordable. The idea is that if more units are available for everyone across the income spectrum, then low-income people won’t have to compete with the middle-class for a paltry number of affordable homes.

In the past, Fox and Valdez have been called arch-nemeses for their differing views on how to address Seattle’s growth. In this conversation, they at least agree that the ultimate goal is to have affordable housing in Seattle for those who need it (even if they can’t agree about how to do it).

I have always thought Fox to be a principled opponent on the housing issue. We don’t agree on many things but we do agree that the priority for housing subsidies should be on people who are truly struggling in our economy. The City’s emphasis on so called “work force housing,” that is housing for people earning around $60,000 is, in my view, an indication that their policies that constraining housing supply are just pushing prices to the point that people with higher earnings now qualify for subsidy.

I think you’ll hear me make that point frequently during our segment: the more we limit and constrain market rate housing, the more pain spreads through the economy, and the fewer dollars we’ll have in subsidies to help people with the fewest dollars. You can listen to the whole exchange below.

 

Blank Ballot: As Mayor Murray Exits Will Things Get Better for Housing in Seattle?

The answer is, I think, no. In case you missed it, Mayor Murray resigned from office leaving today at 5PM. Last night Jenny Durkan and Cary Moon both gave horrible debate performances. Moon, in my opinion “won” the debate, having a better and more confidant command of the issues than Durkan. I can tell that Moon really likes to talk about housing even though she doesn’t really know what she’s talking about. Durkan, on the other hand, speaks the I would about soccer; with pain and a deep sense that it’s really hard to understand how people can get excited about a sport that has scores like 1 to 0. Durkan doesn’t care, but she is more favorable to business. Moon really cares, but favors really bad and silly ideas like taxing speculators. We’re doomed. I’m already sort of missing Mayor Murray.

If Moon won the “debate” (the quotes indicate that it was more of a colloquia) then The Seattle Times’ Vernal Coleman won the moderator contest. The socialists and communists gave that win to The Stranger’s Heidi Groover who did her job, asking questions that Stranger readers would ask (how will you approach housing from a social services perspective etc). Coleman asked about the high costs of non-profit housing citing the figure of $350,000. I had hoped he’d cite my figure of $500,000 but still, he pressed the issue with the question. The answer? I don’t remember. Neither candidate answered it.

Durkan’s total failure came with two phrases, “housing is a human right” and that she would “tap developers” for money to subsidized non-profit housing. She and Moon repeatedly referenced “HALA” as the new tax on housing that would be charged under the City’s Mandatory Inclusionary Zoning (MIZ) scheme it calls Mandatory Housing Affordability or MHA. That’s bad enough, but Durkan who is supposed to be “pro-business” said numerous times that builders would be paying for subsidized housing. And while she said “housing is a human right” she also supported sweeps. I don’t think that Durkan knows what that phrase even means. And if she does, I know she won’t do anything to make it happen. It’s what we call pablum.

Durkan further goofed when she tried to call out Moon for not having run a big organization. It was supposed to be a knock out moment, like “you don’t know how to run a City.” Instead Moon beautifully pivoted and pointed out that she’d run a business with just as many people as Durkan managed when she was a prosecutor. “Have I ever run a $6 billion organization?” parried Moon. “No. But neither have you.” Total win. Moon wasn’t able to shed her weird idea of taxing foreign investors and came across as defensive. She also said, more or less, that market rate builders were part of the problem not part of the solution. She wanted to convey she was with the Oliver, Hasegawa, and Stranger voters.

Based on last night’s debate, Durkan does not deserve the vote of hard working builders. Neither does moon. Knute Berger had as fine a take on the end of Ed Murray as anyone. He said of Murray,

He seemed to embody the strongman-type mayor many Seattleites have yearned for — he used his office to drive agendas, whether the HALA housing plan or raising the level of urgency on homelessness. He wasn’t at constant war with the City Council. He yanked the reins of control on the neighborhood councils to show who was boss.

Not really. He wasn’t so much a strong man as a stubborn man. But he was effective at confounding his technique of putting antagonists in a room and bullying them into a solution. And the outcome was a thing called HALA which was confused with a tax on new development, MIZ. I always said Murray was like the dad driving the car who threatened the kids in the back who were making too much noise. “Don’t make me stop this car and come back there!” Did that technique solve any problems. Of course not. But it shut everyone up except those of us who had nothing to hear from the Mayor.

Murray failed, in the end, to resolve the housing issue. He shut almost everyone up, including even the contentious and skeptical Stranger who dutifully supported his MIZ scheme. That’s something. But that isn’t consensus. And it isn’t policy. It’s just shutting everyone up until the next bathroom stop. But Durkan and Moon seem like they’re auditioning to host a low wattage pod cast rather than running a government and solving a pressing and urgent problem which is more about ending abusive ideology and looking more at data. We don’t have a housing crisis (as Durkan repeatedly mouthed over and over) we have a housing shortage.

Our next Mayor doesn’t have a clue about the distinction between those two concepts. Today, my advice to builders is that we have more leverage if we leave our ballots blank. If one of these candidates wins by 500 votes, we can at least say we made up the difference. That might mean something. Durkan thinks she’s entitled to your vote because she thinks we’re afraid of Moon. I’m not. You shouldn’t be either. Neither one seems to understand the business of building or the economics of housing. Why vote for either one when a vote for Durkan means voting against Moon if she wins, and if Durkan wins, it means a vote for someone who has said she’ll make you pay for non-profit housing. I don’t see the benefit of voting for either. I’ll probably leave my ballot blank.

Forget Amazon: Local Housing Builders May Have to Leave Seattle Too

Editors note: This post was originally an email responding to a fundraising request. Smart Growth Seattle is funded largely by small and medium sized, family owned business like the one Gary Cobb operates. While the Seattle Chamber of Commerce is just waking up to the deliberate efforts to slow and stop new housing development, builders like Gary Cobb face real hardships because of runaway regulation based on ideological excess. 

Hi Roger,

With the city of Seattle’s new permitting levels, I am faced with a year of no income. I am feeling like I have been fired from my own business. I have 2 projects in for permit totaling 9 new town homes and all should have been completed and sold about now, leaving money on the table and the ability to move on new projects, but the dirt has not been touched, due to lack of permits.  These sales would have given plenty to offer up support to you like I was able to do the past.

I am in serious thought that it will get much worse to build in the city before it gets any better.   With design review, we are faced with permitting that is two times as slow at best.  It now takes up to 2 years or longer to get a 4-unit town home project ready to build.  This makes the turnaround time on a 4 unit to be about 2.5 to 3 years or longer.  In the past or even a year and a half ago we could turn a project from purchase to sale in about 12 to 14 months.  This, and added linkage tax, more income tax for the city, and other proposed taxation will, in my estimation, end a lot of small builders careers in this city.  Yes, they will try and even think they can hang on and some may, but others will go by the wayside under the heavy taxation and lack permitting that disallows them to do their work destroying their businesses not to mention laying good people off.

This thought takes me back to mayor Nickels.  In his first term of office, he came to our meetings explaining that he was making it his goal to support the builders and wanted the jobs that it created, along with the tax base, and the new homes we built for our city.  He made it a goal to speed up the permitting processes, while streamlining the Department of Planning and Development that was out of control.   Back then that we had to wait 4 months for a permit, far, far less time than we are facing today.   With mayor Nickels, I was able to see permits in 2 weeks for 2 multifamily projects.  Yes, it can be done in 2 weeks, believe it or not.   I think this administration wants us gone, leaving only the very big builders that focus on high-rise apartments. This is the future that the city wants for generations to come, or so it seems.

The members of the Master Builders are small family owned businesses.  Yes, some are a good-sized builders, but even when I ramped up to building 100+ homes a year and was the 18th largest builder in King County, it is still possible to get busted down with just one major change in the economy, like the 2007 downturn that takes it all away.

We place everything we have on the line to do what we do.  We give all we must to be out there building.  This is a business of risk and reward with high finance, economic changes, and unforeseen problems at every turn.  One can say it’s all about the money, but more than that we are doing what we love to do and that is build.   We love to create new buildings that blend into our city.  We love to hear from a neighbor that the neighborhood looks so much better when we are finished.  We love to hear from a buyer that we did a great job in building the new home they chose to live in.  We love getting up in the morning to do it all over again.  We love looking at new properties seeing the opportunity, sometimes when no one else could.

Most of the in-city builders are working out of their trucks and spending all hours at night to catch up on the paperwork and emails.  We work nights and weekends and lay awake at night planning our next day; we lose sleep in wonder of how we will cover the bills.  No 8 to 5 here, no way.  We sign our own homes away to guarantee the needed moneys from a banker to build.  Many a builder’s pride and joy, their own home, has been taken by a banker unwilling to give a little to allow the builder to survive in hard times.

Most of us are doing what we do because we love doing it and are willing to take the risk.   We are hardworking honest people that really take pride in what we do day after day, and year after year.  On the other hand our city seems to take a different stand and looks at us as rich people dozing our way through the streets and bulling our weight around the city, all for the money. It seems as they think they found a cash cow to take from and to slow down growth so as not to destroy the pristine neighborhoods we now have.

Roger, as my email states I am concerned about the future of the small builder in the city of Seattle. I don’t want our city to go to large high-rise developments and become a base for large out of state developers and owners.   The small builders live here, work here raise families and grow old here.  We really do care about our future here as well as the city I have called home all my life, born and raised.   If I am not permitted to build here then I can’t run a business here.

If some changes are not in the works to fix this problem now then I must assume that the city of Seattle is meaning to create this problem in wanting the builders to leave. It could be worse in that we could be working in Key West FL today. I was just there last month. I can only ask God to help them, as it was such a beautiful place.  I hope it still is…

Kind regards,

Gary Cobb, GNC LLC

Senator Palumbo: Help for Seattle Depends on Allies Outside the City

It’s sad and ironic that I had to make a trip to a farm in the distant reaches of Pierce County to hear a loud and enthusiastic support for jobs and economic growth in Seattle. And who were these people, gathered in a barn at the Wilcox Farm, cheering for jobs and growth? Republicans of course! Meanwhile, miles away, in Seattle Mayoral candidates and local lefties and progressives were actually considering the benefits of fewer jobs and less growth in Seattle. Yes, Seattle socialists and progressives aren’t at all worried about Amazon’s consideration of expanding beyond Seattle; they could care less and even welcome the idea. One Democrat, though, stands out from all the rest, State Senator Guy Palumbo.

I met Senator Palumbo at State Representative JT Wilcox’ annual salmon bake, held on his families iconic farm near Harts Lake in deeply rural Pierce County. What were we even doing there? Well, for me, I long stopped being active in the Democratic party that locally has drifted further and further left, embracing self-defeating policy ideas like an income tax and rent control. I find that Republicans in Olympia speak my language when it comes to housing. I don’t have to spend lots of time persuading them that, yes, supply and demand applies to the housing market.

In Seattle, the Greater Seattle Chamber’s Maud Daudon said that Amazon’s recent discussion of a new headquarters was a “wake up call.” I hope the Chamber enjoyed its nap, because the rest of us have been wide awake over the last 4 years as the city has become overrun with really divisive and destructive rhetoric and policy; over and over again the City Council and Mayor that has enjoyed the Chamber’s undying support, have imposed an ever widening net of horrible anti-jobs, anti-growth, and anti-housing policies. While the Chamber was asleep, the rest of the state has noticed, including Senator Palumbo who represents the 1st legislative district which straddles King and Snohomish Counties.

Palumbo was singing our song recently on Jason Rantz’ radio show decrying the nuttiness of Seattle’s dominant political class, a group that sees job growth as destructive.

There is nothing more environmental that we can do than to build upwards (aka Manhattan) and to have people live and work in the same area … they did the right thing for our city, but somehow, that’s a problem.

That Palumbo sounds like a Republican on this issue isn’t surprising when you consider that the Democratic party in Seattle isn’t for jobs anymore and socialists are tipping the political scale further and further away from the basic notion, supported by Democrats since the 1930’s, that jobs are the path out of poverty and economic collapse.

I have no strong opinion about Democrat Mankha Dhingra, the candidate poised to win a State Senate seat in the state’s 45th district, currently controlled by the Republicans. I have not paid close attention to the details of the race, and like most everyone else recognize that a win by Dhingra means that Democrats will control both houses of the legislature. That’s a big problem for housing policy in the state and in Seattle; legislative Democrats are more conservative, generally, than Seattle Democrats. But having their hands on the levers of power, unchecked, could spell trouble on a wide range of issues and certainly no progress on key issues like trying to figure out why non-profit, subsidized housing, is so unbelievably expensive.

That’s why Senator Palumbo’s role is going to be so critical. Palumbo is a moderate, who supports charter schools and who worked at Amazon. He has demonstrated independence, and he likes data. Those of us in Seattle hoping to at least quarantine the outbreak of a virulent strain of socialism that has infected City Hall are going to have work with both Republicans and Democrats outside the city. The razor thin majority held by the Democrats in the Senate means the moderate and thoughtful Palumbo has leverage over the Senate, and thus over the whole process. Palumbo is principled, but pragmatic. I think he’ll hold the line on efforts to make things worse for jobs and housing in Seattle and, perhaps, work affirmatively to tie the hands of a City government that is increasingly irresponsible and dangerous.