Impact Fees? Increase and Raid REET? Only Poor and People of Color Will Suffer.

Here we go again. The Seattle Times ran a guest editorial titled, “Builders, not residents, should pay for Seattle’s explosive growth.” Now people are buzzing about impact fees on social media. Worse, some candidates for Mayor are talking up the idea. Please stop! We don’t need impact fees. We have other resources like the Real Estate Excise Tax (REET) that pays for many of the things people claim we need impact fees to pay for, and some in Olympia are proposing to take those funds away. It’s vogue for people at the safety of their keyboards or looking for applause lines on the campaign trail to talk up impact fees. And some see REET as a treasure trove for subsidized housing. These measures would just boost housing costs for the people that are most vulnerable to higher housing prices.

And who are the people who are having the hardest time paying rent and getting a foothold in the housing market? Here’s a quote from a Fortune story about a recent Zillow report on housing costs:

“African-American and Hispanic renters find themselves in a catch-22 situation—while owning a home is a great way to build wealth, you need to save up some cash to be able to buy. If you’re spending close to half of your income on rent, saving up that down payment is going to be incredibly difficult,” Zillow’s chief economist Dr. Svenja Gudell said in a press release.

Developers, ultimately, don’t pay fees! Renters and first time home buyers do. Write this down and put it on your refrigerator or on your computer monitor! 

When government sets about to punish market rate developers and make them pay their “fair share” the only people hurt are people with fewer dollars to spend, and most often those are people of color. And these groups are most often touted as the victims of new development. Pretty ironic, isn’t it. Single-family homeowners clamoring for more fees and taxes in the name of the victims of growth, poor people of color who get displaced; but the fees make the problems even  worse.

And, by the way, efforts to drain the one general source of funding for things people want to use impact fees for, the Cumulative Reserve Fund (CRF) are still underway in Olympia (see HB 1797). Seattle’s CRF is funded by REET revenue. Taken together, taking away REET funds and imposing impact fees to replace those lost funds which is almost inevitable, would raise prices for poor people in the name of building them units, maybe, sometime off in the future. It makes no sense. 

Before anyone touches the money from REET or considers impact fees we should get a measure of why housing costs so much to produce; any changes in REET should be tied to the findings of our proposed audit funded by a proviso in the Senate budget.

Anyway, here’s my Facebook rant.

The impact fee notion is harder to put out than an oil slick fire. It keeps coming back over, and over again. First, impact fees (and all fees, taxes, and mandates) boost the price of housing for people who need it, period.

Second, impact fees are narrowly construed; that is they can ONLY be use for “impacts” near by the project. Want impact fees for schools? Then you need to show, using math not stories and bullhorns, just how much that apartment building will increase enrollment. Or demand for a park down the road. Or for intersection improvements.

The fees are prorated, that is the fee doesn’t pay for all the improvement, just the share of the improvement that will benefit the residents (who will pay for the benefit with higher rent).

And the fees are not a freewheeling punitive charge that goes into a fund that can be used to solve the social problems of the day, including for housing. It’s illegal.

Finally, new development and growth DOES pay for needed improvements to infrastructure through collection of the Real Estate Excise Tax (REET). The REET generated about $76 million this year, $26 million of which goes for things like bike and walking paths and other SDOT projects. The Housing Development Consortium and their allies are trying to raid this fund in Olympia for housing. Keep in mind that if they took ALL the money in the sub fund created by REET it could not have paid for the $92 million dollars it cost to build 200 units of housing on Capitol Hill (12th Ave Arts $47 million) and Beacon Hill (El Centro $45 million)

If they get their hands on this cash what will pay for the infrastructure? Yep, impact fees.
So we’ll have MIZ fees, REET fees, then impact fees, all of which will be paid for by renters and new home buyers.

I heard both Jenny Durkan and Jessyn Farrell talk about impact fees. Please don’t do this if you’re elected and don’t promise this on the campaign trail. We’re already lighting an inflationary fire with MIZ. Impact fees aren’t needed. And leave REET as is, a fair widely distributed tax that pays for needed infrastructure.

Oh and that new sidewalk in front of that new housing development? That’s paid for BY THAT DEVELOPMENT!

Let’s deal with the problems we’ve already created with MIZ before we go off looking for more ways to increase housing prices in the name of affordability. Please!

There are two posts I’ve done on REET to argue against more fees, one is older and about the linkage tax proposal and the other is about more recent efforts to raid the REET for housing.

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