Eggs, Bacon, Toast, and an Argument About Housing

There is a regular breakfast get together hosted by a Smart Growth Seattle supporter who owns and operates numerous rental properties on Capitol Hill and around Seattle. The breakfast is a chance for some people in the housing business to get together and talk informally about what’s going on in Seattle’s housing market. This week the breakfast took a bit of dramatic turn, but what unfolded was a microcosm of the larger housing discussion in Seattle.

The breakfast, which usually takes place a Capitol Hill café, started out the way it usually does, with lots of catching up about the news, politics, and people’s stories about how their work is going. One of the regular attendees was facing a serious issue with his bank; without going into lots of detail, the bank was changing the terms of a loan. The reason? Lots of data and news stories are pointing to what most in the business call, “a softening market.”

I’ve written about this before. Rents go up and rents go down. The change is a function that is largely driven by three factors, costs of construction and financing, demand for housing, and housing inventory. If costs are up, demand is up, and inventories are down then rents are high. When demand starts to slow and there is a lot of supply rents start to fall. When this happens banks and lenders can start to get nervous. They worry that the market is cooling and that they won’t get their money back from an investment in housing.

This uncertainty telegraphs through the market. People start talking about sitting on their hands. Waiting it out. Standing pat. All the things that would mean fewer project proposals, fewer loans and investments being made, and then, because of all this worry, ever fewer projects, loans, and investments. It’s how markets work, when people start worrying, confidence erodes, and building slows.

There was a bit of commiserating around the table, and I reprised my old Seattle Transit Blog post about where rents come from. Some people might feel some schadenfreude‎ at builders and landlords talking about a slowing market. After all, maybe their profits will suffer. But as we talked, we all shook our heads collectively at the idea that somehow attacking rising rents with more fees and costs would work. We all know that if rents are going up, the worse thing to do is add costs. If demand stays steady, and supply weak, then people have to pay more for rent, and those higher rents are what pays for the fees, fines and taxes added to housing costs.

Ironically, just as the table was wrapping up a conversation about how cooling demand and possible excesses in supply were going to lead to lower housing prices in Seattle two young men, recognizing me from across the room, approached the table.

One of them wearing a plaid shirt over a black rock and roll t-shirt looked at me and asked, “You’re against rent control, right?”

The guy standing next to him was holding up his phone, taking video of me and waiting for my answer.

“Yes, I am,” I said.

“Why,” he asked.

“Rent control is an inflationary policy,” I started. “While it might work well for the few people that end up in a rent controlled unit, the price of everything else goes up because there is a disincentive to build more housing.”

I looked into the cell phone camera. The guy in the plaid had said that the cameraman was a journalist. He stood there intently staring at his phone, filming me, while we argued about rent control.

“What’s your solution then,” he asked.

I explained, “The best thing we could do is build more housing everywhere, of all kinds, all over the city, for people of all levels of income.”

“My Grandparents were Holocaust survivors and sold pencils,” plaid guy said, “And if it wasn’t for rent control in New York they never would have made it!”

He described how his grandparents ended up being able to buy a home, escape poverty and build a good life for his parents. All because of rent control.

The cameraman asked a question about an easement in Columbia City.

“My brother lives in a small apartment in Columbia City but because of greedy developers wanting an easement he’s losing his home,” the cameraman said.

I didn’t understand what the issue was and said I’d need to know more detail. Then he stomped off.

“He’s really mad,” plaid guy said. “I don’t really know what he’s doing or what he’s working on, or what his name is but he’s really mad.”

The guy kept at it, standing at the side of the table angrily arguing with me about rent control and supply and demand. He was also upset about the changing character of the Capitol Hill neighborhood and the what he saw as the rampant destruction of older, one story buildings. He never did tell me what his name was, so I stuck out my hand and introduced my self. He shook my hand and told me his name.

By this time, the waitress asked him to stop.

“My guys here are just trying to have breakfast,” she pleaded

So I slid over and the guy sat down next to me and kept arguing, a little bit more subdued now but no less angry and upset. My other table mates sat there wide eyed while we continued and I tried to explain that there are good ideas for subsidized housing like using the City’s debt capacity for building on City owned land. I said Councilmember Sawant and I agreed on this but that the City Council hadn’t done anything about it; they were too busy trying to find other ways to add costs to housing.

I also said maybe a transfer of development rights (TDR) program might preserve the one story buildings he was worried were being demolished to make way for housing; you pay off the owner of some of those buildings by letting her sell the floors she doesn’t build to someone else who can build more housing on a parking lot. The best thing we could do, I suggested, was allow as much housing as possible and then come up with fair, broadly distributed property tax levies, like the one we already have, to help offset housing costs for poorer people and families.

He seemed a bit surprised that I engaged him for so long and with a variety of ideas about how to solve the problem. But he didn’t like the fact that the waitress tried to censor him.

“Even this place is just a hipster dump,” he said. “In New York we can argue like this, but here, my God, you argue and everyone gets upset.”

Finally the guy left.

When he was gone, the waitress came back and said, “All this stuff about bartenders getting priced out is nonsense. I own a condo. I worked hard and saved. I do well. But I earned it.”

She explained that she was 35 and had worked hard for what she had like most of the people in the business. She couldn’t understand why people expected to be saved by rent control.

“As I get older I become more and more of a Republican,” she said.

So there it is, all before 9 in the morning. Just another day on the front lines of the housing battle here in Seattle. I joked with the developers at the table, “I do this so you don’t have to.” And it’s the truth; I enjoy engaging people in the topic, anytime and anywhere.

The other thing that is true is that the angry from New York is right: we do have to deal with a lot of emotional arguing on this topic. If we try to avoid it by just saying what people on the other side want to hear, we’ll never make any progress. So whether it’s with strangers at a breakfast table, anonymous commenters, people in the business, City Councilmembers and staff, or friends of friends, I’ll never avoid the conversation about what we need to address the challenges of growing our city: more housing, of all types, everywhere in our city, for people of all levels of income.

 

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