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Letter to Senator Fain: The High Cost of Affordable Housing

I’ve been writing a bit more at Forbes this last couple weeks. But I thought I’d spark some interest here too on the same theme I’ve been pushing lately on Forbes, the high costs of affordable housing. I’m not sure it’ll get very far, but I’d like to see the legislature take on this issue in 2017. As long as the Mayor and Council want Seattle builders to “pay their fair share,” it seems like we should know what we’re paying for. Right? 

Greetings Senator Fain,

I am writing to you ahead of the session because your name has come up often when I have asked who might be a champion for more accountability and transparency from the system we use in Washington to produce subsidized affordable housing.
As you may know, in Seattle and in other parts of the state, non-profit housing agencies are pressing local governments to tax and fee market rate housing (we represent market rate builders, developers, and building owners) production in order to pay for the production of more subsidized housing.
There are many things wrong with this.
First, what cities like Seattle and Bellevue face is a growing scarcity of housing. That means the market should be allowed to produce more housing. Taxing and feeing the production of market rate housing adds to its scarcity and thus to its price. This means the need for more subsidies. You can see the vicious cycle Seattle in particular is about to embark upon with Mandatory Inclusionary Zoning (MIZ) or what they call Mandatory Housing Affordability (MHA). We should simply be allowing more housing of all kinds, everywhere for all levels of income.
We’ve reviewed the numbers, and we can show clearly how the new and unauthorized tax on the production of new housing is infeasible(new costs will tip many projects into infeasibility), inflationary (when projects do work it will because of a higher rent or sales price for the units), and illegal (we believe MIZ and MHA to be a clear violation of RCW 82.02.020, lacking nexus and proportionality).
Second, the money being wrung out of the production of market rate housing by this inflationary and unauthorized tax will be funneled into an enormously inefficient system of subsidization that produces units that are very expensive, take a long time to build, and don’t meet demand — they all have years long waiting lists. The Commerce Department and the Washington State Housing Finance Commission (WSHFC) preside, mostly, over this system.
I’d like to meet with you to discuss,
  1. Passing legislation to require a thorough costs study by the State Auditor’s office with help from an independent accounting firm that would compare the costs of producing subsidized housing in our state with market rate housing;
  2. Requiring a sources and uses funding label for each project in the state built using state funds or tax credits authorized by the WSHFC. This label should be easily accessed and include total project budgets, the sources of funding and a detailed breakdown of categories of spending (eg, hard and soft costs, legal, consultants etc).
  3. The Commerce Department should be required to produce a plan and recommendations to reduce costs for all housing production based on the completion of the cost study in the legislation (see 1 above)
As long as members of the for profit community are going to be taxed for the purpose of funding this projects, we all ought to know what we’re paying for and see that our resources and ultimately the resources of our customers who will pay these taxes in the end, are used as efficiently as possible. This need for efficiency is expected, I’m sure, by taxpayers as well.
We need subsidized housing. Paying for a few expensive units of subsidized housing at the expense of raising all housing prices is a terrible way of doing it. But until local jurisdictions can be redirected or ordered by a judge to stop, we should know what we’re paying for and improve the system we have.
I’ve attached a Urban Land Institute study, Bending the Cost Curve on Affordable Rental Development, that outlines why the costs are so high and offers some great suggestions. I hope we might have a chance to talk before the session gets into full swing.
Thank you for your consideration.
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