Give Your Opinion on Rezone Maps

I’m not really sure how or whether the data will be used, but the City has an interesting interactive survey about the latest maps it has released showing proposed zoning changes as part of Mandatory Inclusionary Zoning (MIZ). The survey is hosted by Consider.it and online survey tool that uses a slider and a visual representation of consensus. You can watch the video to get the idea. So far here’s what the survey responses look like:

If you look there on the right, this particular section about single-family zones has exactly three responses after about 5 days of the survey being open. That’s right, 3 people have bothered to register their opinion. Consider.it’s website says it is, “The first forum that works better when more people participate.” Well, we’ll see. There is a sign up process that requires using an email and it takes some time. And it takes a bit to get used to how to use the slider and get your opinions entered. But I suggest everyone give it try. There has to be more than 3 people out there with an opinion about this.

Will Washington and Seattle Progressives Fix Climate and Housing?

In my last post I pointed out, at length, how the same divide among left-leaning progressives over inclusion and money in the debate over Initiative 732 also divides their approach to housing. I wrote that, in the end, the left is paralyzed by a conflict between doing what science and economics indicates and the subtler need to address and redress inequality in the policy process and economy. Progressives need both of these things, even though the best way to address issues of poverty, for example, is using what we know about economics, not abrogating that knowledge in favor of throwing money at organizations. Is there a way forward?

We can move forward if we can recognize and follow three key principles when considering policy solutions to big problems.

1. Follow the data and science – we know that if we had a surplus of housing that prices would be lower, and even when they are low, some families will struggle to make ends meet. I think the problem progressives have with following the data is that is seems cold and without compassion. But there is quantitative data and qualitative data. Listening to real people’s stories about their challenges in our local economy isn’t necessary to making good policy; but making policy based on anecdotes and conspiracy theories woven by people suffering isn’t compassionate at all, it is, in truth, the best way to make their lives worse.

2. Compromise, but don’t compromise principles – There ought to be engagement with groups and people who are dealing with the problems of housing price in our economy. Progressives tend to be people who consider themselves intelligent and compassionate; when confronted with strong emotion, their tendency is to want to make the emotion go away with facts first, then compromise. We can’t do that anymore. Engaging in real dialogue means have a bedrock position, and fighting for the things that are necessary to move ahead, and willingness to compromise on everything else. The progressive left doesn’t have a good handle on those principles (e.g. price is a measure of supply and demand, period), other than inclusion and diversity. It’s time to chose the data over anecdote, and sound economics over folklore because it is the compassionate choice. 

3. Be skeptical of demands for more funding – The problem with Mandatory Inclusionary Zoning (MIZ) is twofold. First, it won’t solve the problem of rising prices and second, it is mostly an effort to wring cash out of the market’s production of housing for subsidized housing. Simply put, non-profit housing production costs are very high and getting higher just like for-profit costs. But the non-profits don’t look at rising costs and say, “Help us reduce those barriers and costs from parking requirements and design review!” Instead, they ask for more money. When approached by the non-profit housing industry asking for more money, we need to require that they come up with an honest and comprehensive audit of their costs structure and serious proposals to reduce those costs; otherwise no additional money.

4. Organizations aren’t people – Lefties love to say, “Corporations aren’t people!” Well, neither are organizations. Policy makers need to look beyond the people who fill a room today and try to balance those voices and faces with the many, many people who aren’t in the room and don’t have a voice. That is very difficult to do. The easy thing to do is capitulate to the loudest voices and to ignore the fewer voices that may have expertise and important knowledge. People who produce and operate housing are largely ignored in our process. That doesn’t hurt my feelings and our people are too busy working to come to lots of meetings. But it does make for bad policy, because without the input of the farmer, food policy would suffer. Wouldn’t we listen to people who ride buses when making decisions about transit? Housing producers need a bigger voice in the discussion even though making housing is their livelihood; is that reason enough to blind our decisions from their perspective? I don’t think so.

Taken together, this is basically a call for progressives in Seattle to stop trying to solve the problem of inclusion and equity AND housing price issues all at once. The two things are related, but not the same. We simply can’t erase resource and opportunity distribution comprehensively by making policy about climate or housing. We are overburdening discreet housing and climate policy tools with the expectation that they will have perfect and broad beneficial social impacts. This is why it’s so peculiar that we have uncritically assumed normative standards for housing prices and attempt to mandate those standards but not the price anything else, like transportation, health care, and day care.

Putting the burden to somehow achieve social justice with housing policy distorts the policy because it assumes that if everyone in the city paid exactly 30 percent of their income for housing, all our problems would be solved. This is neither possible nor desirable. And taxing and feeing and making housing harder to build in the name of helping the poor is folly. Progressives must look beyond the discomfort of people in the room they are in at the moment, and start thinking about the agony so many face each day struggling in our booming economy, an agony created and enhanced by pandering to self-serving non-profits and angry neighbors bent on an embargo against building any new housing at all.

 

Why Washington Progressives Can’t Fix Climate and Housing

I’m going to vote “Yes” on Initiative 732, a proposal to impose a tax on carbon emissions, sale or use of certain fossil fuels, and fossil-fuel-generated electricity. I’ve written and said before that taxation serves three ends, raising revenue for public benefits, encouraging behavior that is beneficial and discouraging behaviors that are detrimental, and redistributing money (call it the Valdez Doctrine). Taxes and debt when used skillfully can steer the economy, shortening downturns and making the good economic times last. I think Initiative 732 is a tax program that does all three of these things well. But this post isn’t about Initiative 732, it’s about why Initiative 732 has split the left in Washington state and what that split tells us about housing policy in Seattle.

Initiative 732 has been plagued with controversy from its inception. If you support more housing supply as the solution to housing price issues in Seattle, there are two important articles about Initiative 732 that you simply must read. The first, in Vox, “The Left Vs. a Carbon Tax,” traces the wending path of division within the progressive left over Initiative 732. The second, “Weighing the Critiques of Carbon WA’s Initiative 732,” by the Sightline Institute follows that path but judiciously tracks the policy underneath the politics. That analysis concludes, correctly, that the division over Initiative 732 has three components:

• Cap or tax? Should we use a cap or a tax to make polluters pay for each ton of pollution?
• Who should have power in the process? Should communities of color and low-income communities have seats at the table when a policy is being formulated and when it is being implemented?
• What to do with the revenue? Should we invest polluters-pay revenue in clean energy, disadvantaged and frontline communities, and worker transition? Or should the proceeds flow back to people and businesses as cash?

Roughly speaking, these same three fissures are the same ones creating a maddening divide among a broadly left tilting group of people who talk about housing in Seattle. Here’s how they translate in the housing discussion:

• More supply or more subsidies? Should we be charging for-profit producers of housing to generate subsidies for non-profit producers?
• Who has the power in the process, the people who actually take financial risks to produce housing, or people that live in it?
• Who gets the money? Should organizations that claim to represent people of color, unions, and other social justice groups be able to collect funding to fuel the operations of their organizations and deliver subsidies or money to their members?

What’s the problem with the housing discussion in Seattle? We know that housing is built, mostly, by for profit builders and paid for, mostly, by people with cash or credit. This is the housing market in Seattle, and since price is an indicator of how the supply of housing is meeting the growing demand, we also know that as prices go up, the increase is an indicator that we don’t have enough supply. Our problem is housing scarcity. So far so good, right?

The logical and economically appropriate thing for everyone in Seattle to rally around would be a comprehensive approach to housing that would

• Tax consumption of land for housing, so if you eat lots of land (single-family), you pay more, eat less (multifamily), you pay less;
• Take any revenues generated by the taxation of land use would be used to offset the costs of living for people who earn very little and struggle to make ends meet in our community; and
• Remove barriers to entering the market for housing producers, reduce costs of production, and eliminate the thicket of rules, regulations, and red herring design review and parking requirements that slow and raise the costs of housing production and enhance and defend single-family home values.

Instead, what most of those people working on the housing policy discussion are supporting is Mandatory Inclusionary Zoning (MIZ) which ignores price as a measure of supply and demand, and settles instead for a modest boost in production of inclusionary subsidized housing and fees for non-profit housing producers.

That takes us back to the three fissures. For some reason, there is a stubborn resistance to following the logical path because “politics.” What are the politics? The non-profit housing producers combined with various organizations claiming social justice status and representation of people of color want more money; more money for operations of their organizations and more money for programs that address the narrow needs of their constituencies. 

Playing off the conventional view that developers make a lot of profits from the development and construction of housing, these groups have pushed for a tax on the production of housing, a tax that would do the opposite of what is needed to affect prices of housing in Seattle by adding costs and slowing production. And these groups have adopted a bizarre but self-serving economic theory that holds that building more housing makes it more expensive because the new units created luxury units that destroy existing affordable housing and displace poor people. This view has been debunked again, and again by data, economics, and math.

And as if it wasn’t enough to simply wring cash out of the market and raise prices, the progressive left is also putting up barriers and limits to investment in communities that need it the most, those with people with lower incomes, lots of new immigrants, and old energy efficient housing. Councilmember Herbold and O’Brien have succeeded in essentially red lining huge swaths of Seattle by adding costs and fees to those areas in the name of protecting people from displacement, something they have no adequate measure for.

The vast majority of Seattle residents unfortunately, share this view of housing economics: Poor people and people of color are being hurt and displaced as developers race to create housing to boost their profits. Playing off this view, the non-profits have demanded that any housing solution “empower” poor people and people of color. How do they propose to do that? Tax, fee, and regulate the production of market rate housing, and give those fees to the non-profits and social justice groups. It’s notable that they haven’t been loudly in favor of redistributive ideas like guaranteed basic income.

Like Initiative 732, many on the left simply can’t follow the math when groups are leveraging the deeply held progressive value of inclusion and, frankly, the guilt many of them have over past sins committed by the dominant white culture. So instead of moving forward with measures that we know will have a positive impact on prices and on climate, the left starts to argue with itself. How do we both do what data indicate while also meeting the deeply held view that some groups deserve something, dollars, from the solution?

So what should be an enthusiastic embrace of a data driven proposal to reduce climate change ends up in a fight about who was at the table, and what is an obvious solution to rising housing prices, build more housing, ends up as an extortionary policy that will actually increase housing prices for everyone.

Unfortunately, I don’t see this problem going away anytime soon. If anything, it’s getting worse. The drift in national and local politics is markedly Jeffersonian-Jacksonian, vilifying business, corporations, anyone who is an expert, and at the same time confusing efforts by some organizations wanting more for themselves with real inclusion and outreach to underrepresented and disproportionately poor communities.

And many, many locals in Seattle have been padding their own political and financial nests, trying to be as “inclusive” as possible and embracing economic ideas that are antithetical to our long-term best interests. The financial benefits of paying off the opposition and the political largess of being willing to “bring everyone together” are simply irresistible to large developers and wannabe elected officials.

The hang-ups with Initiative 732 and our effort to create an economically and environmentally sustainable housing solution are self-imposed. It doesn’t need to be this way. What’s the solution? I’ll offer one in the next post.

Murray Starts Reelection Campaign by Disappearing Most Developers

I wasn’t there, but Josh Feit at Publicola has a good run down of Mayor Ed Murray’s kickoff party for his reelection effort in 2017. Yes, it’s true, we have another election coming up. I have to take a minute to point out how this Mayor operates and why he needs to make serious changes to his perspective. Murray puts people in a room, pressures them to compromise, and when some kind of “deal” emerges he takes credit for solving the problem that the people in the room were supposed to solve. The truth is that this approach doesn’t result in a deal in which everyone is part, nor is it a solution to the problem. If being a great Mayor means putting people in rooms, pressuring them, then declaring victory, I suppose Murray is on his way to greatness. The truth is that his Grand Bargain wasn’t grand and it wasn’t a bargain for the vast majority of people building housing in the city.

Here’s what the Mayor said about himself and what he’d done to solve the city’s housing “crisis;” his approach had resulted in the

Ending a 20-year battle between developers and housing advocates [to] build a workable affording housing policy

Um, no it didn’t. What you did is put a non-profit developer (Paul Lambrose of Plymouth Housing Group), their trade group representative (Marty Kooistra of the Housing Development Consortium), one of the non-profit housing industry’s lawyers (Faith Petits of Pacifica Law), together with a lobbyist representative of Vulcan (Ryan Bayne), and their lawyer (Jack McCullough).

Sorry Mr. Mayor but that does not a Grand Bargain make. No representatives of any other developers and builders who create most of the housing in Seattle from single-family housing and townhomes, to microhousing, to mid and high rise housing everywhere outside downtown and South Lake Union were at the table in that room. It’s hard for me to understand how anyone could not bust out laughing at what the Mayor said except that I suppose most people think housing is built by huge corporations and that somehow, McCullough was speaking for them. But housing is built and operated in Seattle, at least for now, by small and medium sized businesses, not by Vulcan or large developers that were in Murray’s locked room.

The Mayor has a stubborn streak. So do I. And I can’t abide it when politicians get up and claim they’ve solved a problem when they’ve done no such thing. Nor can I abide it when the solution is achieved by defining out the vast majority of stakeholders that would have raised concerns and even opposed the proposal. What Murray does isn’t solve problems by brokering agreements, but the equivalent of looking for people that will agree with him, then declaring those people representative of the constituencies who are debating or fighting over an issues, then saying he has “a bargain.” It’s not just bad politics and diplomacy it doesn’t solve the problem, and in this case the problem is not enough housing.

If the Mayor wants to solve the housing shortage in Seattle that is leading to higher prices he simply must:

1. Look at market based data on inventory and vacancies;
2. Listen to the people who build all types of housing in Seattle and help them build more;
3. Find ways to bring non-profit developers and for-profit developers together to reduce costs of production of housing; and
4. End mandated inclusion and fees and look for a real incentive for public and private entities to build more housing, and keep vacancy rates higher.

The best measure of a solution to housing prices is lower prices, not a document and proposal signed by a few people  in a room. And this arrangement is especially not a solution when the proposal is largely infeasible, inflationary when it does work, and is probably illegal. I can assure you, this Mayor will not be remembered years from now as the Mayor that “solved the housing crisis” unless he gets more inclusive and looks at the right measures of success, lower housing prices by creating more housing supply and opportunity.

Visualization: Microhousing in the United States

In an recent article, RCLCO (formerly Robert Charles Lesser & Co.), presented an interesting visualization of microhousing in the United States, “Is Smaller Getting Bigger? Visualizing Micro Units Across the United States.” While it is interesting to put our own microhousing question in national perspective there a couple of really important notes before going all in on this analysis. First, this visualization is based purely unit size, here the definition is 350 square feet, much bigger than what we would consider microhousing in Seattle. From the article:

Although the real estate industry has recently focused on the perceived shift toward these small micro units, the majority of micro units renting today were built over several decades and are simply small units in conventional apartment buildings.

I would suggest that when we think of microhousing in Seattle, we’re talking about more than simply the size of the units. We’re also talking about shared use kitchens and common spaces. Furthermore, our microhousing developed out of an institutional framework of supportive housing used mostly by non-profits. Recovery, transitional, or half-way houses often use multiple rooms with shared bathrooms, kitchens, and common spaces. What our local builders figured out was a way to bring that model to the market. It wasn’t simply smaller units.

Second, you’ll notice that many of the areas on the map are college towns.

The metro areas with the highest percentage of micro units are small markets with universities that support institutional rental apartments primarily through students who are willing to live in very small units.

Again, not exactly what we talk about when we talk about micros in Seattle. It is true, and I’d be willing to bet, that the vast majority of tenants of congregate microhousing are between the ages of 18 and 30 and are either in school, have lived in a dorm, or have lived or considered living in a shared housing situation. I was sort of surprised to see the Twin Cities with so many because in my own visit there locals said size limits of 400 square feet made the kind of microhousing impossible. The little bubble next to the Twin Cities, St. Cloud, Minnesota, had a bunch too. No surprise since St. Cloud is a university town, with over 16,000 students attending just Saint Cloud State University.

Third, this analysis is by real estate people for real estate people. Some of the language, to a lay person, will sound cynical. It’s not. But let me cite the paragraph I’m thinking of:

The steep premiums in these markets indicate that developers may be able to drive up per-square-foot rents by delivering more and smaller studios in conventional apartment communities across the nation. This is consistent with research recently published in an RCLCO Advisory, which found that the average size of a new apartment built since 2010 is 70 square feet smaller than the average size for units built from 2000 to 2009.

I hate that phrase “developers may be able to drive up per-square-foot rents.” I really, really hate it. Developers don’t “drive up rents,” market dynamics set rents. Always. But what the paragraph is getting at is that from an investor perspective microhousing can be a good vehicle for creating returns. Keep in mind that real estate investors tend to measure things on a per-square-foot basis. That’s how they think and that’s how they look at investments. Their point is that if you’re looking for a good investment in hot markets, smaller units create better returns per-square-foot. That makes perfect sense since the rents in hot markets are going to be higher than other places, and a smaller unit will be competitive on a per-square-foot basis with a larger product.

From the renter perspective, I’ve dealt with this per-square-foot issue before. I’ve been hassled that I pay too much per-square-foot for my micro unit. The response is obvious: math and utility. Sure, I pay twice as much for my 200 plus square foot unit as I would for a three times as much apartment in West Seattle or Kent; but I don’t want to live in West Seattle or Kent in a 600 square foot apartment. The per-square-foot criticism is like criticizing me because I pay too much for Diet Coke because I pay more per ounce when I buy it by the can than if I bought a case at Costco. It’s true, but I don’t want a case of Diet Coke and I don’t want to store it. I choose to live in a smaller space closer to the things I want to be closer to an pay less over all than I would in a larger apartment in the same place.

Lastly, I guess because today we’re battling for inches in feet in the small apartment options we do have left, the article isn’t about what David Neiman has pointed out in Seattle: there’s a regulatory effort to push up the size of smaller apartments in Seattle so that they are no longer small apartments but just plain old studios. I would have changed the headline, since what RLCO means by “bigger” is a play on words to talk about the popularity of micros rather than their relative per-unit size. Just a minor editorial note, but I kept expecting to see an exposition of how the size of smaller units was creeping upward. No, the point was that they are becoming more popular. All in all, a great set of visuals worth checking out.