Back to Ohio

This week I’ll be attending and speaking at the Ohio Realtors Spring Legislative Conference. The title of my session is Affordable Housing: Developing Policies that Encourage Housing Without Trampling on Private Property Rights. Property rights has become the province of the right wing. It shouldn’t be. Do we have property rights or not? Of course we do. I don’t like the word “rights,” it’s an ill defined term in the vernacular usually meaning something like, “Something I’m entitled to just because.” Rights can too often be tethered to some deontological premise that puts rights outside of common experience; in other words, “God given.” But the right to property doesn’t have to be like that.

In my presentation I’ll share our experience with really bad eviction data circulated in the service of making tenant landlord law more complicated. Much of what I’ll talk about is in Losing Perspective, our response to the report that falsely argued that eviction is a “leading cause of homelessness.” It isn’t. And with only about .3 percent of rental households being evicted, it isn’t a “crisis” or “epidemic” either. Eviction is an unfortunate reality for a very small number of households some of which have violated leases or caused damage and loss to property owners.

The same crisis and epidemic language is spreading in Ohio as well and I’ll do my best to give people their some footing to fight back.  And it’s I fight we have to make across the country. With garbage data, ad hoc arguments, and power grabs by ideologues rife in the discourse, someone has to ask, “what quantitatively defines a crisis,” and “what is the endemic rate of eviction.” That last question is key because the answer for advocates is zero.

What should a private property owner do when someone isn’t paying rent, violating the lease, or engaging in conduct disruptive to other tenants? The answer from advocates is “Nothing. People have a ‘right’ to housing.” We’ll, when that “right” trumps people off setting risk to their own financial well being, they won’t rent their property any more. But perhaps that’s what advocates really want, a break down of the supply of rental housing. The goal of most socialist tenant advocates isn’t socialism at all, but chaos. When interventions like changing tenant land lord law fail, then they say capitalism doesn’t work: “We need rent control!”

Power of Narrative: Rent Control is Back (but it Never Left)

Remember the Renters’ Commission? The City passed legislation to create it a few years ago amid some tepid protest from those of us who felt it would, yes, simply be a City funded platform to organize for rent control. Of course, the Commission dutifully recommended on April 1 (seriously) that the City needed rent control. Not long after Councilmember Sawant held a press conference and the press just as dutifully as the Commission made its recommendation, showed up to cover it. You can see the glow of their lights in the featured image. Here’s the first couple paragraphs from the coverage in the Capitol Hill Seattle Blog.

Building on recommendations from the Seattle Renters’ Commission, City Council member Kshama Sawant announced two measures Monday aimed would alleviate some of the burden for Seattle renters. The first is a proposal to enact a Seattle rent control ordinance. The second, the Economic Evictions Assistance Ordinance, would look to protect tenants against substantial rent increases.

“We have two choices,” Sawant said at a Monday morning press conference at City Hall to announce her planned proposals. “One, just sit on our hands and expect that some day, in the distant future, the Democratic establishment will gather the courage to break from the real estate lobby and finally stand with us. We’ve done that kind of waiting for 40 years.”

“Or we can begin the fight here.”

What can I say? Here’s some comments I made back when the idea of a renters’ commission was proposed:

So the point of my headline is that it has never has been in doubt that the Renters’ Commission would recommend rent control, that Sawant would build off of that, the press would turn on their cameras and bloggers would take dictation about the “crisis,” and much of it would be paid with taxpayer dollars.

This is why we need support to build a resistance to the coming wave of poorly researched “reports,” stories, and press releases about the urgent need to protect tenants from landlords, jobs, and economic growth. More supply means moe choices for renters, less means higher prices and more pain. Rent control and more regulation of the value exchange between tenants and people renting their property won’t help.

Conclusion: Creating Housing Affordability: Fixing Seattle to Solve a Global Crisis

Mark Routon is an experienced real estate broker and a student at Seattle Central College. He passionately believes that stable and affordable housing is a crucial need that must be met in order for any community to flourish. Last quarter, Mark was tasked with writing a research paper for his English class, and he took this opportunity to do an in-depth dive into the causes and solutions for Seattle’s housing crisis. This week Routon’s paper is featured here in three parts. 

SOLUTIONS FOR SEATTLE, INSPIRATION FROM ABROAD

What is Currently Being Done, Why It’s Not Enough

The City of Seattle has attempted to address the crisis through a multi-pronged strategy called the Housing Affordability and Livability Agenda (HALA). HALA involves at least four main strategies:

1. Mandatory Housing Affordability (MHA): “MHA requires new development to include affordable homes or contribute to a City fund for affordable housing. [The City of Seattle] implement[s] this requirement by changing zoning to allow larger development and more housing.”
2. Surplus Properties: “Surplus properties owned by the City can either be developed for affordable housing or sold for funds that will contribute to creation of affordable housing.”
3. Preservation, Equity, and Anti-Displacement: Greater tenant protections and education, low-interest loans, the preservation of lower-income housing stocks, and promotion of home ownership for historically marginalized communities.
4. Promotion of Efficient and Effective Development: Reducing or eliminating parking mandates, streamlining the design review process, reviewing current building codes, and coordinating the permit process better between agencies.

While this a good start for the city, it has issues. First of all, the MHA rezoning map reflects which communities possess more or less political power; the wealthy areas of the city see almost no change. This is antithetical to the city’s equity and anti-displacement rhetoric. Additionally, the permitting changes do not go far enough. In discussions with developers, the sentiment that came up frequently was, “we pay for architects and engineers to design and sign off on these plans. Why does it take the city nine months to review these?”

Lastly, the city had the option to use a massive chunk of surplus land (known as the Mega Mercer Block) in a high-employment, established area to develop low-income housing (Moon, C., 2018). Instead, the land was sold to private developers to build office space. The reasoning was ostensibly that the proceeds of the sale go into the City’s affordable housing fund. However, that fund is fairly useless if golden opportunities are not seized. Land costs are already exorbitant; it seems that furthering the scarcity of buildable land will only exacerbate this.

The City of Seattle isn’t the only actor attempting to address the housing crisis. The non-profit/limited-profit sector plays a large role as well, with the Seattle Housing Authority serving as the largest landlord in the city (Valdez, R., 2019). Capitol Hill Housing provides dozens of affordable units, El Centro de la Raza on Beacon Hill serves as model of what affordable housing can be, and Bellwether Housing houses more than 2,000 people every year. Other organizations, such as United Way of King County, offer services like “Streets to Homes,” which provides those in need of stable housing cash, legal, or social work assistance, helping over 1,500 people in 2018.

This is just a small slice of the non-governmental efforts taking place in Seattle, a city that no one would say lacks in heart. However, according to Clare Moe, a board member of Congregations for the Homeless, non-profits are systematically prevented from being as effective as they could be. Imagine Housing, a non-profit in the Seattle suburbs, recently opened 29 affordable units…only to be greeted with a waitlist of 400 people. Interviewed for this paper on March 4^th, 2019, Moe let loose an interesting fact: “Affordable housing is more expensive to build than market-rate developments.” Numerous factors contribute to this, many of which are rooted in good will. The complexities of using the necessary funding from local, regional, state, and federal levels leads to higher professional fees upfront, ongoing and costly reporting requirements, increased construction costs through the varied rules related to public bidding, labor standards and building materials – including the additional public good associated with creating advanced green buildings. Nonprofits rarely get access to below market rate land on which to build and are subject to the same plan review, permitting and land use requirements as market rate developers.

Both Clare Moe and Diane Sugimura, former Director of Planning and Development for Seattle, suggested in interviews that all levels of government need to have better communication and coordination. Sugimura described the need to work on policy “holistically.” While requiring parking lots and well-paid labor are certainly policies not intended to harm, governments must make sure that they are not unintentionally making a crisis worse. When asked whether subsidizing land costs, changing parking requirements, and expediting plan reviews would make affordable housing more affordable, Moe said, “almost certainly.”

Reduce Barriers to Building

The only way to increase housing affordability is to reduce the overall costs by increasing the supply. Cities around the globe need to make it far easier for new homes to be developed. This means allowing for greater density and working with developers in a way that allows for the city to meet its goals without adding cumbersome restrictions and taxes.

In interviews with local developers, the common response was that the current regulatory processes undertaken by the city lead to significantly higher building costs, which in turn get passed on to the end buyer. Hefty impact fees, long waits for permits, and current zoning all lead to developers needing higher margins for their risk. And as with affordable housing, the largest costs are associated with parking requirements. Some argue that a lack of parking requirements will make the city more congested, but it will actually do the opposite, given some time. According the concept of induced demand, providing car friendly infrastructure will encourage people to drive and own cars. The logic follows that making it unfeasible to use a car in the city will result in less traffic and greater use of public transportation. Cheaper, more abundant housing, less traffic congestion, and a greener use of resources seem like win-wins.

Additionally, in theory, reducing the fees charged to developers (impact, permits, infrastructure improvements, etc.) will actually increase the city’s tax revenue. The construction of more homes means greater sales and excise tax receipts, more laborers employed, more materials bought from local shops, and a larger tax base as the city is able to accommodate more residents. However, to the City’s credit, this is a difficult hypothesis to prove, with the benefits being indirect, unlike the fees from development. This is a recurring challenge in public policy.  Regardless, in conjunction with the other solutions proposed here, the City can experiment with waiving or lessening these fees, costs, and review times. If the housing supply does not meaningfully increase, and/or it seems that developers are simply treating this as a windfall and not a stimulus, the City can reimplement them.

The City can also change some of its policies in regard to the types of structures allowed to be built. Promoting flexibility in the market should theoretically drive prices down. People who seek to live by themselves and don’t require an abundance of space may be the perfect candidate for micro apartments, tiny homes, or detached ADUs. As the City fights the development of these types of housing, it forces the market for these homes into overpriced studios, residing further from their work or schooling, living with family, or having multiple roommates.

Curb Real Estate Speculation

Another leading driver of the affordability crisis is the speculation of housing prices. Speculation is an investment term that refers to a large number of people purchasing an asset class with the belief that the value will either hold steady or continue to inflate. A speculative crash, known as the burst of a bubble, is what happens when an asset’s value collapses under the weight of its expectation, much like what happened in 2008. The difference between 2008 and today appears to be that the market prior to 2008 was built mostly upon fraud, so the checks and balances in the system failed, whereas today the price increases have largely been fueled by job growth and supply shortages.

When an area is booming economically, both local and foreign investors start purchasing units, either for living, renting, or most egregiously, holding as a vacant property. When these investors hold large numbers of vacant units in desirable areas, it drives up the prices of everything around them. Fewer homes in an area abundant in demand will result in increased costs of living. Vancouver, B.C., Canada has been one of the most speculated markets in the world. In the fall of 2018, British Columbia implemented a real estate speculation tax on people that owned property in the city but didn’t pay any local taxes. While the tax is new enough as to warrant very little data on its efficacy, a similar approach can be taken in Seattle in order to free up more units to residents.

Public Development & Subsidies Are Required

In order to maintain housing that meets the needs of the very low-income, disabled, elderly, and students, the city should also invest in a large stock of public housing. The redevelopment of Seattle’s Yesler Terrace is a great example and start. That project will include 5,000 units of affordable housing, as well as a bevy of new market-rate housing. Seattle should build its next public housing project in the University District, near 45th Ave. 90% of households in the UD are renters, and the area is home to thousands of low-income students, as well as staff and faculty who will benefit massively from stable and cheap housing. It is also a transit hub with easy access to buses, light rail, and the major centers of employment: downtown Seattle and the University of Washington (Office of Planning and Community Development, 2016).

There are many ways to build public housing (called social housing in much of Europe), but the best model appears to be the one implemented in Vienna, Austria, sometimes referred to as “the city that solved homelessness,” (Copeland, J., 2017). Social housing in Vienna is developed using a supply-side model, meaning that it promotes competition and innovation amongst the private sector. Land is primarily financed publicly, but the housing is built by the private sector (Deutsch, E., & Lawson, J., 2012). Austrian social housing is designed to create mixed socio-economic communities that blend guaranteed housing for the low-income, the elderly, and students, with market-rate units for the more affluent. As Joe Copeland (2017) of the Seattle news website, Crosscut,puts it, “Vienna offers a vision of a city that doesn’t shove long-time residents to neighboring communities, accommodates a range of incomes, and actually has enough affordable housing that the homeless problem is solved.”

Seattle has a similar concept with their Multi-Family Tax Exemption program, which promotes the creation of affordable, tax beneficial units within new development. However, it doesn’t go far enough; the majority of units still end up as market-rate, and the developers only have to pay a one-time fee to the City if they choose not to build the affordable units. There are proposals being floated that would increase the heft of this fee in order to encourage a greater percentage of new development with affordable units. While this is a good step, and won’t solve the crisis. Strong social housing needs to promote guaranteed mass-affordability in areas with high access to opportunity.

Pretty much every city has an “affordable housing fund” of sorts. The best use for that money is to distribute it into three programs:

1. Create a rent subsidy fund that covers the difference between rent and the 30% of income limit for residents making less than 30% AMI. This program needs to extend for at least a year past when residents begin making more than 30% AMI. Otherwise it will encourage people to earn below their potential, as the non-subsidized rent will eat away at their new income gains. The goal of this program is to minimize displacement risk for the lowest income residents and to promote economic mobility. While rent control can actually be harmful to a city, as it limits labor mobility, this program would tie rental assistance to the person, rather than the unit. The benefit of this is that it allows people to move around the city for opportunity instead of being confined to a neighborhood with capped rents. This program can only work in conjunction with an increase to the housing supply.
2. Purchase land for public development. Following Vienna’s model, allow local developers to submit bids competing for the right to build social housing on the plat. Require developers to set rates on a sliding scale that maintains the 30% of income cap for those making up to 60% AMI, and allow a limited number of market-rate rents to help subsidize the other apartments. The city will then use the affordable housing fund to help subsidize the difference between net operating income and operating expenses to ensure the developments stay profitable. This is because quality of life for the residents will suffer if the operators are losing money. A winning bid from a developer will be the best blend of density, public spaces, amenities, and cost. The ultimate goal will be to add 15,000-20,000 units of sustainably affordable housing through effective public-private partnerships.
3. Ensure that all areas with increased density are adequately served by public transportation. To achieve the density required in order to scale supply to demand, the parking allotments currently asked of new development will need to be waived. In order for this to function effectively, bus, carpool, and rail service will need to be indexed to new development. The current thought process of upzoning is that new housing should be built near existing public transportation. This is great in concept, but in reality, it serves as an artificial barrier to growth. The data shows that these new units are primarily occupied by middle-to-high income earners. This is not inherently bad; data from the Philadelphia Federal Reserve and the WE Upjohn Institute shows that rents within 200 meters of new apartment construction level off or decrease. However, land costs are going to be higher near areas of established infrastructure, and that infrastructure is going to be in areas that are already denser, have greater populations of renters, and higher risks of displacement. The logical approach is to index public transportation to areas of new density. Focus on allowing the private sector to develop housing in current low-density areas, and use the public sector’s resources to meet the infrastructure demands these areas will need.

Many view public housing as a failure based on examples in Chicago, Baltimore, and New York. However, the public housing failures in the past were the result of poor urban planning, a lack of support systems, and racism. These “projects” were built in segregated areas, had very little upkeep, and lacked the proper investment in nearby schools, jobs, and transportation. What needs to be built is much more similar to the Austrian, or Dutch models: Aimed at more general/mixed income renters, possessing desirable amenities, built-in services, and locations, and conceived of as engines of economic and social mobility, not as a place to stick the “undesirables.” El Centro de la Raza in Beacon Hill is a shining example of what Seattle needs more of.

Upzone Single Family Neighborhoods

Depending on how schools, parks, and other public land is considered, somewhere between 51%-70% of Seattle’s land is zoned SFH (single family housing). The areas that have been rezoned in the City’s MHA plan are predominantly above average density and have a greater concentration of POC. While there are good intentions here, this creates a greater risk of displacement. Instead, Seattle needs to rezone almost every single-family neighborhood, starting with those that have the best mixture of current low-density, access to public transportation, and high net-wealth. This will allow for the largest number of new units to be built, increase real wages for those living in the area, and lessen the displacement risk in other areas of the city.

Roger Valdez (Seattle for Growth) described a vision of Seattle in which mixed-use, multi-family buildings were permitted throughout Seattle. Neighborhoods would become more affordable as supply is added, while also bringing the amenities that these structures herald, like coffeeshops, banks, dentists, and daycares. As these neighborhoods become denser and improve their ease of accessibility, there will be an increase in investment from small businesses, as well as the fostering of new communities.

Many single-family homeowners are be opposed to this plan because it will change their neighborhoods. They feel the areas will be less well-kempt, there will be an increase cars and traffic, and that their way of life will change. There is sense present in not-in-my-backyard (NIMBY) communities that the addition of density is at the expense of what they have known; they worked hard and chose to purchase land in these areas for a reason. At its root, their primary concern is that their homes will lose value.

However, the only fair and equitable policy is to upzone those single-family neighborhoods, as they are wealthy, low-density, and historically white. For a city that preaches equity, it’s grossly hypocritical—and a sign of political cowardice—that the MHA rezoning plan hits every area of the city with majority POC residents while avoiding every rich, predominantly white one. Obviously, land values in more renter heavy neighborhoods are cheaper and their property taxes are lower (thus residents have less political sway), but they are also areas with the highest risk of displacing low-income people.

On the other hand, it’s hard to displace homeowners. Homeowners sell voluntarily, cashing out on their equity and gaining wealth. That’s not a luxury that the renting class can afford. This is why cities must focus on concentrating growth in SFH neighborhoods, like Seattle’s Montlake. Near downtown, near universities, frequently served by bus, and within walking distance of light rail. Unlike in renter dominated areas, the homeowners have the opportunity to build wealth from these changes. Not every home will become multifamily, but the space is needed if cities are going to solve this crisis. This creates the best outcomes for the city as a whole. Additionally, most properties will gain value, as their land will be ideal for developers building multiple units. An $800,000 home that can be replaced with four $650,000 units is far more valuable than if the zoning prevents anything denser than the existing structure. Those who don’t sell to developers will see an increase in their value as single-family homes become scarcer.

It seems asinine that NIMBYS would reject these changes that lead to a more equitable city, greater personal liberty (being able to sell to a developer if one chooses), and more affordable starter homes for their progeny, unless they are simply selfish. Cities are based on the idea of the gestalt: a body greater than the sum of its parts. To achieve that dream, privileged zoning must be eradicated.

CONCLUSION

Because of the causes stated above, the proposed policy prescriptions will lower the cost of housing, increase opportunity, allow for supply to match demand for years to come, and be more racially equitable. As the global population continues to soar, and as the existential threat of climate catastrophe looms overhead, it logically makes sense that the societal response must be to embrace reasonable density. Density promotes the most efficient use of resources, and there is hardly a better candidate for density than the modern city. If cities are to be the continued epicenters of growth and progress, it follows that effective public policy is centered around inclusivity, equity, and sustainability. The solutions proposed in this paper are key steps, but not the whole battle. Holistic city planning is required and encouraged.

The City of Seattle has the opportunity to spur economic growth by alleviating the burden of exorbitant housing costs, and the ability to address the number of individuals sleeping on the streets by providing far more shelter beds and a greater stock of deeply affordable housing. However, this is unachievable unless land costs are drastically reduced. Until that happens, Seattle will continue to throw money at an issue without making much progress. For the foreseeable future, the only way to lower the price of land is to remove the artificial scarcity of it that bolsters the value. Policymakers in Seattle have either the option to regressively capitulate to the protests of the home-owning class imbued with ever increasing political clout, or they can act in a progressive manner that will allow for a greater quality of life for all. The ball is in their court.

Part 2: Creating Housing Affordability: Fixing Seattle to Solve a Global Crisis

Mark Routon is an experienced real estate broker and a student at Seattle Central College. He passionately believes that stable and affordable housing is a crucial need that must be met in order for any community to flourish. Last quarter, Mark was tasked with writing a research paper for his English class, and he took this opportunity to do an in-depth dive into the causes and solutions for Seattle’s housing crisis. This week Routon’s paper is featured here in three parts. 

A Nation of Renters

There are now more renting households in the United States than any time since 1965. According to the Pew Research Center, the number of renters increased by over 7.5 million between 2006-2016 (Fry, R., Geiger, A., & Cilluffo, A., 2017). The boom of the renter population correlated not only with the foreclosure crisis, but has run in parallel to the explosion of growth in cities since the beginning of the 2010s. This trend has been observed globally, with an increase amongst the British from around 800,000 renters in 2007 to over 1,800,000 by 2016, with the United Kingdom as a whole adding ~2,100,000 renters from 2010-2015. This represented a 22% increase in the share of the population renting. Denmark, Finland, Spain, Greece, and New Zealand all saw their renter shares climb by at least five percent from 2010-2015, with a total of 21 of the 30 most developed nations increasing their renter shares (Barabas, L., 2018).

This matters as renters are disproportionately hurt by decreases in housing affordability. For much of this last decade, cities like Melbourne, London, and Seattle have all seen the median rent increase far faster than the requisite incomes. The effects of this situation are varied, severe, and felt in some way by nearly everyone within the metro area of the epicenter.

The consequence that first comes to the minds of many people is displacement. Displacement is defined as the undesired change of residence from one’s rooted community. Oft cited causes of displacement are rent increases and/or rental housing stock being bought up for development. In nearly every city facing a crisis of housing affordability, their current zoning laws promote development in the areas with the most renters. Displacement is frequently considered to be the result of gentrification, the name for the socio-economic effects of capital investment in historically low-income areas. Those at most risk of losing their housing are the poorest, who, in the United States, also happen to be primarily people of color. Seattle’s predominantly (and historically) black Central District has seen large rent increases and the greatest racial demographic change in the past decade. Black Seattleites also happen to make up the highest percentage of households making less than 30% area median income (AMI), which, at its core, is the ramification of years of legal discrimination and a lack of resources (Beason, T., 2016). It’s hard to imagine the effect on the human psyche of losing one’s known community.

In conjunction with the moral argument, there is also an economic case for the prevention of the displacement low-income people. According to research conducted by the Philadelphia Federal Reserve, those driven from urban centers due to cost are likely to move into areas with less well-funded schools, worse public transportation, and lower access to economic mobility (Ding, L., Hwang, J., & Divringi, E., 2016). If they have to own a car because they can no longer take public transportation, that too decreases their real wages. As cities have become the global drivers of economic growth and innovation, displacement from their cores can lead to a perpetuation of poverty. No one can achieve economic mobility with a lack of access to opportunity.

Additionally, there are plenty of residents in any desirable city who contribute to an area’s vibrancy more than its direct economic output. Often those who breathe life and beauty into a culturally rich city are not the affluent; the archetype is not of the bloated artist. A lack of housing affordability either drives out those whose work isn’t based in traditional capitalist productivity, or it forces them to hold down low-wage, long hour jobs that suck away at creativity.

During the course of researching this paper, a number of interviews and surveys were conducted amongst various stakeholders in Seattle’s housing market. One of the questions involved the subject’s opinions of creating a more affordable Seattle. Many of those who possessed a negative disposition towards the concept had ideas rooted in a free market capitalist ideology. Their rationale was that living in one’s desired area is not a right; it is a privilege rooted in one’s economic output. In other words, in order to live where you please, you must produce the means.

What this logic misses are the indirect economic benefits of supporting a city’s lower-income population. An artist may not produce $100,000 of direct annual income, but a city with a strong arts culture is likely to also have a strong tourism sector as well. In Seattle, the tourism industry lead to $10.7 billion of economic impact in 2017 (Robinson, K., & Lusebrink, C, 2018). Additionally, the low-income disproportionately work in the service sectors of many economies. Thriving cities need people to work the restaurants, cafes, hotels, reception, and cleaning jobs. A city without services is like a blind racehorse: undesirable. When the low-income employees are faced with the choice of either living cost-burdened near their place of employment, or more affordably further away, no one wins. Living far away from work can increase stress levels, lead to worse health outcomes (which becomes an expensive strain upon the healthcare system), and lower real wages(the actual amount of disposable income after taxes and bills), meaning there is less money available for quality childcare, healthcare, healthy groceries, continuing education, and college funds. Living cost-burdened also raises the likelihood of receiving government subsidies of some sort, in turn increasing the tax bills upon the more affluent.

A jaw-dropping statistic from Patrick Sisson (2018) of Curbed highlights the problem:

“The Census Bureau found that, even with full-time employment, young adults [in the United States] earn, on average, $2,000 less in real dollars than their peers made in 1980. And the National Household Travel Survey found that driving has increased among lower-income millennials, who have often been pushed by housing costs to live farther from employment.” (para. 9)

The Middle Class

While it’s apparent that displacement is rough on lower-income citizens, as well as the community as a whole, it is actually the middle-class in many cities that experience the greatest displacement. In San Francisco, a city and culture that promotes strong programs for low-income people, the middle-class has largely been pushed out to the suburbs and exurbs. As the average rent for a studio apartment has climbed to $2,500, it only makes sense that the only people comfortably able to live near the heart of the city are the affluent and those with protected affordability (Erwett, A.M., 2018).

Many cities are finding that many of their middle-class workers are no longer residents. Mike Rosenberg (2018) of theSeattle Timeswrites, “Local cops, even the police chief of Bellevue [a suburb of Seattle], have had to move to cities outside where they serve. The share of commuters driving at least 90 minutes one-way has grown 70 percent this decade.”

This issue is global. In Sydney, Australia, considered either the world’s second or third least affordable housing market, a study from Sydney University showed that 20% of the city’s essential workers had moved outside the city between 2006-2016 due to unaffordability(Chancellor, J., 2018). These essential workers include police officers, firefighters, teachers, nurses, and ambulance drivers.As housing costs continue to rise, these trends will only intensify. More research needs to be done on how the increased commute times and the associated stress influences the efficacy of these essential employees, but it’s probably safe to assume that it doesn’t improve outcomes.

Most cities try to maintain a stock of affordable housing that can be accessed by these essential employees, but the demand far exceeds the supply. In Melbourne, Australia, one of the least affordable housing markets in the world, Catriona May (2017) of the University of Melbourne reports that the waiting list for public housing has soared to 40,000 people. That same trend is observed in Washington D.C., whereRoger Lewis (2013) of The Washington Post reported that 70,000 individuals are on the waitlist for one of 8,000 affordable units, with some having sat on the list for decades.

A lack of housing affordability also leads to poor social outcomes as well.According to Belinda Turffery (2010) of the UK based charity, Shelter, 21% of adults between 18-44 are delaying having children because of a lack of affordable housing. 22% of 18-34-year-olds live with their parents due to a lack of affordable housing, and 58% of those respondents say that it has harmed their social relationships. It’s likely that similar trends are observed in other countries and cities fighting an affordable housing crisis.

The Cost of Homelessness

The effects of economic growth without a similar increase in housing supply are not just limited to the renting class. The consequences extend to increases in the number of people experiencing homelessness. England has seen a 120% increase since 2012. There are now an estimated 12,300 homeless individuals in London (Crisis.org, 2018). There are 12,000+ people without a place to call home in King County, Washington, an estimated 25,000 in California’s Bay Area, over 78,000 people in New York and nearly 50,000 in Los Angeles County (Henry, M., et al.2018).

Not only are these numbers morally egregious, they are economically malfeasant. The City of Seattle committed $89.5m of its annual budget to fight homelessness. Mayor Durkan made this a permanent funding, meaning that the revenue needed to come from a secure source. In years prior, this revenue was from taxes and fees associated with new development, but as construction ebbs and flows, this wasn’t secure enough for the city to rely on. To make the funding permanent, the city cut $49m from the budgets of other departments; an important act, but one that may have unintended consequences (Adolph, C., & Walters, K., 2018). According to Heather Knight of the San Francisco Chronicle(2017), San Francisco planned to spend $275 million on homelessness in 2018, up from $241 million the year prior. The budget for 2019 is expected to reach almost $320 million. According to Monica Nicklesburg (2018), writing for Geekwire, Los Angeles is dedicating $1.2 billion of their budget to the cause as well.

Too Many Humans, Not Enough Housing

The basic economic principle of supply and demand states that when excess demand for a product or service meets an undersupply, prices soar through the roof. This can be observed quite clearly in Seattle and San Francisco, two cities that have boomed in the digital generation, but that also possess incredibly restrictive building policies. For example, from 2010 to 2018, Politicoreports that Seattleadded nearly 100,000 jobs, but barely 32,000 new homes and apartment units (Roberts, P., 2018). During that same time, the median cost of housing rose 93%. What was worth $337,500 in 2012 had nearly doubled to $651,000 by January 2018 (NWMLS, 2018). In San Francisco, the numbers are even scarier. From March of 2014 to September 2018, the median home price increased from an already whopping $838,000 to a ghastly $1,325,000 (Trulia, 2019).

According to the City of Seattle (2017), “From 2010 to 2015, the number of jobs in Seattle increased almost twice as fast as the number of homes. During that same period of time, [the] average rent for a one-bedroom apartment increased 35 percent.” TheSeattle Times’ Mike Rosenberg and Vernal Coleman (2019) reported that between 2010-2018, only 59,000 new units had been built in Seattle’s King County. Local experts estimate that 300,000+ homes are needed to meet the affordability demand. However, nearly 10,000 new housing units came on the market in 2018; that’s the largest single year increase in the city’s history. As a result, rents stabilized, and actually decreased on average. (Rosenberg, M., 2019). This is evidence that adding supply will lower prices.

This issue extends across the United States. According to Benjamin Schnieder (2018) of the urban policy website, CityLab, the construction of new homes was near a 60-year low in 2017, and only 900,000 homes were slated to begin construction in 2018. That’s 400,000 below what is required to match population growth.

Restrictive zoning policies have been pegged as the leading driver of a lack of new home development, nationally and abroad. A University of Washington study from 2008 showed that regulation in Seattle was responsible for an average of $200,000 of the price of any new home (Rhodes, E.,2008). Patrik Schumacher (2018), of The Adam Smith Institute, described the cause of London’s insane housing prices as the inability to build the best type of property for a particular piece of land. Working from a market-based heuristic, Schumacher advocates allowing for new development to be added to London’s protected Greenbelt, with the belief that an abundance of new, desirable land will drive overall building costs down. Without doing that, London allows for an artificial scarcity of land and thus less affordable housing. Roger Valdez, of the blog Seattle for Growth, said in an interview for this paper that permitting greater flexibility in the market is the only way the crisis can be solved. Citylab(2018) states, “Between 2000 and 2015… the U.S. produced 7.3 million fewer homes than it needed to keep up with demand and population growth.” The cause, not surprisingly, is restrictive zoning that prevents the necessary density.

Creating Housing Affordability: Fixing Seattle to Solve a Global Crisis

 5:30am. A tired hand, freshly jolted from a dream, fumbles around for the off switch to the screaming alarm clock. A young woman, two years removed from her college graduation, rolls out from under the covers into a world still hidden from the light of the morning sun. Though work doesn’t start until 8:00, she needs to leave by 6:20 if she wants to be on time. It’s days like this where she wonders what all went wrong; she has a degree, she has a salary paying her $3,000/month, but life hasn’t been at all what she was told to expect. Between car payments, gas, housing, utilities, and her student loans, she is spending around two-thirds of her income on bills. She wants to build a savings, but the $1,000 she has left is hardly enough to live on in any metropolis. What little savings she did have were recently wiped out by car maintenance, which has become more frequent in recent months. That’s what happens when you must commute 90 minutes each way on a daily basis. She moved to the suburbs despite her downtown city job in order to save money on housing costs, but those savings were replaced with the cost of gas, the wear on her car, and the stress that compounds with each new morning. Every day, she watches her dreams and opportunity slip further away. Every day, she helplessly carries on.

Cities around the globehave noticed an alarming trend; housing has become so unaffordable that it has wiped out the prospects of social and economic mobility for large numbers of residents. To afford the median home in Vancouver, B.C., Canada, requires 12.6 times the median annual income— $72,662 in 2015— meaning a starter home costs nearly $870,000 CAD (Kwan, S., 2019). The prosperity in cities like San Francisco, London, Vancouver, and Melbourne is truly unfathomable. Yet large swaths of their populations lack a place to call home, while even more people live on the precarious edge of displacement, eviction, and upheaval.

The aim of this paper is to analyze how the housing affordability crises observed in these cities compares to the one in the author’s hometown of Seattle, Washington, and how it can be best addressed. Seattle was the hottest housing market in the United States for much of the last decade, with the soaring cost of housing and living serving as the byproducts of the city’s transformation from a quirky, modest city isolated in the Pacific Northwest into a global hub of ideas, technology, and innovation. Through a combination of observing the experiences of cities even more entrenched in the struggle to remain affordable, identifying successful pursuits other cities have undertaken to create more equitable metropolises, and sifting through the deluge of research on this topic, this paper will attempt to promote policy solutions that, if successful in Seattle, can be applied globally. Crafted correctly, these policies can address social justice, economic mobility, and racial equity, while also preempting the negative impacts of future growth.

BACKGROUND

Housing prices across the globe have grown dramatically since the 2008 financial crash, particularly in cities. In most wealthy countries, the 2008 crash led to a massive restructuring of the economy, with nearly 9 million jobs being lost in the United States alone. During the recovery, the sectors that experienced the greatest job growth were primarily low-wage, namely the hospitality and service industries, with their growth fueled by the hiring of once-salaried workers from now-diminished industries. Many of these jobs arose to meet the needs of the information technology (IT) and financial industries that had experienced exorbitant income increases during the recovery (Green, K., 2017). With the concentration of IT and financial jobs in urban cores, the new economy pushed for a reversal in the long-trend of suburban flight. Between 2008-2017, the largest American cities accounted for 72% of all job growth, while many small communities still have unemployment below pre-recession levels. Between 2010-2014, only five U.S. metro areas accounted for over 50% of all new businesses created (Parilla, J., 2017). Across the globe, cities are becoming more populated, wealthier, and as a result, more expensive.

The world’s major cities now seem to all show the same trend: the clear class stratification between the well-paid elite, a surviving, but stressed middle class, and the precariously employed, wage-earning lower class. As the population and wealth of these cities have grown, the cities have not kept up with the rising demand for housing. With a lack of supply, housing prices, both for ownership and renting, have skyrocketed. Governments and economists consider a person “cost-burdened” when they are paying over 30% of their monthly income towards their housing. Across the United States, there are 19.7 million renting households making $35,000 or less per year; 86% of them are cost burdened. In 20 of the 25 largest metro areas in the United States, a median income renter would be cost-burdened if they paid the median rent (Salviati, C., 2018).

In the target city of this paper, Seattle, 47% of households are considered cost-burdened, with a greater percentage in the areas with a high concentration of renters. As many as 90% of households in Seattle’s University District are renters; 66% of them are cost-burdened. Between 2010 and 2015, the number of jobs in Seattle increased nearly twice as fast as the number of homes. Across that same time period, the average rent for a one-bedroom apartment increased 35 percent (Office of Planning and Community Development, 2016). The root causes of the affordability crisis are nearly identical in almost every plagued city, including a lack of new homes, little to no well-designed social housing (public housing designed to promote a positive feedback loop of ideal societal outcomes), and an exorbitant amount of political power in the homeowning and capital-controlling classes.

According to the famous theory put forth by psychologist Abraham Maslow, stable housing is one of the key needs that must be met in order to have a productive and joyous life. As of December 2018, there were at least 12,112 people in Seattle’s King County experiencing homelessness (DeWolf, Z., et al, 2018). In California’s Bay Area, estimates of their homeless population are between 19,000-25,000 (Kendall, M., 2018). According to the annual Point in Time Count, a mass survey to determine the number of people experiencing homelessness, 41% of respondents in King County

reported either eviction, a lost job, or inability to afford rent increases as the causes of their homelessness (DeWolf, et al, 2018). The issue extends beyond those without permanent housing. With 47% of Seattle households being cost-burdened, the city as a whole suffers. As housing-costs-to-income ratios rise, real wages decrease, economic mobility suffers, and quality of life is lessened. While the region continues to grow, this problem will only increase if solutions are not implemented beyond those currently proposed. The numbers are similar or worse in many major cities across the globe. The resources exist to solve this crisis; it is the political will that must be fostered. Allowing children to be raised without stable housing is immoral, unjust, and detrimental to both economic growth and quality of life.

THE CAUSE AND EFFECTS OF OVERPRICED HOUSING

The 2008 Crash Leaves Its Mark

For much of the 20^thCentury, the American populace was primarily composed of homeowners. Long considered the essential asset to building wealth, home ownership was the centerpiece of the American dream. The red front door, the verdant lawn, the white picket fence. While that may have more to do with a fabulous marketing campaign from the real estate and financial industries, it’s what the majority strove to achieve; never has this been more exemplified than in the run-up to the 2008 global financial crash. The pernicious hope that prosperity was a simple purchase and sale agreement away played directly into the hands of vicious predatory lenders, willing to qualify teachers making $40,000/yr. for a $600,000 home. The originating lenders were protected from the inevitable loan default; loans were sold to third-parties who would collect the debt in exchange for an upfront fee. These third-parties then cut up these loans into tiny fractions and paired them with the tiny fractions of thousands of other loans, before selling these new Frankenstein loans to someone else. The end-buyer was supposedly buying a very low-risk financial product. One homeowner might default on their loan, but because hundreds (or thousands) of people had miniscule ownership stakes in the loan, representing only a sliver of their portfolios, no one would feel that much pain. The only thing that could go wrong would be a system-wide failure.

In late 2006, global housing prices started to shake. After a half-decade of unprecedented growth in the real estate market, a wave of foreclosures across the United States precipitated coming disaster. An economy bolstered since 2001 by low-interest rates had begun to slow. The Federal Reserve decided to raise interest rates in order to cool inflation fueled by cheap credit. However, the Fed did not realize how much the economy had also been propped upon fraud, predation, and corruption. As rates rose and credit became harder to access, homeowners in possession of adjustable-rate mortgages (loans with rates that can change at the lender’s discretion) started seeing their monthly payments soar.

Many of these adjustable-rate mortgages were entered into as existing homeowners were encouraged to refinance their houses. Lenders advertised low-interest rates and pointed to the massive appreciation in housing since 2001. Lenders were seeking to make a pretty origination fee; homeowners were wooed by the equity in their assets. According to a report from the Federal Reserve, in 2005 alone, U.S. homeowners extracted $750 billion in equity from their homes (Greenspan, A., &Kennedy, J., 2007). This debt poured fuel on the fire, further heating an already burning economy… and leaving an even larger trail of destruction in its place.

In 2005, there was a total of 532,833 foreclosures across the United States. In both 2008 and 2009, there were over 2,800,000. Between 2007 and 2012, a total of 13,010,332 foreclosures took place (Figure 1). $13 trillion of household wealth dissolved. At least 9 million jobs were lost, some permanently (Kalleberg, A., & Von Watcher, T., 2018). Retirement plans and pensions were wiped out. This historic collapse dramatically changed the face of everything it touched, especially the housing market. The white picket fence had been turned to sand.