MHA on the Radio: The Last Debate on the Biggest Boondoggle

I mentioned last week that I had recorded what was really the last debate on the City’s plan to impose Mandatory Inclusionary Zoning (MIZ), a scheme that charges each new square foot of new housing a tax of as much as $30 a square foot and then takes that money and gives it to non-profits to build subsidized housing. The value exchange is supposed to be that new housing can add additional density with “modest” (the City’s word) increases in square footage. The City’s version of this is called Mandatory Housing Affordability (MHA).

You can listen to the whole discussion here.

I call it the “last debate” because the City Council simply can’t wait to finalize the passage of MHA. The debate, to the extent there actually was one, is over.

After 4 long and often lonely years (sad!) of opposing MHA, I never had a chance to really debate a Councilmember on the issue. Not even City staff would appear on the same panel as me to argue about the merits of the proposal. There was one panel back in early 2017 where I did push Councilmember Johnson on the MHA program, but the panel wasn’t about MHA but about the real estate market.

Johnson, who is not running for reelection, said some strange things. He said that the City is “asking” developers to pay fees for subsidized housing. I had to point out that they aren’t being asked, they are being told to pay the fees. He also said the City Council has made it easier to build. It hasn’t. The Council, along with the Mayor, has made things far worse. Housing production is slower and more expensive today than it was even two years ago; and there isn’t any indication that will change.

Maybe after the Council takes its final vote on MHA I will reflect back on the whole mess. In my now 25 years of being involved in public policy, I have never seen or been involved with such a boondoggle, and that includes the waterfront tunnel.

That word, boondoggle, sums up the MHA program. The Merriam-Webster dictionary defines it as: “a wasteful or impractical project or activity often involving graft.” Where’s the graft? Well, one comment I made that was edited out of the radio segment was that the Seattle City Council has become a wholly owned subsidiary of the Housing Development Consortium (HDC), the non-profit that represents dozens of non-profit organizations that build subsidized housing in Seattle and King County.

Councilmember Johnson never really responded to my points about the high costs of developing subsidized housing, about twice what for-profit developers pay per unit. Nor did he answer how all the money that will be gathered from taxing new housing construction will be spent; he pointed to one project that built some housing for $13,000,000. At the current cost per unit for non-profit housing, something around $325,000 per unit, that would build 40 units. The City says we need more than 25,000. I pointed out that to build the 6,000 units promised by the MHA program, at that cost would be about $1,950,000,000 — that’s $1.95 BILLION dollars. And it will take more than 5 years to build those units. What do people struggling to pay rent do today? Johnson had no answer.

The History Channel page has a longer version of the word, boondoggle than the one offered in the dictionary. Boondoggles are braided cords made by Boy Scouts and word on their uniforms as a neckerchief slide. During the depression, it was learned that the Works Progress Administration was paying millions of dollars to teach people how to “boondoggle.” The Keynesian make work effort was defended by President Roosevelt.

“It is a pretty good word,” Roosevelt admitted in a January 1936 speech before adding, “If we can boondoggle our way out of the Depression, that word is going to be enshrined in the hearts of Americans for many years to come.”

Well, like I said on the radio, for $325,000 a unit (and probably more) we could buy families new houses, and they could become homeowners. That’s a boondoggle maybe I could support. That or just giving cash to renters who are struggling to pay rent. Instead the MHA program will raise the cost of new housing, meaning prices will go up widening the gap between housing costs and incomes; then the only answer to “solving” the continuing “crisis” will be to boost the fees and give even more money to non-profits with waiting lists for their new, expensive and slowly built units. The MHA program will be enshrined for sure but not in anyone’s heart. Instead it is likely to be enshrined in case law in years to come when it is found to be illegal and just plain bad policy.

 

“Will Make the problem worse:” Rent Control Debate on KIRO

Last week I had a chance to get in front of the rent control story — again. This time, with a longer format report, we got the point across: rent control will suppress housing production and make prices worse. You can watch the whole segment on KIRO here.

Impact Fees, Rent Control, and Councilmember Johnson

Last week was busy. There are three things about last week that are worth highlighting as we start this week.

First, we have managed to hold off impact fees. Because the City has not delivered a significant document request from our co-appellant, the Seattle Mobility Coalition (SMC), the hearing on our appeal has been pushed out to June. That means that the City Council will be unable to amend the Comprehensive Plan to carve out language allowing the fees. That means that the Council won’t be able to enact the fees this year. It is a procedural win, but a win nonetheless. With four new Councilmembers maybe there is a chance the City won’t take this up again. I’ve said this is the moral equivalent of blocking a field goal in third quarter of a football game when down 28 to nothing. Maybe this will be something that will turn the tide.

Second, we had a chance to get a word in edgewise on rent control in a segment on KIRO. Rent control is not going away; just the opposite, the cry for it is growing louder. What’s worse is that whether it is a conspiracy or an example of Marx’s dialectical materialism, tenant-landlord law revisions are pushing toward what is a push for the elimination of private rentals. What advocates really want is to seize private rental property and hand it over to tenants. Think this is a crazy idea? It is. In Germany the advocates have just openly made a play to seize property. I wrote about this last week at Forbes in a post called,“Housing Is A Right!” Means An End To Private Rentals. In the post, I dust of Marx’s Capital to describe how the left and socialists conceive of apartments; for them, price is not a measure of supply and demand but a measure of greed.

Finally, and speaking of housing as a right versus a commodity, I recorded what was essentially a debate about Seattle’s Mandatory Housing Affordability (MHA) with Councilmember Rob Johnson. Johnson said some remarkable things in the segment (which hasn’t aired) including the suggestion that he opposes the “commodification” of housing. Along with his weird claim that the Council has made it easier to build housing, Johnson seems to have downloaded the socialist concept that housing needs to be “decommodified.” It’s a catch phrase for sure, but as I wrote the post for Forbes it struck me how far the Council, and otherwise moderate people like Johnson, have gulped down the socialist Kool-Aid. If the segment airs, I’ll post it and you can hear for yourself.

We keep up our efforts each and every day because maybe we’ll make a dent like we did with impact fees. And what’s at stake? Well, the effort to grab private property being touted by the left is a real concern. Will we ask a few years from now when a massive legal effort has to be undertaken to push back, “Why didn’t we do something sooner?” Or will we start now, today, with an effort to push back now. It’s up to you. Please give to our work!

 

Councilmember Johnson: The Council Has Made it Easier to Build Housing

On Tuesday I recorded a segment for KUOW radio with Councilmember Rob Johnson about the Mandatory Housing Affordability. I never post about a recorded appearance or discussion until it is actually public because things change; sometimes recorded appearances or discussions don’t end up on the air. But during the conversation the Councilmember said that the City Council had done things to make housing production easier. I, of course, protested. The segment may air later today and I’ll post that if it does. But here’s a letter I sent to Councilmember Johnson asking, again, for help reducing barriers to production. 

Hello Councilmember Johnson,

—

Losing Control: Housing Committee Drama in Olympia

The last two weeks in Olympia have been interesting — maybe even dramatic. The week before last was all about pushing back on the “Tech Giants” burst into the room (figuratively) with a letter supporting SB 5600, a clumsy rewrite of tenant-landlord law. Last week, I started out with a take down of the irresponsible Losing Home report. By the middle of the week, we had taken on the Washington State Housing Finance Commission (the Commission) at the House Housing, Community Development & Veterans Committee. The controversy at the Committee was over three bills, HB 1982, HB 2010 and HB 2011. The last two bills would require the Commission to consider changes and become more transparent. The first is to allow a small discount on water access for affordable and Farmworker housing projects in rural areas.

I’ve been testifying in front of legislative committees in Olympia for 25 years. That’s not bragging, just some context to what happened last week. I’m used to some drama in Committee meetings and being part of it. But many people thought the form of the proceedings of the last committee meeting were, well, unusual. You can watch for yourself how things unfolded.

But what’s the substance? The first bill, HB 1982, would give a small discount on water permits to housing projects in rural areas. We supported this legislation last year, and I was pleased to speak on its behalf again. The Chair, Representative Cindy Ryu, at first, seemed interested in the details of the bill, wondering if it could be modified or changed. By the time various people had spoken, she had completely changed her mind. She then proceeded to deliver a lecture (her word) about how I had drafted the language and title too narrowly and in a way that would “gut” the Hirst decision, a controversial rural water law suit that held up the capital budget in 2017.

Well, I didn’t draft the bill. And I am pretty confident that the bill, a modest waiving of a fee, had absolutely no impact on the Hirst decision. She said that she was persuaded to kill the bill, right there in the Committee (something not all that common; usually bills die when they don’t get voted out of committee) by the comments by others who opposed the bill. But they all talked about the loss of fee revenue. Not one of them mentioned Hirst. My intuition tells me that a message was delivered, somehow, from the Speaker of the House, Frank Chopp, that the bill should die. Right now! The only other person I’ve heard mentioned how much money the Hirst decision cost the state in delay was the Speaker. He used the same exact language in a frank (no pun intended) discussion I had with him last year about housing costs, Hirst, and whether he is Mayor of Seattle. Who knows? But it was, after watching the video, very bizarre.

The second bill, HB 2010, is based on the recommendations of the Joint Legislative Audit and Review Committee (JLARC) encouraging more for-profit developer participation in the 9 percent Low Income Housing Tax Credit (LIHTC) program. To keep it simple, the LIHTC program provides a subsidy to qualifying non-profit projects. Strictly speaking, for-profits can participate in that program, which provides more money than the 4 percent program. Why don’t they? That’s a question that HB 2010 intends to get at and to solve.

But if you watch the video at about 37:37 Representative Andrew Barkis gets irritated at the comment made by Kim Herman, Director of the Commission. Herman suggested that the legislature had better things to do with its time that make the Commission ask and answer this question. This didn’t sit well with Barkis and provided another flash of tension in the meeting. It’s pretty clear that Herman, as experienced as he is in managing the legislative process, let slip the fact that he doesn’t think the legislature has any business overseeing his work or that of the Commission.

Now the sparks were going to fly. In my comments on HB 2310 I said,

Mr. Herman is a tremendous expert in his field and has contributed a great deal to the industry of a nonprofit housing. He’s been in his job longer than any of you have been in the legislature. So the fact is that that institutional knowledge needs to be transparent to the oversight of the legislature and the fact that [he says] “well, we’ll get back to you,” or “we’ll figure it out and send you an e-mail” to answer very specific questions doesn’t give you the entire picture of a very complicated system of housing finance in the state that has been built over thirty years using low income housing tax credits.

For this comment, the chair again lectured.

I do not appreciate you impugning the intentions of the commission or that particular person because I found that he has been very transparent any time we ask any information he has been very forthcoming so please don’t do that. Unfortunately I had to you after Mr Herman and so he does not have the opportunity to defend his honor.

His honor? You can watch for yourself and decide whether I impugned anyone. The bottom line here is that neither the Commission nor the Commerce Department want to be transparent. And as Mr. Herman’s comments to the Committee show, there is a general resistance to change. And we know change is needed. The cost of their product is rising. And though it was modest, the JLARC findings exposed a weakness in the “don’t-worry-your-little-head-about-that” responses that are typically issued by the Commission and the Commerce Department when it comes to fairness and costs.

Things got more interesting when the Committee moved HB 2311, a bill that would conduct a regular audit of the Commission, something that I said we support as well. But before I did, the Chair of the Committee said this,

And Mr. Valdez if you would limit your comments to how you can constructive –  how we can constructively amend this bill if needed based on the agencies testimony please.

What? There isn’t any precedent to tell a person testifying on what to testify about before they speak. However, the chair does have absolute discretion on what and who speaks and can even decide whether the person is out of scope in their discussion and the chair can rule a person out of order. This power is ancient, and one that I respect deeply. In our system, the chair manages debate, and that word chair really relates back to the Speaker’s chair. In the Parliament, even the Prime Minister, chosen by the Queen, has to sit and speak at the discretion of the Speaker. In the United Kingdom, the Speaker’s role is non-partisan, in our own, the Speaker is partisan. Still, the rhythm of debate and movement of legislation is set by the chair.

A committee chair has devolved authority from the Speaker, and the Speaker is the House, and the House is the people. It’s the reason that elections matter so much. Losing control of the House means losing considerable power. Someone said I should protest the attempt to control what I said. My view is that that chair can scold and lecture whomever she wants; it is her prerogative. I like the Canadian Parliament’s explainer the best if you want to read more.

Still, after being told by the chair to comment on what “we can do to make this bill successful,” I said,

With all due respect, Madam Chair, I’ll comment on what I am going to comment on which is support of the legislation . . . Mr Herman mentioned that there is not an interest in the wider community in the sources and uses of funds within affordable housing projects particularly those with tax credits. But there is, and a lot of us are trying to understand how these projects are working and where the funding is coming from . . . it would be helpful to have a regular audit for the legislature for the community for advocates for everyone.

I then described the strange numbers from Building 9 at Magnuson Park; $61 million in sources, $62 million in uses, and a $73 million budget on the Mercy Housing website. This project got a special appropriation from the legislature of $2.5 million in a previous legislative session. Most people I talk to say that this is the Speaker’s pet project. Again, who knows. He hasn’t answered any direct questions about it.

While the chair of any committee does have power and discretion to use it, those of us who are demanding answers have to do what we do too, which is to keep asking questions. I see the legislative process as liturgy; each of us has roles to play. Mine is to call out inefficiency in our current housing policy. As I pointed out in my comments, efficiency is compassionate. If we all committed, together, to maximizing efficiency more people would get the help they need when it comes to housing. But sometimes the power rests on the side of the status quo. We’ll keep pushing back against that over and over and over again, as long as it takes so that there is more housing for more people in all parts of the state for people of all levels of income.

But what we saw at the last Committee meeting is evidence that the power of our current Speaker, Frank Chopp, is slipping. He’s showing his hand. Why were these three bills even on the calendar? Why the effort to defend the honor of Kim Herman? Why kill such a modest bill that would help Farmworkers? The Speaker’s days are numbered. He’s decided to leave. He has a choice: do the right thing on the way out the door, or be dragged, by the Furies, killing bills in plain sight, defending aging bureaucrats and gross inefficiency, holding on to the drapes. I think, in the end, he’ll do the right thing. We’ll see.