Reform on the Road: More Time in Eastern Washington

Last Saturday I travelled to Wenatchee to attend a dinner with Douglas County Republicans. The topic? Creating a 51st state made of up of Eastern Washington Counties. The proposed name of the new state? Liberty. The presentation by Representative Matthew Shea was provocative, highlighting the stark differences between Seattle and the rest of Washington. After the dinner I went back to my hotel where a group of combat veteran bikers gathered for their annual ride mingled with cowboys in town for a rodeo. The Red Lion bar even had a mechanical bull set up to go along with all the motorcycles in the parking lot. It is a different world beyond the passes. On my way back I stopped at Los Hernandez’ and ate three tamales. The small restaurant has made national news, just winning a James Beard award. I’m heading out again to talk housing and working to build a coalition to reform the way we subsidize housing in our state.

My trip will start in Spokane where I’ll attend the Washington Policy Institute Solutions Summit. Then I’ll head to Granger where we’ll gather to take a tour of Farmworker housing and then to Zillah for lunch at El Porton. Along the way I’ll try to fill in the time with other meetings and visits. The purpose of all this is to keep building support for changing the Housing Trust Fund. Here’s the proposal as it stands today:

Housing Trust Fund Reform Proposal for the 2019 Legislative Session

— Change the name to the Housing Supply Fund (HSF)
— Block grant funds to county housing authorities
— Base grant allocation based on need demonstrated by,

• Income levels
• Poverty levels
• Vacancy rates
• Age of existing housing stock
• Health status
• Education attainment and literacy

— Funding can be used for the following outside of King County,

• Direct cash rental assistance
• Construction of new housing
• Homeownership assistance
• Rehabilitation of existing, older housing
• H2A housing for Farmworkers
• Teacher housing
• Other worker housing
• Manufactured housing for long or short term use
• Reimbursement for portable vouchers used in King County

— In King County funding may be used only for,

• Direct cash rental assistance
• Assistance for people whose primary residence is a vehicle
• Homeownership assistance
• Manufactured housing for long or short term use
• Support for people transitioning out of jail or prison
• No funds may be used for capital or operating costs

— Statewide funds for

• Expansion of the Earned Release Housing Voucher program
• A risk reduction pool for the benefit of renters leaving the criminal justice system (e.g. deposit insurance, replacement costs, lost rent)
• Creation of a program administered by the Department of Corrections for housing transition for people leaving the all levels (federal, state, and local) of the criminal justice system
• Clean up and remediation of sites with soil or other toxic contamination (New!)
• Permanent ongoing quantitative review and audit of the HSF by the Joint Legislative Review and Audit Committee (JLARC)

— Establish and Fund a Farm Labor Housing Authority

• Support a small farmer program to permit and build housing for workers
• Provide technical support for housing financing
• Allocate more tax credits for farm labor housing
• Provide authority to issue bonds
• Develop and build housing for aquacultural workers (e.g. oysters, fishing)

A new addition to this proposal is funding for clean up and remediation of contaminated sites. The economics of land is pretty simple. If you can build something on the land that will create a return on investment to pay back investors and create cash flow something will get built. If that’s not possible, the land will maintain its existing use. When land is contaminated with toxins, say an old oil tank that leaked, the clean up is usually too expensive for new construction — that is, until rents get high enough to rationalize the clean up.

The Department of Ecology has a new program that is looking for ways to help offset those costs so that rents can stay lower after clean up of a site. Paying for the clean up could open up land that currently might just be a parking lot for housing. Many properties in rural and urban areas are great spots for housing, but the clean up is just too expensive. One example of a program is a clean up in the Mount Baker neighborhood that will open up 5 new lots for housing.

There is still lots of work ahead for this proposal, but almost every visit I make out in the community generates a new idea or new approach to using Housing Trust Fund dollars in ways beyond the assembly of capital for bricks and mortal construction. More updates to come.

Seattle: Turning Point, Boiling Point, or Point of No Return?

What a month! Back on May 2nd I arrived back in Seattle from Chicago. I went from the airport to my apartment, dropped off my stuff, and then took a Lyft up to a Ballard church where I saw something I’d seen before, angry neighbors. But this was a bit different. The assembled mob was hurling invective at the Councilmembers about a proposed tax on jobs. Over the next 10 days the debate heated up. I did my best to explain that the proposed tax would yield almost nothing to address the stated problem, 37,850 households with various levels of housing need. The Council lumbered through their debate, and sides were taken, and, in the end, the Council voted for a smaller tax on jobs proposed by the Mayor, after the press injected a crazy unvetted number into the discussion, $410 million a year to “solve” homelessness. And now there is a well funded opposition effort to repeal the tax, setting up a referendum not just on the tax, but, maybe, on all of Seattle City government.

What’s different about all this? It appears that maybe the average person in Seattle is finally fed up with the Mayor and the Council’s ceaseless efforts to appear progressive by proposing and passing policies that don’t work. All the dollar figures being kicked around when there as still tents in the park, under bridges, and on sidewalks may have finally caused the community to say enough is enough. Maybe.

What do these numbers mean?

I have been saying for years that the Council was becoming increasingly incoherent and was becoming a failed government. Simply put, the proposals they’ve offered for housing issues simply don’t align with reality. Two quick examples, Mandatory Inclusionary Zoning (MIZ) and First In Time (FIT). In the case of MIZ, the stated problem was rising housing prices. Rather than do something to incentivize more housing, the Council is trying to mandate a regime of fees that is already sending uncertainty through the housing market, will slow production, and add costs that will result in, yes, higher housing prices. I’ve been the lone voice pointing this out.

In the case of FIT, the Council by fiat created a new protected class, people that show up first to rent an apartment. Here the stated problem was the false narrative the landlords were taking the 7th person to show up for the apartment because he is a white brogrammer with a lot of money; the first person in line, this narrative goes, is a woman of color working two jobs. This narrative is silly of course. In practice, landlords screen tenants for a number of things, and what they’re looking for is tenants that have enough income to pay the rent and a history of credit and tenancy that indicates good future performance as a tenant. And most landlords would be happy to rent to the woman if she met this criteria — and sometimes even if she doesn’t. Who’s most likely to show up first? A brogrammer. And the new rule, thrown out by a court, would mean a landlord couldn’t rent to the woman if she wanted to if she was second in line.

There are days, and weeks when I’ve wanted to give up. The Council’s intransigence, the local press’ unwillingness to challenge the numbers, some funders complaining that I’m too mean or strident in my approach to the problem of misgovernment by the Mayor and Council. I can take fire from the other side, but it is discouraging when people I’m fighting for want distance from me. Friendly fire is the hardest to take.

I’m tired of holding the line against all this on my own with very little support from other organizations. One big exception has been the Rental Housing Association, perhaps because developers and landlords now share the distinction of being the most reviled players in the housing world. Some people, I guess, still think that the Council can be convinced through talk and math to do the right thing. Some of us have tried that and know it simply won’t work unless it is part of legal action.

But that may be changing. The breathtaking overreach of the Council and Mayor on the tax on jobs has struck a nerve with both neighbors and business groups; the more money, more money, more money approach has yield little or no progress on housing. Local lefties and socialists and urbanists are mad because the tax was not enough. And local media swallowed a “report” from McKinsey and Company that had not been vetted and, as I’ll show later, never even existed. People seem to finally be seeing the folly I’ve been seeing and pushing back against for years best exemplified by Councilmember Lorena Gonzalez taking the unvetted McKinsey number of a $410 million annual need for “solving” homelessness, stating it as a fact, than pushing a tax that discourages job creation of $75 million. To satirically paraphrase Winston Churchill, never have so many done so little for so few.

Maybe.

If a repeal movement becomes a referendum on misgovernment, if neighbors and business, and developers, and even socialists come to agreement that the current group of people running the City have failed to do their jobs, if the vote to repeal is big, if these things happen, and if in translates into a slate of rational candidates for all seven Council seats in 2019, maybe, just maybe, we can turn this whole thing around. If. Maybe. If we can hang on till then, maybe we can constructively address housing issues in Seattle without punitive taxes, bogus landlord tenant legislation, and extortionary fees on the production of new housing. If. Maybe. Can we do it? Will we do it?

 

 

ICYMI: Seattle For Growth and Seattle Fair Growth On the Radio

Yesterday I had the opportunity to discuss and debate housing issues on KUOW’s The Record with Bill Radke. You can listen to the whole conversation below. It’s about 20 minutes long.

 

Durkan Is Not Better for Business

Last year, after Mayor Jenny Durkan was sworn in, I was pretty critical of her early decisions, especially appointing more than half a dozen non-profits and Vulcan to her transition team. I even called a post about Durkan, “So Far Not So Good.”

This made somebody really mad. I got some heat for not sending the new Mayor congratulations and praise. I was skeptical, and this somebody suggested I was the “wrong person” to speak for builders. I’ve explained privately some of the fallout from that blog post. It wasn’t pretty.

But here we are and now it isn’t just me ranting and raving about Durkan it’s the Seattle Times. In a scathing opinion by their editorial board, the Times says,

Every council member and Mayor Jenny Durkan sided with those who vilify employers and wrongly blame them for social problems and City Hall’s repeated failures to resolve longstanding problems.

If the tax remains and Seattle doesn’t end its ideological crusade against employers, many thousands of jobs will go elsewhere or go away. That’s the opposite of what’s needed to address affordability and homelessness challenges.

Durkan’s support for the tax is disappointing. She squandered her first big opportunity for bold leadership and balancing the council’s extremism. Her ballyhooed compromise over the tax’s scope still imposed a job-killing tax.

And for some reason, the Seattle Chamber of Commerce still doesn’t seem to get it. In a bizarre “thank you” to Durkan and those Councilmembers they said this:

Two months ago, many thought a permanent $75-150 million tax was a foregone conclusion. What passed yesterday – a $45-50 million tax that sunsets in 5 years – is a bill that will hold Council responsible for producing results. We thank Mayor Durkan for her leadership on this issue in this highly politicized atmosphere, as well as Councilmembers Bagshaw, Johnson, and Juarez and Council President Harrell for raising important questions throughout the process.

When they read this, one of my colleagues actually texted me “WTF?” Indeed.

There are clearly two types of business people in Seattle, those who have finally seen what I’ve seen for some time, that City Government has failed to function as a government and the Council as a deliberative body capable of making decisions. The notion of setting up meetings and trying to explain things to these people is pointless.

And then there’s the Chamber.

When it comes to policy, the Mayor and the Council simply can’t be reasoned with. The right thing to have done would have been to veto the tax on jobs, period.

For those that say, “Well, with Moon we’d have had the full $75 million.” To those people I say, we’ve still got a harmful tax that does little, now even less than before. As I’ve said, never have so many done so little for so few. And this means that for sure the tax will fail to produce any results. What happens then? The tax will get raised and expanded. “We should have done the full amount last time!” they’ll say. Does anyone really think that the City will let go of a revenue source in the future? Maybe if it’s all new people on the Council and a new Mayor.

If we’re going to change this city and rescue it from itself, we’re going to need outside help, especially from Olympia and even from other cities and counties. That’s why I am building relationships across the state. Everyone else outside the city limits is wondering why we are dismembering ourselves. And they realize that the more incoherent City government gets here, the more and more resources Seattle will consume. It’s kind of like having an addict as a relative; you may want to ignore the problem, but as it gets worse for them, it also gets worse for you.

We simply have to stop thinking that by being nice and collegial to the Mayor and Council will result in them doing the right thing; in fact, when we don’t confront them for their bad actions we’re sending a clear message that we’re ok with it. Being co-dependent with the cash addicted non-profits and the Mayor and Council that do their bidding is not the answer. Being principled, sending a clear messages that we won’t sit still for bad housing policy, and building relationships with others outside the Seattle bubble will.

 

Nostalgia File: I Used to Support a “Head Tax”

Sometimes I can sense my age. I am getting older. The signs are here and there, like having to stretch before I run to avoid nagging injuries to ligaments, muscles, and bones. Another sign is irony. I think that’s the right word to describe the experience of having supported something then opposing it later — or the other way around. Someone reminded me today about the old head tax from 9 years ago. I fought for it and lost.

The old head tax was a charge to employees who drove to work. That tax raised about $4 million per year that paid for pedestrian infrastructure like crosswalks, signage, and sidewalks. For the average business the tax cost less than $100 per year and most business paid nothing. And if employees didn’t commute in a car the business paid nothing.

It all made good sense: tax something you want less of, single occupancy drivers, and the money paid for things to encourage not driving. And the tax was cheap for business.  But 2009 was the beginning of a huge downturn, business groups like the Downtown Seattle Association (DSA) wanted it gone.  It discouraged growth. Yep, back in those days the Council seemed to get the idea that taxes discouraged the things they are levied against.

So then, the Council complied and repealed the tax. I was about as mad and disgusted at the Council then for repealing the tax then as I am with them for passing it now.

But the differences are huge. That tax was small and actually followed my theory of taxation: it discouraged bad behavior, paid for things the market can’t pay for, and redistributed some money to people who walked instead of drive.  It was an efficient little tax. Most businesses filled out a form and paid nothing. Even huge businesses paid a couple thousand dollars a year. Meanwhile, we got small but important improvements like sidewalks.

The tax passed yesterday is dangerous because it is significant and may cause job loss, fewer jobs created, and reduction in employee hours.  And the new head tax doesn’t buy much, a few hundred units years from now. Hardly a bargain.

What hasn’t changed in nine years is my being on the losing side.

Later, I proposed an alternative:

Here’s my deal for the DSA. Seattle could improve on Oregon’s system. Let’s reinstate the “head tax” but, this time, we’ll collect the tax from employees who drive alone instead of their employers. It would be a use fee collected via payroll; it isn’t taxing wages like the payroll deduction for TriMet since we can’t legally tax wages in Washington. The charge per employee who drives alone to work would be a flat charge, say $25, collected on an annual basis from the employee’s paycheck. And the DSA should love the fact that this simpler method would be collecting money from the employee, not the business. And to deal with the [Richard Conlin’s] concern that $25 isn’t enough of a disincentive, the charge could rise by 25 percent a year over the length of an employee’s tenure. Gradually they’d feel the pinch and maybe get on the bus or try biking to work. More importantly the city would get its $4 million—and perhaps more over time—for improvements to make it more and more convenient and efficient for people to walk, bike, carpool, and ride transit to work rather than slugging it out in long, expensive, single-occupant car commutes

Did anyone pay attention? Nope. And this proves I am not anti-tax or a libertarian. So there is that. But I am getting older, and I guess it’s reassuring to see that some things never change.