Listen: Arguments In Front of Seattle Ethics and Elections
Back in June, we made our case in front of the Seattle Ethics and Elections Commission (SEEC) that Councilmember Sawant. Please remember the Councilmember Sawant is not the problem in Seattle. She’s one vote on a 9 member City Council that, along with the Mayor, is supposed to be running a City of thousands of employees. They’ve all failed to do that basic function and are now adding to the problems by making bad policy that impacts housing. And Jenny Durkan has been a terrible Mayor; she did nothing to stop this nor did her predecessor or the many Councilmembers that have watched City government spiral into its current broken state. More on that at another time.
Still, I think that our arguments standing up for people who provide housing are worth reading or listening to. You can hear the whole presentation at this link: http://www.seattlechannel.org/ethics?videoid=x114731&jwsource=cl. Unfortunately I can’t embed the video. There isn’t much to watch, honestly, so if you have the time take a listen.
Thank Mr. Chair, members of the Commission, and Mr. Barnett for hearing our concerns today.
When the COVID-19 crisis began to unfold months ago, I was on the phone almost hourly with housing providers from Seattle and the region expressing their concerns about their residents, their own families, and their businesses. Their concerns were not about money — although the massive losses of income to people and families were looming — but how would they keep residents housed and for how long would this crisis persist? Would they have to lay people off? How would they pay their bills while government sorted out COVID-19 response?
As eviction bans were imposed, and housing providers were beginning to sort through the impacts of lost income and how they might help their residents get help and find help for themselves, Councilmember Sawant began using City resources to urge people to not pay their rent — whether they had income or not, a “rent strike.” My phone rang again and again, this time not just with anxiety about the future but outrage and anger. “How can a public official using resources I help pay for,” they asked, “try to put me out of business? Isn’t this illegal? Isn’t it wrong? Isn’t it unethical?”
That’s why we filed this complaint. There are two issues detailed in the written documents. First, we believe that the Councilmember violated her oath when she urged people to disobey the Governor’s stay at home order. There is no disputing the facts here: demonstrations like the one that the Councilmember was fomenting were clearly a violation of a legal order by the Governor, no matter the content of the protest. The public health basis of that order was that prohibited activities would contribute to the spread of COVID-19 and cause substantial harm to the wider community. “It’s not about you,” we were told at the time, “Think of your grandmother or your friend’s grandmother.”
Second, also a fact, the housing provider and resident relationships are legal contracts between a business owner and customer. The money to pay for costs of operation, maintenance, health and safety, and debt service come from rent. Consider the business of the law, for example. To urge people to engage attorneys, contract for legal services, have those services fulfilled, and then refuse payment is destructive both to the lawyer and to the client. The lawyer is legally owed money for their work and the client is now in arrears and in violation of that contract. In the case of housing the same is true, there is harm to both parties.
That the instigator of these illegal and harmful acts is an elected official is why we’re here. Does this Commission think that a plain violation of oath and urging risk and damage to housing providers and residents is appropriate and — this is key — ethical conduct based on the code that mandates your work and the plain meaning of that word to most people in this city you serve? An elected official swears an oath to uphold all the laws, even those she may want to change them — like tenant landlord law — because she believes them unjust.
And civil disobedience assumes the violation of a law upon appeal to a higher standard; but civil disobedience assumes a violation of the law and accepting its consequences. Councilmember Sawant, I guess, paid her mortgage while urging others to not pay their rent. There are no consequences for her in this action.
This is not a free speech or civil disobedience issue. Not only is Councilmember Sawant entitled by our Constitution and 1000 years of legal precedent to speak her mind, as an elected official, she is obligated to do so. She’d be violating her oath just as seriously if she did not speak out about things she thought were wrong and if she did not exhort action from the community to make them right. I think it’s ethical to break the law or a contract when accepting the consequences to make a point.
But that isn’t what she did. She urged others to violate a lawful order made to protect the wider community –including those not participating in the protest – and to harm lawfully functioning businesses and their legally binding relationships with their customers and clients. She did all this using City resources during a period of great anxiety and stress for millions of people in this region grappling with an unprecedented health crisis. This was, clearly a case of yelling, “Fire!” in a crowded theater.
You might find it ironic that I agree with Christopher Hitchens assessment of the Supreme Court decision written by Oliver Wendell Holmes in the Schenck case that socialists like Eugene V. Debs were shouting fire when there really was a fire. Notwithstanding the fact that Mr. Debs’ ideology is antithetical in many ways to what I truly believe, his imprisonment for speech is an embarrassment to our country and was wrong — it was not moral and it was unjust. It was also, unethical. However, in Councilmember Sawant’s case not only was there no fire, she was trying to set one.
But we’re not suggesting here that the Councilmember have her right to speech abrogated, or that she be penalized for her beliefs. She should say what she thinks, even and especially while using City resources. But asking people to violate a legal order and harm legal relationships and business during a crisis using the platform and influence of public office and public resources isn’t protected speech but is unethical as we’ve described based on the code and the plain meaning of the word. This is the question we’re anxious to see the Commission consider and answer on the record.
Who Should You Vote For on August 4th? Or Should You Vote At All?*
*Updated with a recommendation on the Attorney General election.
There are three points of reference I’ll give you when considering my advice on how to vote in the upcoming primary (although you already should have your ballot). The first is from an English historian of Polish descent, who wrote about English politics in the 18th century, Lewis Namier. He said of people who wanted to be in Parilament that,
Men went there ‘to make a figure,’ and no more dreamt of a seat in the House in order to benefit humanity than a child dreams of birthday cake that others may eat it.
From The Structure of Politics at the Accession of George III
How about something less obscure. There is a new entry that should be in the DSM VI (the next version of the Diagnostic and Statistical Manual of Mental Disorders), something I call Sally Field Syndrome.
Sally Field Syndrome is commonly found among people who seek political office, fame, or other broad affirmation from crowds of strangers. The pathology is typified by needing approval and seeking applause from crowds of people in church basements or more commonly in recent years “likes” on social media.
Third, my name is Roger, and I am a recovering politician. Yes, it’s true, I once ran for office. I knocked on doors interrupting people’s dinners, and I called strangers asking for money. I sometimes sat in my Jeep in a cul de saq somewhere I was sent trying to find the next set of doors I was supposed to “doorbell.” I sought endorsements. And I even — and this is hard to say — supported an income tax.
So anyone whose name on the ballot is, by my definition, not qualified to hold office. There are no Solons among them. I hear you say, “But c’mon, Roger. We can’t not vote.”
Agreed. Exercising your right to vote is important even if you submit a blank ballot, which is what I usually do (with, perhaps, a couple of names selected of people I think are OK). The rule I follow is based on why I don’t vote for judges: I don’t want to be standing in front of someone who is sending me to jail or fining me knowing I voted for them. If you can’t accept giving your ascent to bad decisions, policy, and behavior it is better to vote, “present.” But here is what I think of the menu you’ll be choosing from.
Congress
No Recommendation — Congressional candidates range from outright hostile to housing providers and new housing development (Pramila Jaypal in the 7th District) to Republicans who are representing more animals than people (Dan Newhouse 4th District). Unfortunately, most of Washington’s more market friendly representatives are in rural areas. If you have to vote, pick a Republican, notwithstanding what you see on CNN or Fox News.
Governor
Phil Fortunato — Senator Fortunato has listened to what we have to say and proposed legislation to prevent the City of Seattle from banning winter eviction. The Republican primary is a clown car. Phil isn’t a guy that I agree with on everything, and we might end up hating each other if he was elected. But he understands business and is far smarter than how he might initially come across. Of all the candidates for Governor, Fortunato is the one who I know will not just open the door to his office but will welcome us in to sit down and talk.
Lieutenant Governor
No Recommendation — This is an important office, and one that is deeply under-appreciated. Back in the old days, guys like Joel Pritchard essentially chaired the Senate. They weren’t devoid of opinions or values, but the person in the chair took the notion of being objective extremely seriously. When matters of procedure in the Senate would come up, the Lieutenant Governor would stop, consult his attorneys, and then issue a decision. Back in those days, the 1990s, when that happened there would be a kind of hush.
I remember Joel Pritchard’s voice from those days, “Having received a constitutional majority, the legislation is passed, the title of the bill will be the title of the act.” Bang! The gavel would go down. People believed Joel Pritchard when he ruled against them, and they felt validated when he ruled for them. It meant something. Today, the office has become partisan. Nobody running has the ability to be a Joel Pritchard.
Attorney General
Don’t Vote For Bob Ferguson — Here’s another one that unfortunately I can’t suggest who I would vote for if I had to pick; but for God’s sake, don’t vote for Bob Ferguson. Ferguson has one of the most serious cases of Sally Field Syndrome I’ve ever seen, he seems almost desperate for higher office, suing Trump four or five times a week. And he’s sort of that eager to please white guy we have so many of around here who wants to be Robin Hood, probably another add to the DSM VI, Robin Hood Syndrome, the tendency of some white, male, and left leaning politicians to take from the rich and give to the poor. Former Seattle City Councilmember Mike O’Brien had a severe case of Robin Hood Syndrome.
In Ferguson’s case he likes to sue housing providers that may have made a mistake in communicating with their residents. I wish we had an Attorney General that would just help us navigate things like how we might be able to amend the Constitution to get tax increment financing or give an opinion that state dollars can be use to help people pay rent isn’t a gift of public funds prohibited by the Constitution. I think Ferguson is the driving force behind the eviction ban.
Secretary of State
No Recommendation — This used to be the domain of old Republicans. Nominally, the office is largely ministerial, processing LLC applications and managing elections. But in today’s world, it has, too, become a partisan battleground with Democrats attacking the incumbent because she’s a Republican. I guess I’ll vote for Kim Wyman the incumbent if I vote at all for the office.
State Treasurer
Duane Davidson — The State Treasurer sits on the Washington State Housing Finance Commission which doles out millions of dollars in Low Income Housing Tax Credits (LIHTC). Davidson is a rural guy, and he seems to understand the economic problems of out of control regulation in urban areas, high prices, and the black hole that keeps consuming cash for housing subsidies. We need Davidson for another four years. He actually gave us an opportunity to make our case about the inefficiency of the state’s housing subsidy system, something that internally he probably took a lot of grief for. Vote for him. This one does matter. We can keep working with him.
Superintendent of Public Instruction
Maia Espinoza — If Espinoza was a Democrat she’d be on a fast track in this state for high office. But she has principles that keep her skeptical of the dominant culture around here. Founder of the Center for Latino Leadership, Espinoza has taken the honest and more challenging route of trying to represent what Latinos in Washington actually think rather than what white liberals on Capitol Hill think they should think. I don’t think the position is the best use of Espinoza’s skills, but she needs our votes to get through the primary. Our education system doesn’t need to slant further toward people who want to abolish private property, and Espinoza is on our side in that debate.
Commissioner of Public Lands, Auditor, Commissioner of Insurance
No Recommendation — Each of these are powerful offices that are held by people that favor the one party state Washington has become. Who’s the best alternative? I just don’t know. If I had to choose, I’d vote for a Republican in this primary. The Auditor should be running a serious analysis of non-profit housing spending. Pat McCarthy, a Democrat, won’t do that.
Washington State Legislature
No Recommendations — I used to say that our state legislature should have the best and the brightest, the people that you’d count on to make a soufflé, solve the New York Times crossword puzzle, and change your oil, and all before noon on Sunday. You’d settle for someone average, like you. Unfortunately, our legislature is populated by people who got there because they baked cakes and recruited Precinct Committee Officers. They are what an old boss of mine called, “low potential high achievers.” Of course this isn’t true of all legislators, but in general our system of choosing people to hold these important seats favors whim and whimsy over rigor and rectitude. Unless you know someone you like, in this primary, I’d just write in “Alfred E. Neuman.”
So there you go, my deeply cynical endorsements. My views have been formed over almost three decades of decline. All I can say is that everyone is dumber now than when I started. May God have mercy on us. And God that felt good to write this.
Tell The Governor: We Need Efficient Rent Relief, Not Eviction Bans
Here is the letter we sent today to the Governor’s office asking that the statewide eviction ban expire at the end of this month. Why do we need an eviction ban if we have rent relief on the way? Please take a moment and comment on the rent relief proposal below the letter. We’ve modified it to include a reference to the ban. But these two things are connected.
Hawaii: Working to Get Broad Rent Relief
I’ve been working with Ryan Tanaka a business owner and advocate in Hawaii to get broad rent relief from the federal government in their next financial stimulus. Tanaka has lead the effort on commercial rent relief looking for solid quantitative measures of the impact. I’ve written about the findings of the survey just completed at Forbes.
“For many businesses,” says Tanaka, many of which are “small and locally owned in Hawaii, their very existence comes from tourism and they need a lifeline to survive five months with no revenue.” Tanaka set out to measure the damage and propose a solution based on reducing property taxes to hard hit businesses in exchange for rent reductions or forgiveness. How bad is the problem of unpaid commercial rent in Hawaii?
We’ve already documented the impact government intervention on COVID-19 has had on residential rent collection. This data and data from surveys like the one from Hawaii should spur action — soon. Otherwise we’ll see the rent “forgiveness” movement grow.
You can read the whole Forbes article here.
COVID-19 and Value: Impact Depends on How Long This Lasts
Loss of Rent and Property Value
In Seattle and across the country, temporary Covid-19 eviction moratoriums have led to numerous occupied, non-paying rental units. The uncertainty behind this new-normal is bound to have impacts on property values as rental income continues to fall. In order to understand the potential impacts, we must first comprehend how rental income, vacancies, cap rates, and values work together.
Vacancy Rates
Per industry standards, a vacancy rate of 5% or less signifies a stabilized property (however, individual property owners may have their own standards for this). When units are physically occupied, but financially vacant, property owners face a higher vacancy rate, and thus significant rental income loss. The rate of occupied, non-paying units’ stacks on top of the property’s existing vacancy rate, often creating a vacancy rate above 5%, making the property unstable.
Cap Rates
Cap rates are used across the industry to signify a property’s risk level. Higher cap rates portray higher risk, but also higher returns. Conversely, lower cap rates signify low risk, with marginally lower returns. Cap rates vary for each property class. Class A properties are well-located, stabilized, newer properties, that yield lower cap rates. Class B properties may be older, not well located, or not quite as stable.
The problem with using cap rates to show property value loss during a pandemic or recession, is that cap rates do not typically move much during temporary events. Losses due to Covid-19 regulation, being temporary and shared across all property-levels, would not necessarily result in a cap rate moving upward.
The property generally stays in the same physical state, although the owner may defer maintenance projects until income is more certain. The main loss in rental income can lead to the property becoming unstable because of the increase in “vacancy.” At that point, an owner may consider a higher cap rate (unstable Class A cap rate properties may move to a conservative Class B rate to depict risk). However, the current crisis may be too temporary to assume any cap rate changes. If the Covid-19 regulations stick around for a significant amount of time, this may create a different story.
Values
The most prevalent place where rental income losses can be seen in a property’s financials, is in the actual monetary value of the property. There are many ways to derive value, but a simple way is simply dividing Net Operating Income (NOI) by the cap rate (owner derived or industry standard). Net Operating Income is determined by rental income, vacancy losses, and operating costs. When vacancy losses increase, rental income decreases. If the cap rate stays constant, but NOI is reduced, the monetary value of the property may significantly decline. Additional value losses can be seen if the property owner elects to use a higher cap rate.
Overall, rental income losses due to Covid-19 regulation will impact short-term property values. However, if the COVID-19 crisis remains temporary nature of this current crisis is not likely to yield long-term negative value effects.
