Seattle’s Aggrievement Industry is Growing Too

As Seattle has grown we’ve seen a lot of new jobs and the growth that comes with it. One of the areas of growth in the new economy is the aggrievement industry, the business of cataloging and stirring up the concerns, worries, and anxieties people feel about the changes created by economic growth and opportunity. Change by definition means things won’t be like they were yesterday, and it also means that some people will feel as though they are worse off after the change or because of the change. We can respond it two ways, either reassuring people that overall change will be better and coming up ways to make growth easier for everyone, or we can stoke those worries and feed off the anger and resentment.

I think to get a sense of why things keep going this way it would help to read some of the responses published by the Seattle Times recently in a article headlined, “Seattle Doesn’t Know How to Handle the Boom.” I love the headline because, for once, it is subtle. I agree, people in Seattle are having a melt down about growth and it’s getting ridiculous. Here’s one of the complaints:

I have experienced much more competition for jobs, of which I now have three to try to get by. My friends and I all live in constant terror of losing our places to live. My landlord is selling at the end of my lease & the rent on a 2 bedroom apartment is more than the mortgage for a half a million dollar home. You have to make $7,500 a month to qualify for either. It’s pricing normal people that are from Seattle out.

Forget about the numbers and consider the frustration and worry. It is real. People are facing challenges as the city changes. But the Seattle Times offers no solutions nor does it when it puts together stories ever focus on the source of the problem or even defining it. For the Times, it’s enough to say that prices are “skyrocketing” and then dump anecdotes about people complaining about the prices. Who needs to report on causes or solutions?

And when the press does identify the cause, it is most often some external existential threat. In the case of Charles Mudede at The Stranger, the cause of this person’s angst and struggle is what has called the “dark energy” of capitalism expressed in the form of international speculation in real estate. The story goes that Chinese billionaires are buying up all the land and housing in Seattle and leaving it empty, rendering it impossible to create new housing for real people. His latest lament takes over all average prices downtown, about $2400 for new apartments, and suggests that these “luxury apartments” are all that exists in the market.

Another group is fomenting anger toward landlords for high prices with a campaign to “make landlords pay for economic evictions” (see the featured image above). First of all, so-called economic evictions simply aren’t clearly defined or tracked. What does the term even mean? These people would say that it’s when people are pushed out of their apartment for a renter that will pay higher rent. That simply isn’t good business. And nobody collects that kind of data, only anecdotes to stir up anger at landlords and pack the Council chambers with angry mobs.

When rents do go up dramatically, it’s usually when buildings have been purchased and get upgraded, making up for years of deferred maintenance which is why the rent was low. And the price of course is determined by demand and relative supply. It wouldn’t make sense to buy an old building, spend millions on it, and rent out the renovated units unless prices covered those costs because so many people need housing and are having to pay more an more for it because it is scarce.

But who wants to organize people to expand programs that we know work like the Multifamily Tax Exemption (MFTE) that creates a 20 percent rate of inclusion for rent restricted units so that it can be applied to existing buildings? Nobody gets punished with MFTE. There is no blame. There is no outrage. It’s too wonky. Organizing requires a villain and a victim. Programs like MFTE have been a workhorse for saving real people money, but the aggrievement industry can’t stoke anxiety by proposing a solution that doesn’t involve punishment for the villain, in this case landlords.

And politicians follow along. It wouldn’t makes sense, I guess, to run a campaign for office that pointed out that we need more housing, of all kinds, in all parts of the city, for all levels of income. That campaign doesn’t have a villain and doesn’t have a victim, just a solution that would offer more of a good thing to more people. Instead, the raft of people running for office in 2017 all have their own suitcase of implements of destruction for greedy developers and landlords like impact fees, rent control, and higher rates of inclusion in Mandatory Inclusionary Zoning (MIZ).

The press loves to stoke aggrievement, groups and individuals love to play off it and to use it to gain power, and politicians are frightened by the aggrievement and fear and pander to it, promising to find the culprit and make them pay “their fair share.” And all those “solutions” are like bloodletting and leeches; they just makes things worse, which makes the press happy, gets more power through blame for those people, and builds political careers. And the wheel keeps turning.

 

More Thoughts on the Election in Two Weeks

I often get queries about how I’ll vote in the upcoming election. I sent a message to our mailing list giving a lot of detail about how I’ll mark my ballot on the election for Mayor and to replace the retiring Tim Burgess. Here they are. 

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Greetings,

If you are a Seattle voter you likely have received your ballot for this year’s primary election. You’ll need to return that ballot (postmarked) on or before that day. Here’s my general answer on the question “How should I vote?” I think it’s pretty much the same for, “Who should I support financially.” I think the primary will sort out many things for us; there will be fewer candidates and we’ll have a better sense of where the conversation will go until November. Meanwhile these are my thoughts on the question about voting.

My first involvement with a campaign for City office was in 1993 when I managed a City Council campaign for a lawyer named James Fearn. Fearn was a supporter of the Seattle Commons, a project that ended up being voted down by the city a year later. Subsequently I managed Peter Steinbrueck’s campaign in 1997 that started out as a campaign for Mayor, but he switched to a Council run. I could go on about that year’s election. I’ve been around this town and its politics for close to 25 years, and I’ve never seen the city in so much trouble as it is today, especially when it comes to issues related to growth and housing.

One note before I talk about candidates. I don’t vote anymore for candidates unless I believe that they are likely to do what I want them to do. I don’t vote for the least bad candidate or the candidate that’s “close.” And please don’t vote for a candidate because, “she’s a nice lady,” or “we had lunch one time” or “she seems really smart.” One of my mentors, Larry Kenney, asked me when I said a candidate was a smart guy, “yeah, but how does he vote?” All that matters to me anymore is whether a candidate will hurt or harm the cause of housing production in Seattle. If I can’t answer that confidently I will leave my ballot blank rather than vote for the least bad option. You should too. Voting “present” is participation; voting for bad candidates is giving assent to bad policy.

For City Council the only candidate out there I can vote for is Sarah Nelson. I’ve known Nelson for a while including her days as staff for Richard Conlin. Nelson, with an editorial in The Stranger, finally came out as an actual supporter of business and basic economic fact rather than fantasy. The Affordable HousingCouncil (AHC), the Political Action Committee for the Master Builders Association, also endorses her. I am betting on Nelson because I hope that she’ll encourage her colleagues to make better decisions and that she’ll work behind the scenes to moderate the rhetoric and process on the Council. I am also hoping she’ll communicate with us, listening to what we say and taking it seriously, something nobody seems capable of doing on the second floor of City Hall. She was the first person on City Council staff to alert understand the gravity of the downzone of the low-rise zones that was proposed by then City Councilmember Sally Clark, legislation we eventually appealed.

UPDATE: It was pointed out to me yesterday that Nelson was a supporter of the One House, One Lot movement, an effort to squash small lot development. It is true that Councilmember Conlin and Nelson favored ending the increased production of housing on small legacy lots. This is problematic and one more thing to consider. However, I’d say that since that time Nelson’s help with low-rise zones and her eventual embrace of our efforts to make small-lot development easier, along with her subsequent record reflects maturity and evolution. And all of the other candidates are rent control supporters and are likely to support making Mandatory Inclusionary Zoning (MIZ). This isn’t to suggest that Nelson is the “least bad option,” and her record is worth considering when marking your ballot or making a contribution.

When it comes to Mayor, I have thoughts in a long blog post up today. There isn’t any candidate I can enthusiastically endorse. I will say that Mike McGinn is most likely the candidate, if he gets through the primary and gets elected, that could slow down or stop the imposition of Mandatory Inclusionary Zoning (MIZ).

In other City races on the ballot and on the Port I have no recommendation and I’ll leave my ballot blank on the seat currently held by Lorena Gonzalez.

Email or call with any questions or comments. Thank you for the work you do to make this a great city.

Will Any Candidate Stand Up to “Angry Seattle?”

When I first visited Seattle way back in 1983 I fell in love with the city. My affection for the place grew from afar; I lived in Albuquerque, New Mexico where I would finish high school. After high school I set out for Tacoma, and the University of Puget Sound, largely because of its proximity to Seattle. And eventually, after two years of graduate school in California I came back and this time to Seattle where I’ve been ever since. For the first time in all those years, almost 30 now, I am beginning to feel like I don’t belong here anymore. The upcoming election has started to solidify this feeling.

How much The Stranger reflects the broad viewpoint of the people and voters of the city is a question I can’t answer. But I think their language and coverage of housing issues reflects some significant part of that view. Here’s the headline from their recent story reporting their own election endorsements:

HELLO, ANGRY PEOPLE! Stranger Endorsements! Are! Out!

That’s right, the headline speaks directly to the “angry people,’ angry one would suspect at all the jobs, economic growth, and increasing opportunity for everyone as that growth continues bringing with it more demand for housing. Angry not because of the growth, they’d argue, but its unequal distribution.

Hence the move by the City Council to pass an illegal tax on income; illegal not just because of previous court interpretations of Washington’s Constitution, but existing law that doesn’t allow local jurisdictions to impose taxes without the approval of the legislature. It’s pretty simple. They can’t do it.

Angry Seattle believes that if someone is doing well financially and having success that the success and the money must have been swindled from poor people who, presumably by some measure are more deserving. It’s the notion that the pie is of fixed size: if your slice is bigger, then mine will be smaller. That’s not fair or moral. Angry Seattle doesn’t believe in baking more pies. That would be “trickle down baking.”

The Stranger goes on in their more detailed endorsement to bemoan the fact that their endorsement board, and the angry people in Seattle, can’t vote against Republicans. They say there are only 6 viable candidates.

But it can be hard to tell the six incomplete-jokes-to-serious candidates apart. All six want more affordable housing, reformed police, and better options for the homeless. All six say the rich don’t pay enough taxes and the poor pay too much. And they’re all pissed off, card-carrying members of The Resistance.

For someone who understands basic economics and how Seattle broadly denies the function of supply and demand, reading this paragraph is like biting into a donut filled with nuts and bolts. Ouch! And imagining Jenny Durkan and Jessyn Ferrell as The Resistance is worthy of an eye roll and a face palm and shaking my head. I’m trying to imagine them throwing the tear gas canisters back at the cops while their faces are wrapped in a bandana.

In reading through the answers of these two candidates in particular, the pain continues. One would have guessed that whatever membership in “The Resistance” (whatever that is) had by Jenny Durkan, a United States Attorney, and Ferrell also an attorney and recently a State Legislator, would be ameliorated by their knowledge of basic economics and their confidence in their own depth of experience. But their answers on housing are pabulum stirred together to create the sense of satisfaction for a hunger for strong answers and also enough of the right words to appease Angry Seattle.

Here’s Durkan (from the Downtown Seattle Association’s (DSA) candidate page):

One of the most critical issues facing Seattle is the lack of affordable housing supply. This problem will only grow as our population grows. I will look to leverage City and regional tools and partnerships to help meet this need. I strongly support the implementation of the HALA recommendations. I will focus on the “highest impact recommendations” first as identified by HALA. At the same time, we must ensure implementation delivers the promised benefits and that impacts on neighborhoods are mitigated.

Supply of affordable housing? See, housing is affordable when the supply keeps up with demand. There is no such thing as creating “affordable housing supply.” When the market produces (whether it is market rate or subsidized, new housing or old housing, individual units or shared ones) more housing that there is demand prices go down, and it becomes more affordable. But Durkan knows she has to say those words “lack of affordable housing supply,” a formulation that doesn’t fool me or, really, Angry Seattle. I know she doesn’t mean it or understand it, and so do they.

Ferrell seems to know what she’s talking about (from the same DSA page).

Housing affordability is an area where the current administration has made important strides, but we can do more. Every day we’re generating only about 30-40% of the housing supply needed in Seattle to match the demand of newcomers to our City. To keep our City affordable and inclusive, we need the right set of policies that ensure that our housing supply keeps up with demand.

Pretty good, right? But the problem is that Ferrell supports Mandatory Inclusionary Zoning (MIZ) fees, and she supports impact fees both because she says that developers need to “contribute” to you guessed it, “affordable housing.” When we met with her, I told her she had to change her thinking if we truly want to get at this problem; we already contribute, as much as $75 million per year for infrastructure through Real Estate Excise Taxes (REET) and the current system to producing “affordable housing” is creating units that cost as much as $500,000 per unit.

These two women got into law school, finished law school, passed the bar exam, and have had stellar careers. But when people so smart run for public office, they end up reduced to babbling out buzz words and phrases designed to reassure some while appealing to others. In this case, these two were on their best behavior, trying to sound business friendly. When they’re out in the general population their language gets even more sloppy and desperate. There’s nothing like an election to turn otherwise bright people into contestants in a “Me Too” tournament.

What’s left? Not much. We’ve got Mike McGinn who said that he doesn’t want the endorsement of the development community. McGinn seems to be counting on his name familiarity and his pervious experience as Mayor and the promise that time, as he puts it, mellowed him out. Here’s what he says on the same DSA page.

If elected I would immediately start a broad based public process to identify how to address housing prices. This will include a discussion of how neighborhoods can accommodate housing growth, and how to accompany growth with appropriate investments.

Wow. Right answer. I’d give anything if the City staff had bothered to do a little work, maybe some extra reading on their way home on the bus, or even just lazily accepted supply and demand as they did the idea that taxing housing would somehow help prices. Instead, the City simply went the route of squeezing developers for cash to give to non-profit housing builders, something that will raise prices and ensure more fees and taxes in the future as a response. I wish I could trust McGinn; but I worry he’s just pandering to Angry Seattle, this time the neighbors who don’t want anymore housing.

And almost everyone in town, including the candidates, keeps calling the MIZ scheme “HALA” when we know HALA is just a raft of recommendations. Whatever. I give up on that one. In our interview, I even asked Durkan to tell me the difference. She never did.

So out of all the “serious” candidates, two look like they might be close, Ferrell and Durkan, but say things that make it clear that they know that to win, they need to be members of The Resistance to appeal to Angry Seattle, and that means proposing bad policy. The other candidate, McGinn, sounds like he’ll put a break on the MIZ scheme. That’s great! But why? To allow Angry Seattle to make it even worse? He’s not very clear on that topic, suggesting that he understands making the fees higher won’t work. Then why have fees at all? Again, he’s sketchy.

As for me, there are no candidates in this race I find personally or intellectually resonant with what I value. The closest is McGinn, and it maybe that he’s the best bet to at least slow down the disastrous spiral we’ve begun. All the candidates want to appeal to Angry Seattle.

And here’s the thing, I’m not angry that other people are making money. It makes me feel good that we have more money in our economy. I think it is a hopeful sign for people less fortunate and for those who are trying to make it. What does make me angry is when well meaning, mostly white, housed, educated people get angry about other people doing well, then propose and implement horrible policies that will make life worse for those people striving to dig out of poverty or to get further ahead in the economy. I don’t see anyone running for Mayor at this point that understands that the pie is not one size, it can get bigger and we can bake many more pies. I’m tired of well off, educated, white people in a great city with great opportunity complaining and being angry. I wish we had a viable candidate that would tell them to get over themselves and support a real solution: more housing of all kinds, all over the city, for all levels of income.

July 5, 2012: A Reminiscence on a Defense on Density

Facebook has evolved much over the last decade and even over the last five years. A feature I have grown to appreciate is the “On This Day” feature that allows one to go back to see what one posted exactly a year ago, or three years ago, or depending how long one has been on Facebook eight or nine years ago. A little while ago I found this very economical use of words that I posted as a status update. I think it still articulates my basic view that there are some pretty deep reasons why cities (and this is almost a synonym for density in this case) make sense and are important. You can read a much longer exposition on my old Seattle’s Land Use Code blog. 

I am a density advocate because more people in a smaller space is the most efficient and sustainable use of our limited resources. Density has fewer impacts on the environment. Rather than limit our choice and freedom, land use policy that promotes density helps make us more free, prosperous, and can help us realize some the most basic and accepted goals of every human society, including the Golden Rule, “do unto others as you would have them do unto you,” or “to love our neighbors as ourselves.”

I Love Speculators! The Story of the Transatlantic Cable Guy

In case you missed it, there has been a lot of press lately about the notion that the reason that Seattle housing prices are so high is because, “speculators” are roaming around the city snapping up land, parking wads of capital everywhere and leaving all these homes empty. Once again Sightline is late to the party, but at least they showed up. Dan Bertolet wrote a nice post taking down this nonsensical view.  I wrote a post about this a while back and even went on the radio to dispute it and wrote about it at Forbes. It’s not happening! But as I point out in my posts, this narrative allows some people to still accept the fact of supply and demand, but argue that someone is gaming it. Sure, they say, there really is short supply, but it is because somebody is taking supply off the market. Or, another argument goes, all the money pouring in is making people who own land push their prices up and up and up, and the speculators (knowing some secret we all don’t with money we don’t have) are paying those prices. Speculation, doesn’t work like that, and housing and real estate investment is almost never speculation.

Here’s the definition of speculation from the Merriam-Webster dictionary: “[speculation is the] assumption of unusual business risk in hopes of obtaining commensurate gain.”

If you take a big risk, like betting $1000 on a long shot horse at the race track, and the horse wins, you’ll win a lot of money. If you guess that tomorrow everyone will love the color blue, and you buy a million blue things, and they do love blue, suddenly, you’re making lots of money.

Americans have a very paradoxical and unforgiving view of speculators: we admire and resent them. When a person spends lots of money on an idea and loses big, we take a kind of satisfaction in that. “Thought he was a big shot. Now look at him.” Failed speculation makes us feel like we made the right bet taking our paychecks and sucking up to our stupid boss.

When someone invests in  an idea that everyone thought was a bad, but turns out to be good, we think of that person as a hero. What a genius! She figured out we all really wanted blue things, and we did, and she made a billion dollars. But there is still resentment there. “I could have told you that. She had family money and went to Harvard. She was born on third and thought she hit a home run.” When her business fails, lots of people stand around and say, “Well, that’s what happens when all you care about is money,” as they fondle their blue thing she invented.

People are out and about and everywhere in Seattle decrying “speculation” as being the reason why housing prices are so high. Nonsense. The reason prices are high for anything, blue things or any other thing, is because lots of people want that thing and there are few of those things. Housing is scarce, lots of people want it, so it’s expensive. That’s a long settled point and not worth arguing about again here. And we’ve already explained that in order to have even a blip of an effect on housing prices, speculators would have to buy enormous amounts of land and housing, on the order of thousands of units. It’s just not happening.

Let’s be absolutely clear: real estate investment, whether in the form of development of property with high potential of financial yield or regular old townhouse and apartment development requires borrowed money. When people lend money they tend to be very demanding about getting their money back. This is even more true for institutional investors like pension funds and banks which aggregate capital to create return for their depositors. In reality, housing and real estate financing is set up to specifically discourage speculation. 

So anyone who understands the world of housing finance and economics knows that it isn’t wild speculation in real estate but limited supply and high demand that drives housing prices. As Bertolet deftly points out, the extent to which there is in investment in real estate by larger financial interests is because it is scarce and delivers a return. If you have some problem with people making money buying real estate, open the supply spigot and build housing like crazy; prices will fall and so will the investment by bigger entities like pension funds.

But finally, speculation is the life blood of innovation. Some people in Seattle are so small minded, envious, and just plain confused, that they insist on characterizing people who speculate as bad, greedy people bent on destroying life as we know it. This is just wrong. Consider the story of the transatlantic cable. Telegraph messages, phone calls, and even today, internet connections don’t happen magically in the ether or even via satellite. There’s a bunch of cable running under the Atlantic Ocean. How’d it get there? A speculator made it happen, and his name was Cyrus West Field, and he lost a lot of money on what even by today’s standards seems like a stupid project: unspooling a cable thousands of miles under the ocean. But he did it. And eventually he made money. Without the occasional speculator with lots of money and a crazy dream, many of the things we take for granted wouldn’t exist.

Your homework is to watch the story of how this all happened.