Last Week in Olympia: Sparks Fly Over Rental Legislation

Last week I made comments on Senate Bill 5569, legislation that would essentially roll back some of the new requirements being placed on rental units in Seattle, specifically first in time requirements in Seattle. These requirements elevate the status of the first person to show up at a vacant rental property to the same status as religion, race, or disability. Even if a person renting a property has several qualified applicants, she can’t pick and choose based on need or disposition or anything; the first person to show up gets the unit. This was intended to stop something that nobody has shown is actually happening, renting only to people that work at Amazon or other tech companies. The Seattle City Council is trying to accomplish rent control in all but name with other requirements like limits on deposits and new inspections regimes. All of these things are based on anecdotes not data and are intended to help renters. What would help renters is more housing, so that land lords had to compete with other land lords for tenants. But as long as housing is scarce, life for people looking for housing won’t get any easier. 

You can’t see my face, but at the end Senator Frockt challenges me and I insist on the point that simply being in a room while issues are discussed is not consultation. The Seattle City Council has really ceased to be a deliberative body when it comes to most land use and housing legislation, passing whatever feels good over the objection of people that know about how to make and operate housing. That’s a big reason why I am having to appeal to the State Legislature for help. 

There has always been a dynamic and even creative and healthy tension between state and local control. In Seattle, at a time when demand for housing is outpacing supply, producers and operators of housing have faced an ever expanding gauntlet of rules, regulations, fees, fines, inspections, infringements, and limitations that are confusing for both housing providers and consumers and have become increasingly difficult to manage and administer. It’s time for the state to take back some control.

What’s important for the Committee to know, is that this chimera of regulation does not help poor people, people of color, people with evictions, or people with criminal records. Rather, the City of Seattle has indulged in the imposition of piecemeal rent control for purely political and ideological reasons. Also important, is that the Mayor and Council have pursued this improvisational regulatory spree with no consultation whatsoever with people who make and manage housing.

Limit Demand for Housing? “You Can’t Get There From Here!”

Miguel Keeler on the Facebook group City Builders asked this question and I answered. I lightly edited my response to include come comments in [brackets] about free movement. 

I’ve been thinking a lot about the demand for housing the area.

You know what one radical solution just might help? Not allowing any more companies to move in such as Google, and the proposed fifth tower for Amazon, ect. These companies are going to have hundreds or even thousands of people move here (even though there is a housing shortage and they know it) to jack up the prices even more for rents and homes/condos in the city pushing the people/families making a salary or $25k-$75k/year out of the area that are struggling…meanwhile people that make $80k+ are pouring in, creating even more demand for an already slim housing market.<

So why not limit the jobs being created here and let the housing be build first, can’t have people without housing and vise-versa. You know how when a city stops producing housing, rents and home prices go up as more jobs and people come in…why not try and do the opposite for a little while, create more housing and hault jobs being created (we can’t even house the homeless). I know it’s “illigal” to do…but wouldn’t help people working in retail, coffee shops, ect, stay here? Sure it might seem like a stupid idea, but as far as I can tell, no one has tried it before, and it just might work. Think about it, and let me know what you think.

——————————–

Thanks for asking. If we know that price, in the simplest terms, is a quantitative measure of how demand is meeting the need for supply, then falling demand, whether induced or not, would result in lower prices. In theory, if some actor in the economy (or rather outside the economy) could simply dial down demand, then it is true, price would drop as supply, if it was left alone, “caught up” to demand. Then that economy would achieve equilibrium.

However, this discounts the fact that producers of housing would see the end of rising demand as a signal to hold back production of housing. A builder or investor would note that the market was about to face a surplus if production continued. Capital would redirect itself elsewhere. Money would either go to another market or it would invest in something else.

Also, housing production does not induce demand for more housing. Demand for housing is created by a complex web of utility needs when an economy grows. Jobs make a place appealing, or an appealing place draws people which creates jobs. The more jobs and more appeal an area has then more people want to live there AND people that live there begin to resent new people, and then zoning gets used to plan and “manage” growth. [I’d add here, too, that the notion of free movement and choosing where to live is part of what people consider to be basic “rights” in our country. The idea that we’d mandate where people live is, up till now, been something that would be intolerable].

But there are limits to what can be done about growth and demand. When I lived in Santa Barbara County years ago, the regime there put hard limits on building permits. What resulted was not a drop in demand but just a steady increase in prices as more people kept coming. Zoning and other limits to supply end up being used to “make it stop.” It won’t. All that limits to housing production do is make life worse for everyone by creating inflation in the economy, a condition of rising demand, inadequate supply, and thus an inventive by incumbents (single-family homeowners) to keep a lid on supply — the value of their asset keeps climbing.

Dialing up supply isn’t a perfect solution either. Putting a bayonet into the back of builders and saying, “Build!” wouldn’t be beneficial either in an economy that is seeing inadequate production. But if we were going to inventive and even subsidize something, it should be the production of housing. Capital is going to resist going into production of a thing that is getting over produced (and that’s what we want for housing, massive over production) unless there is a cushion. If units are vacant or undersold, we’d have to pick up that slack in the form of taxation or loss in value of property of both.

What keeps us locked in a cycle of limited supply is a combination of the way capital works (money tends to move rapidly toward production of things that are scarce, and away from things that are in surplus) and the headlock current property owners have on the regulatory system that produces housing.

If we eliminated the angry single-family homeowner guarding their cave, we’d still have a dynamic of rapid production in times of scarcity, a possible glut which would be bad for the industry but good for consumers, and then slow production and rising prices. Government can help the cycle along and help people who get caught up in the gears of this system.

Your question and the idea of induced demand — the idea that by creating more jobs and housing we draw in more people and that’s bad — reminds me of an old Burt and I routine about the farmer who’s wife is having a baby. The doctor is working on delivering the baby and the farmer is holding up the lantern. The first baby makes it out. And then the doctor says, “There’s another one!” The farmer is aghast and blows out the lantern. “Why’d you blow out the light?” the doctor asked. “It’s drawnin’ them!”

Supply and demand is really simple. But it’s application in the real world defies that simplicity. I think of the economy like the weather, a natural force we can always be learning more and more about, sometimes control, but ultimately must be prepared for so that people don’t get hurt. There is no such things as too much housing. If there is too much of it, people benefit with lower prices. And if we grow in a dense, efficient way, we make the most of a scarce resources, land and defy the notion that, “they aren’t making anymore.” Trying to tame the economy with mandates and limits never works, unless we look at it like a windmill and work with it.

I turn to another Bert and I routine (sadly I can’t find the audio for the one I mentioned) to answer the question, “Will we ever get to the place where everyone gets exactly what they want and need in an economy with no winners and losers?” Well, the answer is, “You can’t get there from here.”

David Neiman: Some Basic Facts on Small Efficiency Dwelling Units

On February 16th, the Construction Code Advisory Board (CCAB) will make a final recommendation on reconciling the conflicts between the land use code which sets a minimum unit size for apartments at 220 square feet and the building code that has strong minimum size requirements within those units for habitability. This issue was hotly contested and discussed. There is still some work being done to formalize the recommendation. Meanwhile, David Neiman wrote to the CCAB to point out some basic facts they should keep in mind while looking at adding some modest flexibility to the building code. 

As a follow-up to our last meeting and a pre-amble to the next meeting where the full CCAB will consider a final recommendation, I wanted to send around some background information that I think might be helpful to share with the CCAB members who will be coming to this conversation relatively fresh.

There were some persistent factual issues that came up during our meetings that would be good to clear up for the full board discussion. These ideas are widely believed, and were raised several times by multiple people. They are nonetheless incorrect. If they again come up at the full CCAB discussion I hope this information will help to put them aside so the discussion can focus more on substantive issues, less on the red herrings.

1)      Unit size and affordability.  At various times we heard skepticism that regulations that raise or lower the size of small apartments make much difference in the rent that people pay. Market survey data shows us otherwise. The figures below are from Dupre & Scott’s Oct 2016 Apartment Advisor Report. The first chart shows a direct linear correlation between unit size and rent. The second chart compares the average rent for the median congregate housing unit vs. the median SEDU. Note that the SEDU rent is over 30% higher than its smaller cousin. It’s also noteworthy that the average unit size for SEDUs is weighing in at 286sf, well above the statutory minimum. See page 7 of the attached report: TheApartment Advisor October 2016 by Dupre + Scott.

2)      Small apartments dominating the housing market: On multiple meeting members expressed a belief that micro-apartments make up an outsized portion of our new housing construction. Concerns were voiced that if it were possible to build 220sf SEDUs we might become a city where the multi-family housing stock was largely made up of ultra-small apartments. The reality is quite the contrary. Below are some statistics about last year’s housing production from page 7 of the same Dupre & Scott report:

• 15% of units were studio apartments.
• 56% of units were 1 bedroom apartments.
• 24% of units were 2 bedroom apartments.

Here’s Seattle’s overall stats for housing production citywide. Last year we permitted over 11,000 units of housing.

Here’s the permit data for SEDU permits issued citywide in 2016.  We permitted 791 SEDU units in 18 projects. This info is not as easy to gather since the city doesn’t directly track production of specific unit types. This information is gathered from the pro version of Seattleinprogress.com using keyword searching of project descriptions.  Similar data was presented in an article in the Urbanist last year, showing less than 1000 SEDU units produced in 2015.  Microhousing is a very important segment of our housing sector. It’s is the only form of market rate new construction that can directly increase the supply of affordable housing in the city by building more. This housing is in high demand and we would do well to build more of it. But it is not, by any means, a large portion of our housing production.  The kind of changes I have been advocating might increase project density by 10-15%, turning 791 units into perhaps 900 units, as a rough guess.  These are not wholesale changes but they are important ones.

Hopefully this helps.  I have some closing thoughts that I’d like to share, but my keyboard is running low on ink and I suspect my audience may be running low on patience. I will indulge you with those another day.

Regards,

-DEN

David Neiman is the principle of Neiman Taber Architects, a residential architecture firm specializing in housing adapted to the Pacific Northwest climate. David was also been a leading (and successful) proponent of making significant changes to the multi-family code

Seattle is Not a “Welcoming City”

On Monday of this week Seattle declared itself a “Welcoming City” in the face of President Trump’s actions on immigration. I don’t exactly understand what this declaration means. And local politicians are almost dizzy with excitement as they run around from place to place making statements denouncing the President’s latest moves. It’s almost as if they liked it. But Seattle isn’t welcoming, especially when it comes to new people moving into our community. City government has made every effort to block and stymie new housing production in the face of rising demand. That means higher prices and for people with less money that means suffering and added difficulty.

Many people may not agree with my approach to homeless encampments or people who are living in their cars. I think the City should build off the fact that people are coming up with their own solutions to homelessness. If a person has figured out how to gather together a group of people with tents and form a community, that’s better than sleeping in a doorway. A couple sleeping in a car on the street may not be a pleasant sight, but it sure beats the alternative of sleeping outside. Shelters don’t work for everyone and these solutions are solutions even if we many not like them. 

I’m about fed up with Seattle’s meltdown over Trump. I’m even more fed up with the self congratulatory actions of the Mayor and Council. I wrote this e-mail Monday because I hoped they might get that supporting refugees from far away while turning away and sweeping people here right now is hypocritical. Of course I don’t think my e-mail earned even a shrug. But I sent it anyway. Seattle can pass all the resolutions it wants, but until it stops taxing housing and limiting it’s production it might as well be building a big beautiful wall.

Councilmembers,

I understand you are considering a resolution regarding refugees and making Seattle a “welcoming city.” I’m not sure what that means when you and the Mayor continue to make it more and more difficult to accommodate new people in our community by throwing up more barriers to building new housing of all types throughout the city for all levels of income.

You’ll likely disagree with that characterization.

But is it welcoming to sweep people who are what I call domestic refugees? What would the national press or President Trump think about ongoing sweeps of homeless people?

What message does it send to pass your resolution while just down the road people’s homes are being towed away, their tents destroyed, and many of their possessions lost. You can do better than this.

And, as a matter of principle, passing statements about being welcoming while making it hard for people who already live here, whether in a tent or in an apartment or for a family trying to buy their first home, is at least ironic if not hypocritical.

Please include language ending the sweeps. Take it off the table. Stop towing vehicles that are people’s homes. And find ways to increase housing supply and subsidies for families that need help that don’t increase overall housing prices. Now is the time to be bold, right?

Roger–

Density’s Lament

For several years I was King County’s “Tobacco Tzar,” charged with creating, explaining, and enforcing rules and laws intended to limit the deadly effects of the leading preventable cause of death, cigarettes and tobacco. Even with all the controversy that swirled around the issue and me, we overcame opposition both within King County, public health, and from many people who thought eliminating second hand smoke was the vanguard of a puritanical purge of local culture. At a minimum, they said, banning smoking in most public places would put bars out of business (it didn’t). Through all this, there was one moment of breakthrough that stands out in my mind, something missing from todays endless fight over housing in Seattle.

One day one of my inspectors came to me with a warning notice he had issued to the Downtown Emergency Service Center’s (DESC) shelter on third. Someone in the shelter had complained that there was smoking going on in the shelter. The process, as yet untested, was that we’d issue successive notice and order documents and then eventually file an action in superior court against the business violating the new state law. Challenging smoking in the shelter was the right thing to do, and we knew this because our data pointed clearly to the fact that smoking was increasingly concentrating among the poor and especially among homeless people. We knew that meant they’d own the death and disease of the addiction as well.

It wasn’t long before the muckety-mucks were hurriedly convened and I was called on the carpet for trying to enforce the law in a homeless shelter. People from all parts of King County Government were at a big table looking at me like I was insane: homeless people smoke, they said, and there’s nothing we can or should do about it.

That was just plain ridiculous. But these people were worried about headlines and politics, the Executive at the time was on the hunt for higher office and we couldn’t have a headline that read, “County Shuts Down Homeless Shelter Over Smoking Ban.” Of course, they didn’t think about the other headline at all, “County Ignores State Smoking Law, Allows Addiction to Flourish Among Homeless.” That’s not how those people’s brains worked.

I had an idea, let me go talk to Bill Hobson about the issue. Hobson was the now legendary leader of DESC, and organization that revolutionized how homelessness, addiction, and mental health are confronted in Seattle. Before he died last March, Hobson was a leader and guru on harm reduction in the city. Hobson and I talked for a long time, well over an hour, about all kinds of things including our own lives and what brought us to our meeting. Finally he asked, “What are we going to do about this smoking thing?”

Hobson explained that he had to allow smoking in the shelter. He’d been under constant pressure from businesses and the City of Seattle to keep the shelter doors closed after a certain point. Allowing people in and out at night created problems on the street and in the shelter. Once someone was in the shelter, she was in, and going in and out to smoke would create a safety issue and more heat from the City and business about noise and activity on the street. It was an operational necessity, and Hobson said he’d pay the $100 a day fine if he had to in order to keep things as is. He had even spent money on a ventilation system. He’d just pay for the status quo, which was, at the time, better for people in the shelter than making them choose between smoking and shelter.

I didn’t want DESC’s money. I wanted people in his shelter and everywhere to stop smoking. That was our goal, and the notice and order was the hammer that had brought us together. What I proposed was that we kept enforcement in abeyance (the County never backed me up on enforcement, so it was kind of a bluff) and we’d try offering training for staff on cessation counseling and free Nicotine Replacement Therapy (NRT) to clients who wanted to quit. Hobson liked the idea, and his staff was excellent in their work helping us design a database and protocol for training, offering help to clients with non-confrontational conversational counseling, and offering nicotine patches and other forms of NRT.

That was the easy part. But how would we train providers working in the shelter and throughout DESC about this new intervention? After all most of them smoked, and most of them likely held the same view people in public health and the County did: smoking is one of the last pleasures these people have. My staff and I started putting together the training. We’d point out that wealthy and affluent people and those with jobs and insurance were quitting in record numbers. We’d point out that the smoking ban and other incentives for people who were housed and employed were making it easier to quit. We’d show them that for poor people, the corporate world provided no help, no incentives, and in fact assumed poor people would smoke. We’d show the data that if the trend at the time continued, almost all people with money and jobs and housing would quit, and their clients would own the majority of the addiction.

Then we showed them this video:

I can still remember one tough looking caseworker at the back of the room who was, in my memory, standing with her arms folded and her jaw set as I spoke at the front of the room. After the video I always kind of got a little, just a little, choked up. I saw her and the whole room relax. I explained that the tobacco industry manufactures a product that is designed to addict, keep people addicted, and generate huge profits for publically traded companies. I think we even showed stock prices and Warren Buffet’s advice to investors about buying tobacco stocks.

The tension broken, our health educators then instructed about how to intervene, offering help to clients who wanted to quit. In the next few years I did dozens and dozens of these trainings in King County and from Alaska to West Virginia, and the rhythm was almost always the same. We’d start with tension and skepticism among providers to a realization that helping their clients break a corporate driven addiction wasn’t a take away, but a compassionate addition to their efforts to improve the health of their clients and save them precious dollars and cents.

It was a satisfying thing to be part of. It felt good to lead people to a realization that what they thought was an effort to clamp down more rules on their clients — to hurt them — was really an effort of compassion for them, a real and honest attempt to fight back against a corporate effort to profit from the addiction of their clients. And there was something they could offer and do to help.

A long story, I know. But here’s the thing: I don’t see or feel anything like this in the housing discussion. And it isn’t me or the other messengers about why building more housing will lower prices. It’s because the argument about prices is a red herring, offered as feint by entitled single-family homeowners to protect the equity in their investment. You see, we’re not really arguing about economics. If we were, the argument and the fight would have been over a long time ago. It’s about money.

Honestly, there are days when I become emotionally and intellectually exhausted by this whole battle we’re engaged in. I feel like I’m living in a Swiftian satire or in a Vonnegut novel. Like with the tobacco fight, this is made worse by the fact that people that should be firmly in alignment with our fight are busy trying to compromise with the enemy. The housing fight in Seattle defies plain logic and common sense; simple and tested solutions are discarded in favor of byzantine schemes with winners and losers. And there is precious little real compassion for people who are struggling to make ends meet; various groups make their point that building more housing makes life worse for poor people by using poor people as props. Statistics and anecdotes about people struggling are used to advocate for policies that will make the lives of those very people worse.

Anyway, I had to get that off my chest. I guess the good news is that only a few people have even read this far. For all the words and discussion of this issue, it all comes down to headlines on social media. Click! Click! Click! Like! Like! Like! And the Trump obsession seems to be growing, not fading.

Gimmicky, grass roots approaches won’t turn this around. I’m still thinking through what we must do next. I’m not very good at giving up. So I’ll let you know when I think of something.