June 20, 2016

Re: Mandatory Inclusionary Zoning Proposal in PLUZ Committee on 6/20/2016

Mayor Murray and Councilmembers,

Attached you will find a three page list of process hang ups, rules, regulations, and code language that each add time and cost to the production of housing in Seattle. Each of these is a solvable challenge and impacts the production of all kinds of housing, both market rate and subsidized, throughout our city.

Taken together, all of these problems are creating what is becoming a crisis in housing production. Yet City staff, the Mayor, and the City Council are putting all their energy and time into the proposal you will consider this today to impose Mandatory Inclusionary Zoning (MIZ), and almost no effort into addressing these serious issues that are resulting in higher housing prices.

Mandatory Inclusionary Zoning does not incentivize housing production, but creates additional costs for construction to take advantage of upzones, and it reduces rent revenues from the required rent restrictions. In lieu fees also push up the price of for sale housing. These increases and losses will make many projects infeasible.

Additionally, because of legislation the Council has passed and the many problems cited in the attached document (e.g. the increase of set backs for power lines from 10 feet to 14 feet), much of the additional Floor Area Ratio (FAR) that is part of the so called “Grand Bargain” is of no value and can’t be used to offset costs and lost revenue created by the MIZ proposal.

More broadly, this proposal will not improve overall housing prices in the city of Seattle. It will do the opposite. Because you are repeatedly taking actions to slow and reduce supply (e.g. last years low-rise legislation, the elimination of microhousing, reduction of single-family housing production in small lot legislation, abutting lot legislation, etc.), make operating buildings more challenging, and failing to address serious issues like the definition of frequent transit service, you have made it more difficult for housing producers to keep up with growing demand. That’s why housing prices go up.

By forcing projects to build more FAR, restrict rents, and assume more costs in additional fees you’ll create some additional rent restricted units. But those units will be paid for by higher rents and prices in the balance of housing produced, not in lost profits. That means higher overall prices. And judging from the City’s past performance on these issues, what will result from any ensuing outcry from the public will not be an elimination of barriers to production but more restrictions, rules, regulations, fees and taxes. You will be putting us on course to be the next San Francisco.

Lastly, the legislation you are considering has serious legal problems. State law is abundantly clear that inclusionary housing programs must be voluntary and that there must be a fair exchange of the value of private benefit with public benefit; MIZ programs cannot make projects infeasible. The City also can’t create what amounts to a tax on housing production nor can it impose what amounts to an impact fee. As a matter of process, we are not a party to your agreement for this legislation (see page 3 which states, “all parties agree to develop and consider options.”), in fact we have been completely and repeatedly ignored in our request for information about the numbers behind this legislation (see attached).

And that leaves us with the fact that this legislation, too, has no numbers. This puts the City at risk of failing to meet proportionality requirements in State law. While the City and some advocates have been congratulating themselves on the innovative nature of this proposal, nobody has even seen the assumptions behind it. You’re considering legislation that is essentially a blank check: “Trust us, we’ll do the math later.”

But it isn’t too late. We are only knee deep in The Big Muddy at this point. We would ask that the Council do nothing until City staff engage the wider development community and demonstrate the fair exchange of value between increases in FAR and fees and rent restrictions. Let’s see some numbers. Unless and until we can see numbers and that the imposition of this proposal won’t result in creating more challenges to housing production that lead to higher prices, we simply can’t support it. And please spend more of your time addressing the real issues that impact and slow housing production and result in higher housing prices.

Thank you,

Roger Valdez
Director