I noted in my letter about the Grand Bargain to the Mayor and members of the Seattle City Council that

If the stated problem being addressed by the [Housing Affordability and Livability Agenda] . . . effort and the Grand Bargain was housing price, we have yet to see any metric established for determining how these interventions (regardless of our skepticism) would reduce overall housing prices, the very worry that inspired the creation of the Housing Affordability and Livability Agenda Committee.

I decided to do a review of both the recommendations of the HALA Committee and the Final Framework of the Grand Bargain, looking for any sustained discussion of price or housing prices or how the ideas in the report or proposals in the Bargain would lower prices. It should not come as a surprise that I found none of these. To be fair, the HALA report mentions “price” or “priced” on twenty separate occasions. The Bargain doesn’t mention it at all. Here’s the opening paragraph of the HALA report (report) that I think captures the tone and nature of that document.

As Seattle expands rapidly and experiences massive economic and population growth, we are confronted by the reality of more people chasing a limited supply of housing than ever before in our history. This, combined with a booming regional housing market, fewer and fewer federal and state funds dedicated to subsidized housing, and widening income inequalities locally, nationally and globally, have created – and will likely sustain – a housing affordability crisis unlike any Seattle has experienced since the Second World War. At the same time we are constrained by outdated policies and historical precedents that are no longer viable for the long-term health of our city. Some of the challenges are intrinsic to Seattle, for example tight limits on housing supply epitomized by the fact that at present almost two-thirds of our urban land is restricted to Single Family zoning.

To me this mostly gets it right, but what follows in the Report doesn’t seem to substantively deliver answer to the fundamental question raised by this paragraph – what will we do to lower housing prices? The syllogism of the paragraph is worth exposing for review.

Seattle is growing
More people chasing limited housing
Less funding for housing subsidies
More income inequalities nationally
At the same time housing supply is constrained by bad policy
Therefore we are going to have a sustained housing affordability crisis

What is glaring here is the complete absence of clearly defining how price and affordability relate. Instead, there is the sloppy assumption that, I guess, “Everyone knows what we’re talking about.” But do they? Almost every basic discussion of how to define inflation usually uses the term “too many dollars chasing too few goods.”

I appreciate the nod to the economics textbooks. But the paragraph is emblematic of how our discussion confuses “price” with “affordability,” two entirely different though related concepts. The confusion feeds an ideological “crisis” that means, in Seattle, we can’t simply accept the idea that housing prices are related to supply, so we invent an “affordability crisis” to cope with the dissonance between the reality of supply and demand and the need to address “equity.” Something we don’t need to do if we listened to Paul Krugman, who points out regulation limits supply and increases prices.

When we look at the logic of the first paragraph of the report, and simplify it even more it goes like this: lots more people, too few housing options, and that means an “affordability crisis.” But price is an objective number and affordability is a subjective relationship to price; price is a number, neither good nor bad, but whether that price is affordable is a much more complicated question and hard to measure. Think about it in an analogy to another quantitative measure, height. Johnny is eating lots of food, his parents are tall, Johnny is going to grow up to be tall,  and therefore Johnny is going to have a problem getting along with other kids in school.” Huh?

The affordability crisis is a non sequitur in the logic of the housing discussion. Why? Because if we followed the logic to where it really leads, we’d come out with a pretty simple solution to the scarcity being described: Build more housing to meet the housing needs of all the new people. Instead, the word price and the outward and qualitative empirical symptoms of inflation in the market are put into a blender and turned into a smoothie called the “Affordability Crisis.” And just like we don’t know what Johnny’s relative height means for his future unless we go deeper into other data, saying he is going to have trouble with other kids in school is just way too many leaps.

But leaping over logic in politics, as in nature, is a survival mechanism. Voters say we’re having a housing crisis so we must be having one. What’s the solution to this crisis? The answer is lots of programs, ideas, proposals, and schemes that various groups claim will address the problem but also support important political and economic interests, but not address the underlying issues of where the prices we don’t like are coming from. Non-profits can claim through the Grand Bargain that greedy developers are paying their share, and developers can be told that they are getting more development capacity. Never mind that none of this addresses overall housing price.

Like I said before, this confusion of terminology and data doesn’t come as a surprise. But it is still disappointing that the moment of pulling together such a wide array of local leaders and people worried about housing was lost to politics rather than having a comprehensive and quantitative discussion about housing prices and how to effectively address them. Sure, lots of numbers were pushed around, but none of them had anything to do with measures that would have a beneficial impact on price, only how many units should be cranked out. It’s as if having concluded Johnny will be vertically challenged, City leaders unveiled its solution: give Xbox Johnny an XBox for Christmas! That solution won’t address his height relative to his colleagues, but it’s sure to make him feel better this holiday season.

Below, I have every instance of the word “price” or “priced” in the HALA Report with a page citation. Many of the sentences are accurate and even bold statements in the broader context, especially the connection of housing price to parking. One important note is the section that explicitly ties seemingly small or bureaucratic items like permitting and utility hook ups to housing price (pages 38-39). Again, great comments by themselves, but not part of a red-flashing-light legislative agenda like the Bargain. 

Leslie Brinson Price, Mayor’s Office of Policy and Innovation

Page 1

As rents and prices rise, individuals and families are too frequently displaced from their homes and or pushed out of Seattle altogether.

Page 5

In response to this urgent need, in September 2014, Mayor Ed Murray and the City Council adopted Resolution 31546 calling for the development of a Seattle Housing Affordability and Livability Agenda (HALA) to support development and preservation of a diversity of housing types at a broad range of prices for Seattle residents over the next ten years.

Page 10

Household size is considered to correspond to the size of the housing unit (1 person for 0 bedroom units and 1.5 persons per bedroom for other units), which is the method used by HUD to adjust income limits for subsidized housing for purposes of determining affordability of rents or sales prices.

Page 10

R.2   Enact a Real Estate Excise Tax (REET) for Affordable Housing

Washington’s REET is an excise tax imposed any time a property is conveyed to a new owner. It is assessed on the property seller, and levied as a percentage of the sale price . . . This additional REET capacity, which the HALA recommends be 0.25% above and beyond the existing State cap, would allow local jurisdictions to capture a portion of the appreciation of real estate prices upon the transfer of property and reinvest it in affordable housing.

Page 16

Parking quotas act as density limits, inflate the average size and price of housing units, and prevent some smaller properties from being developed altogether.

Page 29

P.4    Engage Private Owners with New Financing Tools and Technical Assistance

Some owners who operate rental housing that is currently priced for lower income tenants are faced with a tradeoff between raising rents and making much needed improvements, or selling their property due to an inability to obtain needed financing when major repairs are required.

Page 32

Housing prices in Seattle have risen to such astronomical levels that city funds dedicated to allowing at least a few low-income households to reap the benefits of homeownership are stretched extremely thin.

Page 35

RP.3 Improve Interdepartmental Coordination

To build in Seattle, developers must first obtain permits from at least 3 departments of city government. Running the permitting gauntlet commonly takes 10 – 14 months from permit application to building permit issuance for a complex multifamily development, and adds thousands or tens of thousands of dollars to the cost of each new dwelling. Each of the permits required has a legitimate purpose, but the could dramatically speed housing construction in Seattle, lower its cost, and temper housing prices by better coordinating the way these public agencies process permit applications.

Pages 38-39

Uncertainty is a cost—a damper on investment—and it raises the price of housing.

Page 39

Three-quarters of survey respondents would be comfortable with increased density if housing prices were more affordable.

Appendix C

Issue: Parking is a key factor in the cost of building new housing, the supply of housing and therefore its price, and in the livability of neighborhoods.

Parking requirements can act as a density limit and inflate the average size and price of housing units.

Appendix F-6

Increase the number of homeownership units that are affordable to homebuyers at or below 80% AMI. With housing costs increasing rapidly, actions should be taken to create affordably priced homeownership units that will keep low-income homebuyers in the City.

Appendix F-16

Opponents offered that rent control has been consistently proven to be a failure, would not add to housing supply or affordability, and is a price control that will lead to shortages and thus higher rents.

Appendix G

Proponents acknowledged that many major U.S. cities have some kind of assistance for homebuyers at these income levels and that moderate income homebuyers are being priced out of Seattle.

Appendix G

Committee members also raised that zoning flexibility, which could result in smaller homes at lower price points, might be the best approach at this time to support moderate-income homebuyers.

Appendix G

The Committee rejected this proposal for a number of reasons, including concern that the strategy would amount to a government taking of a property right and skepticism that the City could act quickly enough or offer a competitive price

Appendix G

CPI: Consumer Price Index

Appendix H