This is my email to State Senator Guy Palumbo and State Senator Mark Mullet who wrote an important opinion editorial in the Seattle Times over the weekend. I’m hoping their join our reform efforts not for more and more and more money, but sensible, fair and efficient reforms. Palumbo and Mullet are Democrats. Will they work across the aisle on this issue? We’ll see. Up to this point, only Republicans seem to understand the problem, too many rules and fees and taxes, and the solution, fewer rules and fees, and taxes on housing. 

Dear Senator Palumbo and Senator Mullet,

Thank you for your opinion editorial in the Seattle Times.

The solution for housing scarcity is certainly not taxing jobs. Thank you.

But what is the solution? More money?

Since 2008, Housing Trust Fund (HTF) projects have built 9655 units at a cost of $2,060,894,710. The HTF funded $599,496,831 of those construction costs, about 17 percent. The average project over that time had about 39 percent of its funding from the HTF, the rest coming from other sources including Low Income Housing Tax Credits (LIHTC).

Over that period, King County received about $130 million of the HTF allocation, about 31 percent and Seattle received about $61 million or about 17 percent. This trend has continued, with urban areas receiving $40 million from the HTF with half of that going to King County. Very little, about $4 million went to home home ownership programs. Meanwhile, rural Washington got $17 million from the HTF about 30 percent.

What’s going on?

Some would argue that since population is concentrated in King County it should get a third of the funding. But consider where the greatest housing needs in the state can be found. That need is in rural Washington. Consider Grays Harbor County.

As I have been doing research on the disparity of the distribution of HTF dollars I’ve been looking at years of data, including top line numbers on Grays Harbor compared to King County.

	Grays Harbor	King
Poverty	16.60%	10.70%
Area Median Income	$48,517	$84,897
60% AMI Hourly	$14.00	$24.49
Unemployment	6.50%	3.40%
Food Assistance	22%	8%
Housing Production*	11.6	2.7
Housing built before 1980	65%	53%
Housing Trust Fund (2008 to 2018)	None	$130,038,755

* Number of residents per units produced (OFM)

I hope you have the patience to stick with me here. So what’s going on?

Housing in Seattle and King County is getting more and more expensive. Over this 10 year period per unit costs have gone up in Seattle from about $221,000 per unit to about $369,000 per unit. One project in Seattle proposed by Plymouth Housing will build and open 84 studio apartments at 501 Rainier sometime in 2021 for a total cost of about $31,000,000 or about $369,000 per unit. A rehabilitation project at Magnuson Park, Building 9, in Seattle will create just 148 units, someday, for $73,000,000 or about $493,000 per unit. Here’s what I wrote about Building 9 and Grays Harbor County:

For scale, consider that the passed and then repealed tax on jobs would have raised about $47 million per year, about two-thirds of the cost of this one project. Another stick to use would be my analysis of housing on the Peninsula where over the last ten years housing paid for by the Housing Trust Fund averaged about $120,000 per unit. For $73,000,000 that would mean about 608 units in Grays Harbor County, enough to reach more than 25 percent of the 2,000 units local activists are calling for there.
Why are these costs rising so rapidly in Seattle and urban King County? Here are the words of a board member of the Capitol Hill Housing Improvement Program, known as CHIP, expressing frustration over my relentless criticism of their rising costs:

A lot of people focus on numbers, but we should focus on value of our buildings, including their sustainability and their effect on the community. Rob mentioned that to the extent that there are cost differentials, we could give examples of why it might be more expensive and that those things should be changed (ie government regulations). Rob proposed that comparing market rate and affordable housing is like comparing apples and oranges (emphasis is mine).

Yes, I admit it. I focus on numbers. Numbers aren’t Republican or Democratic. You can compare apples and oranges, they are both fruit, and the apples in Seattle are a lot more expensive than the oranges in Grays Harbor County. The reason is overregulation. Even powerful non-profit housing developers, in meetings they think are private, agree with the people I work with in market rate housing: there are too many rules.

But here’s another number: 26,000 households. This is the number touted as those households at 30 percent of Area Median Income (AMI)  that are “cost burdened,” a term you reference in your editorial. Those households earn about $20,200 per year, and should pay about $500 a month for housing. If they pay 50 percent, the typical definition of cost burdened, they are paying about $840, a difference of about $300. If we just gave cost burdened households $300 a month (I think the 26,000 number is way too high) it would cost about $93,000,000. The total cost of building non-profit subsidized housing in Seattle averaged about $60,000,000 a year, probably a conservative number.

The point is that we could eliminate most if not all the cost burden for people who already have housing, with cash. Why would we spend $9,594,000,000 — 26,000 X $369,000 — to build those households units, years from now? We wouldn’t. That would be irresponsible. And it would not be compassionate, fair, nor efficient. Programs like the Multifamily Tax Exemption (MFTE) program could pass on modest tax reductions to new and existing housing (if your colleague Speaker Chopp would allow it!) to substantially reduce an eliminate cost burden with rent restrictions. Taken together, these tax reductions and direct cash subsidies could wipe out cost burden by the end of next year. This would also prevent many households from missing rent payments and falling into homelessness.

Back to the powerful non-profits.

Why don’t they work with us to eliminate those, lower the cost of market rate housing which would lessen demand for subsidies and allow them to build more units and house more families? See above. The legislature is all to willing to find more and more and more money. And that’s where I depart from you both. We don’t need more money. Really. We don’t. We don’t need imaginative or new taxes or sources of revenue. We don’t. We need fewer rules and a more efficient and fair system of using the subsidies we have. 

Please work with us to stop the relentless search for revenue, find ways to reduce barriers to production, and produce a more fair, efficient, and compassionate system of solving the state’s housing issues. People are suffering in rural Washington while the non-profits in Seattle are doing nothing to hold the Seattle City Council and Mayor accountable. Every bad land use and housing decision by Seattle, like taxing jobs, illegal mandates for inclusion and fees, and now impact fees, means higher hurdles for housing there, more demand for money and fewer dollars for other people in the state. Now they are coming to you for even more money. Don’t forget that Seattle’s Mandatory Housing Affordability (MHA) program is an extortionary scheme that will raise prices and is illegal under state law (see especially RCW 36.70A.540(c) and RCW 82.02.020); we’d urge bipartisan to preempt cities in Washington from Mandatory Inclusionary Zoning.

Again, numbers aren’t Republican or Democrat. Are you willing to work across the aisle to fundamentally reform this system? I am ready to meet and work with you anytime (see attached). Senator Warnick has taken leadership on this issue. And next session, no matter what happens at the ballot box, I believe we can do this, together, in 2019 in the Senate. I’ll repeat the chorus of your article in the Seattle Times:

We need to think creatively to find results-driven solutions. We also need to work collaboratively with the business community to ensure that whatever solutions we pursue work for all concerned.

Above all, one thing is clear: Doing nothing and allowing this crisis to worsen is not an option.

Amen!

Roger–
PS — All my numbers are evolving based on ongoing research and public disclosure requests. I believe the Joint Legislative Audit and Review Committee’s work on this topic will help give a better understanding of non-profit costs. We are also doing our own study using a consultant.

 

Attachments: Housing Reform Ideas and Grays Harbor County 10 Year Plan to End Homelessness