What is Affordability?

In the weeks ahead we’ll be delving more into research about how the City is establishing what it calls “housing need.” The foundation of almost all the discussion over the last several years has been the assumption that housing is affordable when it consumes 30 percent or less of a household’s income, discounted for some percentage of Area Median Income (AMI). Therefore, housing need is expressed as a ratio of housing cost to income: “My household earns $88,000 annually, which means we can afford $2,200 in rent per month.” Anything more than $2,200 per month means I am cost burdened and any less means I am potentially “downrenting” or “overhoused,” terms that express that I am essentially underpaying for my housing.

There is something satisfyingly simple about the way the City and other government entities like the Washington State Commerce Department define what housing need is at any given time. Just take census data for household income then subtract the number of units priced at 30 percent of those household incomes. Voila! That’s how many units we need. But Michael Stone a professor from the University of Massachusetts Boston has challenged this way of defining affordability.  In his paper, “What Is Housing Affordability? The Case for the Residual Income Approach,” Stone points out,

Affordability is not a characteristic of housing—it is a relationship between housing and people. For some people, all housing is affordable, no matter how expensive it is; for others, no housing is affordable unless it is free. “Affordable” housing can have meaning (and utility) only if three essential questions are answered:

1. Affordable to whom?
2. On what standard of affordability?
3. For how long?

Intuitively we know what this means. In the past, when I have considered household income and what I can “afford” I realized that I didn’t want to pay that much. At other times, if I heard what I could “afford” I would have been stunned, realizing that the standard of 30 percent of my income, even when discounted based on my relationship to median income, was still too much.

Quantitatively, the problems with the Housing Cost Income Ratio (HCIR) are myriad. First, nobody in the housing market, even poor people, make decisions about housing based on the standard used by government to assess their need. So almost immediately, the housing market is out of sync with the normative standard being used to measure the problem. Normative means “you should be paying X for housing.” Some of us are paying too much, for sure, but that also means some of us aren’t paying enough.

But for people struggling to make ends meet, this takes on an outsize importance. Government is determining the “problem” based on income to rents at an arbitrary level of 30 percent of gross (before taxes and other expenses) income. Stone goes on:

Because ratios are pure numbers, they can be compared across time and space and thus are susceptible to being reified as universal and lawful. Such “laws” then become legitimated as appropriate indicators and as the basis for normative standards . . . Once the ratio measure is accepted as the appropriate indicator, ipso facto, the standard must be a ratio or a set of ratios. Yet the notion that a household can adequately meet its nonshelter needs if it has at least a certain percentage of income left after paying for housing implies either that (1) the lower the income of a household, the lower the amount it requires for nonshelter needs, with no minimum whatsoever, or (2) that the normative ratio must diminish with income, all the way to zero below certain incomes. Further, since an affordability standard is intended to measure whether housing costs make an undue claim on household income in relation to other needs, basing such a standard on what people actually pay provides no way of assessing whether they are in fact able to achieve some minimum standard for non-shelter necessities.

Just because I pay 30 percent or less doesn’t mean that my housing costs aren’t consuming so much of my income that I can’t meet other expenses; and conversely, if I am paying more than 30 percent, I may still be able to cover other expenses because they are fewer or non-existant. Take the case of a single mother with two kids who is paying 30 percent of her income compared to a single person who is paying 40 percent. The parent probably has many more household expenses than the single person. While the current statistical regime tries to account for this by adjusting the standard for household size, it probably doesn’t much help the practical problem: the single-parent has many more expenses that draw down limited earnings.

Finally, the methodology of calculating need is deeply suspect. Taking one set of census data and subtracting it from another data set assumes that people should sort themselves into housing according to the HCIR. In a way, this implies that people who aren’t paying enough rent should pay more, while those who pay more than 30 percent should pay less. It’s as if local, state, and federal government could declare housing problems over when we achieve a perfect state of equilibrium, with everyone paying exactly 30 percent of their income for housing.

In the end, the problem with all of this is pressure to tax the building of new housing to build new units priced at 30 percent of monthly income with the appropriate discounts for AMI; i.e. everyone who earns $44,750 in Seattle should pay no more than $1,198 per month. Nevermind that many households could pay more and some might not even be able to afford $900 per month. Clearly if Seattle is going to solve the housing problem it needs to figure out what that problem is first, and the current standard hasn’t done a very good job of doing that. Why would we continue using it as the basis for determining need and imposing taxes to eliminate that need? It’s time for new thinking and methods.

Regulatory exactions! Linkage fees! Development charges! Oh my!

The Seattle Lawyer’s Chapter of the Federalist Society is hosting a seminar on the proposed linkage tax on Thursday of this week. Here are the details:

Featured Speakers:

Global Interest in Seattle Microhousing

China Central Television, or CCTV, featured Seattle’s microhousing phenomenon last week. The online and broadcast programing on CCTV reaches a wide audience in China and Asia. According to their website. CCTV

Is constantly updated with top news from China and around the world. Offering new reports, live and on-demand video content and searchable archives, CCTV.com is available in Mandarin, English, French, Spanish, Arabic, Russian, Korean, and Chinese ethnic minority languages.

We were happy to share the microhousing story, it’s promise for a product that allowed the market to build an affordable option for people needing housing in Seattle’s most active and expensive neighborhoods, and how the City Council legislation last year now makes the product almost unbuildable. The global attention to Seattle’s former leading role building the product is just a reminder of how innovative and important microhousing is and why it is such a disappointment the the City Council failed to listen to our messages and chose to side with neighbors looking out for their own narrow interests.

 

Another Neighbor for Microhousing

I have had to write about the “angry neighbors” many times here and elsewhere. These are the folks who talk about how renters don’t have an “investment” in their “established neighborhood.” But now and then there is a glowing bright spot not just of tolerance but understanding. At Capitol Hill Seattle Jason Weill writes a very honest and smart take on his neighboring microhousing building, the Altura.

My neighborhood retains its class diversity. I don’t want to live in a monoculture. At the Seattle Night Out party my building hosted in August 2014, I met neighbors from around my block including several Alturra residents. I appreciate that my neighborhood can attract people young and old, rich and poor, with many different occupations. aPodments are one way to keep rents affordable for more people, and Alturra has attracted a surprisingly broad mix of students, full-time workers, and recent college grads saving up for their first real apartment.

In time I think we’ll look back on the micro-apartment trend and laugh at the worry it stirred up. These buildings are going up to cash in on a hunger for inexpensive housing at a time when market-rate buildings are in short supply. As of 2013 the city had added 15,000 jobs year-over-year while only 9,000 housing units were expected to become available for each of the next five years. With Amazon on pace to have enough office space for 71,500 Seattle employees by 2019, the math favors landlords and builders today. Ten years from now I expect that we’ll have a more resident-friendly housing market once all the construction is complete and companies have tapered off their hiring.

There you have it. Had our City Council listened to our concerns and considered the fact that skeptical neighbors, even angry ones would eventually get beyond their worries once projects were built and full of fellow human beings. And Weill goes on to show what most people intuitively understand if they think about it enough: rents change over time, and even go down.

There’s a sense that rents can “never” go down in Seattle, but I’ve seen it firsthand in 2008–09 when Washington Mutual had collapsed and when tech companies put a hold on hiring. A rent drop can and will happen again. Maybe these micro-apartment buildings will eventually be pared down to have fewer apartments by knocking down some or all interior walls. With the most modification, aPodments can become groups of townhouses — the last housing innovation that caused outrage in Seattle’s residential neighborhoods. Alternatively, like so many residential buildings that have gone up here in the past 120 years, they can be sold, knocked down, and rebuilt in a new developer’s image. After all, this is Seattle, where we’ll get it right eventually.

Weill still shows a bit of bias with his reference to “real apartments,” but all in all he gets it. This editorial is a welcome read. Maybe the Mayor’s Housing Affordability and Livability Agenda (HALA) Committee will listen to Weill and neighbors like him more than the angry ones.

Yes to Urban Rest Stop in Ballard

This is the letter of support we sent in response to neighborhood resistance to an Urban Rest Stop in Ballard. Neighborhood opposition to this service is unconscionable and if you have moment please register your support for the Urban Rest Stop. Email Bruce Rips at Bruce.Rips@seattle.gov.

January 5, 2014

Bruce Rips via e-mail

Re: Permit # 3016841 Urban Rest Stop Project in Ballard.

Dear Mr. Rips,

I am writing in support of the Ballard Urban Rest Stop. This project should go forward as soon as possible to serve people in the Ballard Neighborhood who are struggling with lack of housing.

It’s pretty simple. Here is what the Urban Rest Stop does:

The Urban Rest Stop provides a clean, safe and welcoming facility where individuals and families can come and use restrooms, shower and laundry facilities. All services are provided at no cost to patrons.

Entitled, frightened, and angry neighbors have opposed microhousing and other projects welcoming new people into our neighborhoods for the same reason they are opposing the Urban Rest Stop: because they are worried about their own financial interests and about new people who are different from them.

Here’s what Jon Scholes head of the Downtown Seattle Association and a neighbor of the Downtown Urban Rest Stop:

Scholes says Ballard can take comfort from downtown’s experience with its Urban Rest Stop. “I live a few blocks from it myself,” he says of the hygiene facility. “Our general perception is they’ve been good neighbors.”

Whatever potential issues with the Urban Rest Stop proposal can be addressed with the right resources and there are many in our community that would be glad to collaborate to resolve any legitimate issues.

We look forward to a speedy resolution to this appeal so that families in Ballard who need a place to get basic services and support can get what they need as soon as possible. We need to welcome everyone who wants to live in this city regardless of income or status. The Ballard rest stop helps do that.

Sincerely,

Roger Valdez
Director