Not a Plan Yet, but a Committee to Plan

We’ve been calling for a comprehensive housing plan from the Seattle City Council, including with our video and petition. For too long the Council has taken a piecemeal approach to housing and land use and has largely relied on regulations, rules, fees, and taxes which simply add costs to housing, reduce supply, and ensure higher housing prices. But last week we got a draft resolution from Councilmember Clark’s office proposing a committee. We are working on a response to the resolution. Things have to start somewhere, and this is the first step. We’d like to get your thoughts on the resolution. What do you think? Any ideas? Let us know. Send me an e-mail at roger@seattleforgrowth.org

A RESOLUTION concerning the development of a Comprehensive Housing Strategy for the City of Seattle and calling for establishment of a Comprehensive Housing Strategy Advisory Committee that would be jointly appointed by the Mayor and Council.

WHEREAS, the availability of housing throughout Seattle is integral to the health and well- being of residents and to the vitality and vibrancy of the City; and

WHEREAS, the City is experiencing strong economic growth that has fueled the demand for rental and homeownership housing for households of all income levels; and

WHEREAS, the Mayor and Council desire to ensure that the growth and vitality occurring in the City translates into opportunities for high quality housing options for all its residents; and

WHEREAS, according to the American Community Survey (ACS) 5-year estimates 2006-2010, the households with the greatest need for assistance in accessing affordable housing today are those with incomes at or below 80% of AMI; and

WHEREAS, there are currently 321,700 housing units in the City, and it is expected that the City will add 70,000 new units over the next 20 years; and

WHEREAS, of those 70,000 new units, it is anticipated that more than 40% or 27,000 units will need to be affordable to those at or below 80% of AMI, assuming income levels of households living in Seattle today remain essentially the same; and

WHEREAS, the City has a variety of existing programs and policies that assist in providing housing affordable to households at or below 80% of AMI including: The Rental Housing Production and Preservation program; homeownership assistance programs; rental assistance programs; the Multi-Family Tax Exemption (MFTE) program, the Incentive Zoning Program, and others; and

WHEREAS, these existing programs and policies are unlikely to provide the number of affordable units that will be required to meet the future affordable housing needs of households across the City; and

WHEREAS, in 2013 the Council adopted Resolution 31444, which set out a work program for reviewing affordable housing programs and policies including the Incentive Zoning Program; and

WHEREAS, pursuant to Resolution 31444, the Council has commissioned reports looking at best practices used nationally for increasing the availability of affordable housing in an effort to identify new programs or policies or revisions to existing programs and policies that could increase the availability of affordable housing in the City; and

WHEREAS, as a result of this work, the Council will make policy decisions in the Fall of 2014 regarding the Incentive Zoning Program and other affordable housing programs that will be incorporated in the proposed Comprehensive Housing Strategy described in Section 1; and

WHEREAS, the City is in the process of reviewing and updating the Comprehensive Plan, including the Housing Element of that plan, which will include goals for the availability of affordable housing across the City over the next twenty years; and

WHEREAS, the Planning Commission produced a white paper entitled “Family-Sized Housing An Essential Ingredient to Attract and Retain Families with Children in Seattle” detailing needs and potential solutions for family housing; and

WHEREAS, the City will soon begin planning efforts for the next Housing Levy that provides significant funding for the preservation and production of affordable housing and is anticipated to be put on the ballot in 2016; and

WHEREAS, the City could use these efforts as the foundation for the development of a Comprehensive Housing Strategy that would: project likely housing development over the next 20 years; clearly identify the current and projected affordable housing needs over the next five to ten years; the ability of the existing programs and policies to meet those needs; the estimated gap(s) that exist in meeting those projected housing needs; and recommendations for new or revised programs and policies that could help fill the gaps and meet the City’s housing needs over the next five to ten years.

NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF SEATTLE, THE MAYOR CONCURRING, THAT:

Section 1. The Council requests the Executive to work collaboratively on the development of a Comprehensive Housing Strategy that will seek to support the overall development of housing in Seattle and ensure the availability of more affordable housing for the residents of the City over the next five to ten years.

Section 2. To assist with this work, the Council proposes that a Comprehensive Housing Strategy Advisory Committee be jointly appointed by the Council and Mayor. This advisory committee would be supported by the staff of the Office of Housing, Department of Planning and Development and other appropriate city agencies. The work of the advisory committee should be informed by the recent consultant reports commissioned by the Council, as well as the other studies that have been done by other jurisdictions looking at strategies for increasing the availability of affordable housing. At a minimum, the strategy should include:

• current and estimated development of housing units, as articulated in the City’s Comprehensive Plan;
• current and estimated needs for affordable housing;
• current and estimated funding for housing programs and expected production from such funding;
• existing programs or policies and expected availability of housing from such programs;
• recommendations concerning new programs or policies for housing production and preservation and/or revisions to existing program or policies and expected availability of housing from such recommendations.

Section 3. The Comprehensive Housing Strategy Advisory Committee should complete its work and issue a report to the Mayor and Council by March 31, 2015.

 

On the Radio: Funding, Incentive Zoning, and Rent Control

As I touted in a previous post, I’ll be on the radio waves tomorrow morning as a guest on the Rental Property Coach Show. But if you’re like me and don’t have an AM radio, or maybe you want to sleep in because you’re exhausted after ringing door bells for Jess Spear all day today, you’ll appreciate these four links. The show is divided into four sections.

• Part 1: Where do housing subsidies come from; Why Incentive Zoning doesn’t work; and, Scandal! 
• Part 2: No “Workforce Housing” crisis; Pixie dust and is there really a rent crisis?; and, Costs are rising faster than rents.
• Part 3: What’s wrong about rent control?; Two ways out of the price problem, controls or supply; and What about Ballard?
• Part 4: Prices change; Lack of supply hurts poor people the most; and Watch the video and sign the petition.

Thanks to the Residential Housing Association for giving us the time, it was a great opportunity to unpack these ideas. Take a listen to one or all of them.

On the Radio: Housing, Growth, and Rent Control

Today between 1 and 2PM I’ll be on the “Rental Property Coach” radio show on AM 1590 talking about housing and development and, very likely, rent control. The show is recorded at this time and then broadcast on Saturday morning.

We are able, however, to take calls with questions or comments. If you have questions or thoughts about housing, growth, and the idea of rent control in Seattle, give the station a call.

You can call in any time between 1 – 2 pm at 1-866-485-1590.

As a reference point, check out two recent posts about rent control here, and here.

I will post the show’s air time and a link to the full show later.

 

Rent Control? What About Cost Control?

Yesterday, 43^rd Legislative District Candidate Jess Spear made a case for rent control.  We’ve already explained why rent control is inflationary, and a bad idea whether it is imposed by the City Council or a Roman Emperor. But how fast are rents rising? And what will make them go higher? What effect would rent control have if it took effect?

This post relies on data put together by real estate data guru Mike Scott of Dupree + Scott. The data I am citing was created for the Downtown Seattle Association (DSA) and for articles in the Rental Housing Association (RHA) newsletter.

Some people out there will rule this data out of bounds because it’s biased. That’s fine. I’ve been transparent where it came from. I am happy to see other data if it exists. My point is to inject some data into a largely emotional discussion about rents.

According to figures from the DSA, rents in Seattle increased about 5 percent per year on average since 1997. In some years it didn’t go up at all. Other years rent went down. Yes, rents go down.

Keep in mind that the increase in an individual’s rent often doesn’t increase annually; instead, it often has periodic jumps. For example, if I pay $900 a month in rent, my rent might not go up for three years; then it might increase by $150. That’s a one-time increase of 15 percent, but during my time in the apartment it’s about 5 percent per year, consistent with the market.

It still might sting. But my wages and prices for everything else probably changed, too. For someone who just lost a job, getting hit with that rent increase adds insult to injury. For others who got cost of living adjustments over the same time, it might be manageable. It all depends. I am not taking away from the challenges people face, but I am also trying to point out, that on the whole, rents are keeping pace with most other prices and wages.

According to Mike Scott, in the RHA newsletter, rents tracked up at just over 3 percent in King County, roughly the same rate as inflation if we discount 2009, which had negative inflation. But what about operating expenses faced by landlords?

Between 2000 and 2013 collected [rent] revenue went up 3.7% a year while operating costs rose a little over 4% a year in King County. It’s never great when costs climb faster than revenue.

What Scott’s numbers show is that rent is tracking up, and it changes, going up and down over the years too. But the average rents are not climbing much faster than inflation and they are consistent in their climb; rents, in general, are not a volatile price.

But you have to keep in mind that costs to operate apartments are going up as well. According to Scott,

In 2012, taxes and utilities consumed 43% of total operating costs. Ten years from now they would consume 50% of total operating costs. After that, taxes and utilities continue to eat up a larger share of total operating costs every year.

So the gap between being rent revenue positive and breaking even is closing every month. That means at the current rate, without something changing, those lines will cross, and costs will exceed rent revenue. When I shared this fact on Twitter, Dominic Holden of the Stranger, Tweeted back, “Cry me a f….n’ river.”

Holden was expressing the dominant narrative that landlords have oodles of money and can afford reductions in rent revenue (he was also referencing an important American standard). But the idea that being a landlord means jacking up rents isn’t consistent with the data. In fact, market conditions being what they are have kept rents from increasing at the same rate as operating expenses. When you put that pressure on rents together with dwindling supply you have a recipe for inflation in the housing market.

All of this taken together means that rent is not rising too much higher than inflation. While one time rent increases are painful, in general they don’t happen every month or every year. When increases are averaged out over time they are about 3 to 5 percent, while general inflation is  about 3 percent.

However, the costs to operate housing–especially utilities and taxes–are rising faster than rents over all, putting more pressure on rents. Add scarcity created by lower supply and increasing demand and the stage is set for rents climbing even faster and more frequently. That’s bad for landlords, but even worse for renters.

Then why not cap increases? Why not just impose controls on rents? Rent control makes no sense because the costs to operate will still keep rising. And if we don’t build more housing or make if we make it more difficult to, price pressures will increase. Even if every unit in the city is controlled, the point will come when hard expenses will simply exceed rents. Investors won’t build housing because they would get any return — they’d actually lose money.

Rent control would have to have cost controls too, which means wage freezes and freezes on tax collections and utility payments. Operating a multifamily apartment building isn’t free, and the expenses paid for taxes, insurance, maintenance, and an array of other fixed and unfixed costs for services can only be paid with rent revenue. And there are people who make their wages providing those services; do we expect them to take a pay cut too?

This is why rent control is folly. If we build more housing, we force competition between landlords to entice renters to sign a longer lease with a free month of rent; we can also eliminate the rules and limits that make it difficult to operate a rental property. We can can also expand the the Multifamily Tax Exemption (MFTE) Program which had demonstrated success. This is how we eliminate the pressures on price created by scarcity and rising costs. That’s why we need more housing and more choices, not mandates and controls.

Will Seattle Be a Great City for Everyone, or Just a Few?

If you’ve been following my work and the work of Smart Growth Seattle over the last few years you’ve definitely noticed that I can get pretty worked up about density and housing supply. I’ve even aggressively challenged members of the Seattle City Council over the years—some who I genuinely like—because they’ve made decisions that, in my view and the view of many others, run counter to the idea that we need more housing. Why do I get so outraged and frustrated when members of the City Council bargain away future housing units to make today’s angry neighbors happy?

Here’s why:

And,

 

And;

 

I’ve taken these from supply and demand genius Mike Scott’s latest blog post on growth and housing. In that post he shares some amazing numbers.

Year-to-date migration into the region is up 24% this year compared to last year. A total of almost 43,000 people moved here between January and May. Even if half as many moved out, that still means there are 21,500 more people lining up at Starbucks every morning.

And not all these people are coming to Seattle. But as we’ve pointed out frequently, there are 120,000 estimated to be arriving in Seattle in the next 20 years. Who know, maybe we’ll even exceed that. Scott says for this year the new people mean that, “we have added demand for 10,000 or more housing units already this year.”

And that’s the point of growth management: growing in dense, transit oriented, and efficient cities rather than scattered widely all over the region. Putting more people in a smaller space is about efficient use of a scarce resource, land. This strategy also is better for our air, water, and reduces our carbon footprint. But that means building more housing.

It’s also good for our economy. We posted recently about a study that found our city is an “innovation cluster,” a place that is attracting lots of jobs in sectors that are creating new opportunities in the economy. And it’s true, innovative companies are creating lots of jobs.

And unemployment is down.

 

According to the real estate blog Seattle Bubble,

In June the Seattle area’s unemployment rate hit its lowest level in almost six years. June’s 4.8 percent unemployment rate was comparable to the 4.7 percent level in August 2008. The national unemployment rate is still a bit higher at 6.1 percent, also roughly on-par with the same period in late 2008.

But are we adding the housing to keep up with all these jobs? According to Moretti we’re not. Here is in a recent Washington Post article on his study:

Moretti’s super-productive cities have been among the the least likely to add new housing since 1990. Decisions to build or restrict new housing are normally the realm of urban planners. But here’s what they look like to an economist: “It’s as if we have some of the most productive metropolitan areas in the world,” Moretti says, “but we don’t allow American workers to flow to these areas to take advantage of that high productivity.”

The Trulia chart doesn’t show Seattle, but Mike Scott recently shared some data with City Council. You might remember this.

Scott points out on his website that, “Demand has outpaced new supply lately. Even though developers opened 7,200 new units in the past 12 months, vacancies fell. That’s because the region added demand for almost 8,200 units in the same period.”

So the reason I get so excited is I hear the experts saying we are an incredibly amazing place to live (think Florence during the Renaissance or Alexandria under the Ptolemies); people of all incomes and walks of life want to be here because they see a future for themselves. But I don’t see us making room for them. Instead, as Moretti points out, “people are marching against Google buses when they should be marching for more housing permits.”

So yes, I get annoyed and outraged when I see our City Council in the process of making it worse, inhibiting our greatness and closing it off to the many new people, of all incomes, who want to be here by making it harder to build more housing. Great cities are open, welcoming places, full of diversity, innovation and opportunity. Will we live up to that potential, or close our gates to change?