Mark Routon is an experienced real estate broker and a student at Seattle Central College. He passionately believes that stable and affordable housing is a crucial need that must be met in order for any community to flourish. Last quarter, Mark was tasked with writing a research paper for his English class, and he took this opportunity to do an in-depth dive into the causes and solutions for Seattle’s housing crisis. This week Routon’s paper is featured here in three parts. 

SOLUTIONS FOR SEATTLE, INSPIRATION FROM ABROAD

What is Currently Being Done, Why It’s Not Enough

The City of Seattle has attempted to address the crisis through a multi-pronged strategy called the Housing Affordability and Livability Agenda (HALA). HALA involves at least four main strategies:

1. Mandatory Housing Affordability (MHA): “MHA requires new development to include affordable homes or contribute to a City fund for affordable housing. [The City of Seattle] implement[s] this requirement by changing zoning to allow larger development and more housing.”
2. Surplus Properties: “Surplus properties owned by the City can either be developed for affordable housing or sold for funds that will contribute to creation of affordable housing.”
3. Preservation, Equity, and Anti-Displacement: Greater tenant protections and education, low-interest loans, the preservation of lower-income housing stocks, and promotion of home ownership for historically marginalized communities.
4. Promotion of Efficient and Effective Development: Reducing or eliminating parking mandates, streamlining the design review process, reviewing current building codes, and coordinating the permit process better between agencies.

While this a good start for the city, it has issues. First of all, the MHA rezoning map reflects which communities possess more or less political power; the wealthy areas of the city see almost no change. This is antithetical to the city’s equity and anti-displacement rhetoric. Additionally, the permitting changes do not go far enough. In discussions with developers, the sentiment that came up frequently was, “we pay for architects and engineers to design and sign off on these plans. Why does it take the city nine months to review these?”

Lastly, the city had the option to use a massive chunk of surplus land (known as the Mega Mercer Block) in a high-employment, established area to develop low-income housing (Moon, C., 2018). Instead, the land was sold to private developers to build office space. The reasoning was ostensibly that the proceeds of the sale go into the City’s affordable housing fund. However, that fund is fairly useless if golden opportunities are not seized. Land costs are already exorbitant; it seems that furthering the scarcity of buildable land will only exacerbate this.

The City of Seattle isn’t the only actor attempting to address the housing crisis. The non-profit/limited-profit sector plays a large role as well, with the Seattle Housing Authority serving as the largest landlord in the city (Valdez, R., 2019). Capitol Hill Housing provides dozens of affordable units, El Centro de la Raza on Beacon Hill serves as model of what affordable housing can be, and Bellwether Housing houses more than 2,000 people every year. Other organizations, such as United Way of King County, offer services like “Streets to Homes,” which provides those in need of stable housing cash, legal, or social work assistance, helping over 1,500 people in 2018.

This is just a small slice of the non-governmental efforts taking place in Seattle, a city that no one would say lacks in heart. However, according to Clare Moe, a board member of Congregations for the Homeless, non-profits are systematically prevented from being as effective as they could be. Imagine Housing, a non-profit in the Seattle suburbs, recently opened 29 affordable units…only to be greeted with a waitlist of 400 people. Interviewed for this paper on March 4^th, 2019, Moe let loose an interesting fact: “Affordable housing is more expensive to build than market-rate developments.” Numerous factors contribute to this, many of which are rooted in good will. The complexities of using the necessary funding from local, regional, state, and federal levels leads to higher professional fees upfront, ongoing and costly reporting requirements, increased construction costs through the varied rules related to public bidding, labor standards and building materials – including the additional public good associated with creating advanced green buildings. Nonprofits rarely get access to below market rate land on which to build and are subject to the same plan review, permitting and land use requirements as market rate developers.

Both Clare Moe and Diane Sugimura, former Director of Planning and Development for Seattle, suggested in interviews that all levels of government need to have better communication and coordination. Sugimura described the need to work on policy “holistically.” While requiring parking lots and well-paid labor are certainly policies not intended to harm, governments must make sure that they are not unintentionally making a crisis worse. When asked whether subsidizing land costs, changing parking requirements, and expediting plan reviews would make affordable housing more affordable, Moe said, “almost certainly.”

Reduce Barriers to Building

The only way to increase housing affordability is to reduce the overall costs by increasing the supply. Cities around the globe need to make it far easier for new homes to be developed. This means allowing for greater density and working with developers in a way that allows for the city to meet its goals without adding cumbersome restrictions and taxes.

In interviews with local developers, the common response was that the current regulatory processes undertaken by the city lead to significantly higher building costs, which in turn get passed on to the end buyer. Hefty impact fees, long waits for permits, and current zoning all lead to developers needing higher margins for their risk. And as with affordable housing, the largest costs are associated with parking requirements. Some argue that a lack of parking requirements will make the city more congested, but it will actually do the opposite, given some time. According the concept of induced demand, providing car friendly infrastructure will encourage people to drive and own cars. The logic follows that making it unfeasible to use a car in the city will result in less traffic and greater use of public transportation. Cheaper, more abundant housing, less traffic congestion, and a greener use of resources seem like win-wins.

Additionally, in theory, reducing the fees charged to developers (impact, permits, infrastructure improvements, etc.) will actually increase the city’s tax revenue. The construction of more homes means greater sales and excise tax receipts, more laborers employed, more materials bought from local shops, and a larger tax base as the city is able to accommodate more residents. However, to the City’s credit, this is a difficult hypothesis to prove, with the benefits being indirect, unlike the fees from development. This is a recurring challenge in public policy.  Regardless, in conjunction with the other solutions proposed here, the City can experiment with waiving or lessening these fees, costs, and review times. If the housing supply does not meaningfully increase, and/or it seems that developers are simply treating this as a windfall and not a stimulus, the City can reimplement them.

The City can also change some of its policies in regard to the types of structures allowed to be built. Promoting flexibility in the market should theoretically drive prices down. People who seek to live by themselves and don’t require an abundance of space may be the perfect candidate for micro apartments, tiny homes, or detached ADUs. As the City fights the development of these types of housing, it forces the market for these homes into overpriced studios, residing further from their work or schooling, living with family, or having multiple roommates.

Curb Real Estate Speculation

Another leading driver of the affordability crisis is the speculation of housing prices. Speculation is an investment term that refers to a large number of people purchasing an asset class with the belief that the value will either hold steady or continue to inflate. A speculative crash, known as the burst of a bubble, is what happens when an asset’s value collapses under the weight of its expectation, much like what happened in 2008. The difference between 2008 and today appears to be that the market prior to 2008 was built mostly upon fraud, so the checks and balances in the system failed, whereas today the price increases have largely been fueled by job growth and supply shortages.

When an area is booming economically, both local and foreign investors start purchasing units, either for living, renting, or most egregiously, holding as a vacant property. When these investors hold large numbers of vacant units in desirable areas, it drives up the prices of everything around them. Fewer homes in an area abundant in demand will result in increased costs of living. Vancouver, B.C., Canada has been one of the most speculated markets in the world. In the fall of 2018, British Columbia implemented a real estate speculation tax on people that owned property in the city but didn’t pay any local taxes. While the tax is new enough as to warrant very little data on its efficacy, a similar approach can be taken in Seattle in order to free up more units to residents.

Public Development & Subsidies Are Required

In order to maintain housing that meets the needs of the very low-income, disabled, elderly, and students, the city should also invest in a large stock of public housing. The redevelopment of Seattle’s Yesler Terrace is a great example and start. That project will include 5,000 units of affordable housing, as well as a bevy of new market-rate housing. Seattle should build its next public housing project in the University District, near 45th Ave. 90% of households in the UD are renters, and the area is home to thousands of low-income students, as well as staff and faculty who will benefit massively from stable and cheap housing. It is also a transit hub with easy access to buses, light rail, and the major centers of employment: downtown Seattle and the University of Washington (Office of Planning and Community Development, 2016).

There are many ways to build public housing (called social housing in much of Europe), but the best model appears to be the one implemented in Vienna, Austria, sometimes referred to as “the city that solved homelessness,” (Copeland, J., 2017). Social housing in Vienna is developed using a supply-side model, meaning that it promotes competition and innovation amongst the private sector. Land is primarily financed publicly, but the housing is built by the private sector (Deutsch, E., & Lawson, J., 2012). Austrian social housing is designed to create mixed socio-economic communities that blend guaranteed housing for the low-income, the elderly, and students, with market-rate units for the more affluent. As Joe Copeland (2017) of the Seattle news website, Crosscut,puts it, “Vienna offers a vision of a city that doesn’t shove long-time residents to neighboring communities, accommodates a range of incomes, and actually has enough affordable housing that the homeless problem is solved.”

Seattle has a similar concept with their Multi-Family Tax Exemption program, which promotes the creation of affordable, tax beneficial units within new development. However, it doesn’t go far enough; the majority of units still end up as market-rate, and the developers only have to pay a one-time fee to the City if they choose not to build the affordable units. There are proposals being floated that would increase the heft of this fee in order to encourage a greater percentage of new development with affordable units. While this is a good step, and won’t solve the crisis. Strong social housing needs to promote guaranteed mass-affordability in areas with high access to opportunity.

Pretty much every city has an “affordable housing fund” of sorts. The best use for that money is to distribute it into three programs:

1. Create a rent subsidy fund that covers the difference between rent and the 30% of income limit for residents making less than 30% AMI. This program needs to extend for at least a year past when residents begin making more than 30% AMI. Otherwise it will encourage people to earn below their potential, as the non-subsidized rent will eat away at their new income gains. The goal of this program is to minimize displacement risk for the lowest income residents and to promote economic mobility. While rent control can actually be harmful to a city, as it limits labor mobility, this program would tie rental assistance to the person, rather than the unit. The benefit of this is that it allows people to move around the city for opportunity instead of being confined to a neighborhood with capped rents. This program can only work in conjunction with an increase to the housing supply.
2. Purchase land for public development. Following Vienna’s model, allow local developers to submit bids competing for the right to build social housing on the plat. Require developers to set rates on a sliding scale that maintains the 30% of income cap for those making up to 60% AMI, and allow a limited number of market-rate rents to help subsidize the other apartments. The city will then use the affordable housing fund to help subsidize the difference between net operating income and operating expenses to ensure the developments stay profitable. This is because quality of life for the residents will suffer if the operators are losing money. A winning bid from a developer will be the best blend of density, public spaces, amenities, and cost. The ultimate goal will be to add 15,000-20,000 units of sustainably affordable housing through effective public-private partnerships.
3. Ensure that all areas with increased density are adequately served by public transportation. To achieve the density required in order to scale supply to demand, the parking allotments currently asked of new development will need to be waived. In order for this to function effectively, bus, carpool, and rail service will need to be indexed to new development. The current thought process of upzoning is that new housing should be built near existing public transportation. This is great in concept, but in reality, it serves as an artificial barrier to growth. The data shows that these new units are primarily occupied by middle-to-high income earners. This is not inherently bad; data from the Philadelphia Federal Reserve and the WE Upjohn Institute shows that rents within 200 meters of new apartment construction level off or decrease. However, land costs are going to be higher near areas of established infrastructure, and that infrastructure is going to be in areas that are already denser, have greater populations of renters, and higher risks of displacement. The logical approach is to index public transportation to areas of new density. Focus on allowing the private sector to develop housing in current low-density areas, and use the public sector’s resources to meet the infrastructure demands these areas will need.

Many view public housing as a failure based on examples in Chicago, Baltimore, and New York. However, the public housing failures in the past were the result of poor urban planning, a lack of support systems, and racism. These “projects” were built in segregated areas, had very little upkeep, and lacked the proper investment in nearby schools, jobs, and transportation. What needs to be built is much more similar to the Austrian, or Dutch models: Aimed at more general/mixed income renters, possessing desirable amenities, built-in services, and locations, and conceived of as engines of economic and social mobility, not as a place to stick the “undesirables.” El Centro de la Raza in Beacon Hill is a shining example of what Seattle needs more of.

Upzone Single Family Neighborhoods

Depending on how schools, parks, and other public land is considered, somewhere between 51%-70% of Seattle’s land is zoned SFH (single family housing). The areas that have been rezoned in the City’s MHA plan are predominantly above average density and have a greater concentration of POC. While there are good intentions here, this creates a greater risk of displacement. Instead, Seattle needs to rezone almost every single-family neighborhood, starting with those that have the best mixture of current low-density, access to public transportation, and high net-wealth. This will allow for the largest number of new units to be built, increase real wages for those living in the area, and lessen the displacement risk in other areas of the city.

Roger Valdez (Seattle for Growth) described a vision of Seattle in which mixed-use, multi-family buildings were permitted throughout Seattle. Neighborhoods would become more affordable as supply is added, while also bringing the amenities that these structures herald, like coffeeshops, banks, dentists, and daycares. As these neighborhoods become denser and improve their ease of accessibility, there will be an increase in investment from small businesses, as well as the fostering of new communities.

Many single-family homeowners are be opposed to this plan because it will change their neighborhoods. They feel the areas will be less well-kempt, there will be an increase cars and traffic, and that their way of life will change. There is sense present in not-in-my-backyard (NIMBY) communities that the addition of density is at the expense of what they have known; they worked hard and chose to purchase land in these areas for a reason. At its root, their primary concern is that their homes will lose value.

However, the only fair and equitable policy is to upzone those single-family neighborhoods, as they are wealthy, low-density, and historically white. For a city that preaches equity, it’s grossly hypocritical—and a sign of political cowardice—that the MHA rezoning plan hits every area of the city with majority POC residents while avoiding every rich, predominantly white one. Obviously, land values in more renter heavy neighborhoods are cheaper and their property taxes are lower (thus residents have less political sway), but they are also areas with the highest risk of displacing low-income people.

On the other hand, it’s hard to displace homeowners. Homeowners sell voluntarily, cashing out on their equity and gaining wealth. That’s not a luxury that the renting class can afford. This is why cities must focus on concentrating growth in SFH neighborhoods, like Seattle’s Montlake. Near downtown, near universities, frequently served by bus, and within walking distance of light rail. Unlike in renter dominated areas, the homeowners have the opportunity to build wealth from these changes. Not every home will become multifamily, but the space is needed if cities are going to solve this crisis. This creates the best outcomes for the city as a whole. Additionally, most properties will gain value, as their land will be ideal for developers building multiple units. An $800,000 home that can be replaced with four $650,000 units is far more valuable than if the zoning prevents anything denser than the existing structure. Those who don’t sell to developers will see an increase in their value as single-family homes become scarcer.

It seems asinine that NIMBYS would reject these changes that lead to a more equitable city, greater personal liberty (being able to sell to a developer if one chooses), and more affordable starter homes for their progeny, unless they are simply selfish. Cities are based on the idea of the gestalt: a body greater than the sum of its parts. To achieve that dream, privileged zoning must be eradicated.

CONCLUSION

Because of the causes stated above, the proposed policy prescriptions will lower the cost of housing, increase opportunity, allow for supply to match demand for years to come, and be more racially equitable. As the global population continues to soar, and as the existential threat of climate catastrophe looms overhead, it logically makes sense that the societal response must be to embrace reasonable density. Density promotes the most efficient use of resources, and there is hardly a better candidate for density than the modern city. If cities are to be the continued epicenters of growth and progress, it follows that effective public policy is centered around inclusivity, equity, and sustainability. The solutions proposed in this paper are key steps, but not the whole battle. Holistic city planning is required and encouraged.

The City of Seattle has the opportunity to spur economic growth by alleviating the burden of exorbitant housing costs, and the ability to address the number of individuals sleeping on the streets by providing far more shelter beds and a greater stock of deeply affordable housing. However, this is unachievable unless land costs are drastically reduced. Until that happens, Seattle will continue to throw money at an issue without making much progress. For the foreseeable future, the only way to lower the price of land is to remove the artificial scarcity of it that bolsters the value. Policymakers in Seattle have either the option to regressively capitulate to the protests of the home-owning class imbued with ever increasing political clout, or they can act in a progressive manner that will allow for a greater quality of life for all. The ball is in their court.