June 14, 2017

To:                   Councilmember Rob Johnson, Chair, Planning Land Use and Zoning Committee
From:             Roger Valdez, Director, Smart Growth Seattle
Re:                   Implementation of Mandatory Housing Affordability (MHA) in the
                          International District (ID)

We’ve made it abundantly clear through comments in the media, public testimony, and in personal meetings with you and your staff that the Mandatory Housing Affordability (MHA) Program is

• Infeasible – many projects won’t qualify for financing because of additional construction costs, inclusion requirements or fees;
• Inflationary – when financing is possible it will be because rents or prices will have risen to rationalize the additional costs and delays created by the mandates or fees; and
• Illegal – the program is in clear violation of RCW 82.02.020 that limits charging for additional square footage to voluntary programs.

Nevertheless, the Mayor and Council have chosen to press ahead with this proposal in the International District and these are our concerns.

The MHA program as proposed in the International District has the following problems. The MHA proposal

Is unfair – Fees are much higher in the International District than for comparable neighborhoods like South Lake Union and Downtown. For almost identical zones, DMC 85, for example, the charge for in lieu fees in South Lake Union is $12.75 per square foot while in the International District the charge has been set at $20.75. This is inequitable. Is the intent to discourage development in the International District and promote more housing in Downtown and South Lake Union? This is the economic message you are sending to producers of housing with these prices.

South Lake Union and International District Fee Comparison

Ignores the Special Review District (ISRD) – The International District, unlike most of Downtown and all of South Lake Union, is governed by rules implemented and enforced through the ISRD. This adds yet another layer of complexity and costs on the creation of new housing in the neighborhood. Why would the Council further complicate this with additional fees and requirements? If projects go forward, they will certainly be even more expensive for people who need housing.

Ignores existing programs – The International District has a myriad of incentive based options for transfer of development rights and potential, tax credits, special tax valuation for historic buildings, and other programs that are both complex and challenging to implement for housing producers. Will the Council produce a better statement of how these programs might be impacted by the implementation of MHA in the neighborhood? Why wasn’t this work done so that these impacts could be more transparent to housing producers, advocates for preservation, and the neighborhood at large?

The Mayor and Council are charging ahead with a program that is ill advised and counter productive in the first place. The MHA program will boost overall housing prices in the city while generating far fewer units that could be created by market rate builders if freed from the existing limited zoning and a growing thicket of regulations, rules, fees, and mandates being imposed by the City.

We suggest that you consider:

A voluntary program – This makes particular sense in the International District, a is far more complex neighborhood to build in than South Lake Union, for example. This would allow the City to understand what kind of zoning increases would incentivize more housing creation and at what point fees kill projects or make them more expensive for consumers.

The complexity of the neighborhood – The International District is at the heart of Seattle’s long history and the Council has not done enough work to consider how the imposition of yet another set of rules and regulations will work or not work with the many, many other programs that impact housing creation in that neighborhood.

Waiting for a new Mayor – The city will have a new Mayor in less than six months; doesn’t it make sense to hold off on such a complex and possibly dangerous proposal when a new Mayor has yet to have an opportunity to weigh in.

Finally, we would urge you to slow down the movement of legislation to implement the MHA program. The political objective of the Grand Bargain has been achieved: the signers of the deal who build in Downtown and South Lake Union can move ahead with their projects and the non-profits who signed the deal will get the fees. It’s time to take everyone else in the city seriously as they express honest and deep concern about the impact that this program will have on their futures and the production of new housing in the city.

Sincerely,

Roger Valdez
Director