The central argument of this post is that Seattle is facing a crisis of housing scarcity, and so municipal zoning restrictions on the supply of housing should be lifted.

Seattle is currently the fastest growing large city in the United States. According to U.S. Census figures, in the one-year period from July 2012 through July 2013 (the last complete twelve month period for which data are available), Seattle added over 18,000 new residents for an annual growth rate of 2.8%, outpacing Austin, Charlotte, and Washington D.C. (Balk, 2014).  Spurred by a strong economic rebound from the Great Recession and a surge in hiring by Amazon and other tech companies, this growth shows no signs of slowing in the near term.  And in the long term, Seattle’s diversified industrial base, its highly educated workforce, its deep-water port on the Pacific Rim, and its mild climate on a quickly warming planet suggest the likelihood of strong population growth for many decades to come. The position of this paper is that this growth should be welcomed and encouraged, but that accommodating this growth wisely and justly will require significant adjustments to the municipal land-use laws currently in place in the city of Seattle.

For this growth has, so far, seen a corresponding rapid escalation of housing prices in Seattle and across the region. Between 2010 and 2013, median apartment rents in Seattle spiked by almost 11%, the highest rate of increase in the nation during the same time period, and Seattle is now the eighth most expensive market for rental housing in the nation, with median rent for a one-bedroom apartment at $1580.00.

And of course, rising housing costs do not affect everyone the same. For low-income households struggling to make ends meet, rising rents have a disproportionate impact, since poor families on average pay a higher portion of their income for their housing than do higher income families. According to the federal department of Housing and Urban Development, a household is considered “cost burdened” if they spend more than 30% of their total household income toward housing costs, and “severely cost burdened” if they spend more 50% of their income toward housing costs. City of Seattle data shows that of the poorest households in the city (those with incomes under 30% of Area Median Income), a full 62% are severely cost burdened, paying more than half their incomes toward their housing.  And there are disproportionate racial impacts as well.  35% of African American households in Seattle are “severely cost burdened”, compared with 21% of Asian households and 18% of White households (City of Seattle).  This disproportionality of household rent-burden across class and race makes rising housing costs a social justice issue, not just an economic one.

Many individuals and families facing rising housing costs in Seattle have moved to less expensive cities in South King County such as Kent, Auburn, Renton and SeaTac. And many low-income people who might have considered moving to Seattle from the suburbs in order to access its more robust public transit and other services are unable to do so. This is part of a nationwide trend that the Brookings Institute has called the “suburbanization of poverty”. This phenomenon is a reversal of the dominant pattern of the 20^th century in which low-income people were concentrated in the central cities, with middle and upper classes retreating to the suburbs(“white flight”).  Alan Berube, in his book Confronting Suburban Poverty shows how many previously middle-class suburbs have seen their poverty rates spike in the last 15 years. And he argues that in many ways dispersed suburban poverty is worse than concentrated urban poverty, for in cities it is easier to live without a car, and the financial burden that entails.

For all of these reasons, many have begun to characterize rising housing costs as a social justice crisis. And the issue has taken an increasing sense of urgency in local politics. Last year, Socialist Councilmember Kshama Sawant was elected on a platform largely focused on rent control, and many of her campaign posters were emblazoned in large red typeface: “The Rent is Too Damn High”.  Not to be outdone, in the fall of 2014 Mayor Ed Murray convened a new task-force on Housing Affordability and Livability, bringing together 30 local leaders from non-profit and for-profit housing development companies, community-based housing advocates. There is no more urgent issue in Seattle.

Survey of Affordable Housing Strategies

“Housing Policy” has historically been primarily the province of the federal government. The department of Housing and Urban Development has directly funded thousands of public housing units nationwide, as well as “Section 8” rent subsidies, but the budget for these subsidies has been slashed dramatically in recent decades (Rachel G. Bratt, 2006).  These cuts at federal level have required states and municipalities to develop a wide range of policy solutions to fill the void:

Housing taxes: The City of Seattle Housing Levy and the Washington State Housing Trust Fund have together proven very effective, together funding several hundred housing units in Seattle over the last two decades.

Development fees:  The Mayor’s HALA task force is considering raising revenue from housing developers through “linkage fees” and “impact fees”. However the number of projected units that could be built with this revenue is quite small, numbering in the low hundreds.

Incentive Zoning:  Seattle has a policy in place called “incentive zoning” which gives developers flexibility on building restrictions in exchange for including affordable units in apartment buildings. However, in the 10 years this policy has been in place only a couple hundred affordable units have been built through this strategy.

Rent Control:  Though it is currently illegal under Washington State law, many have begun to discuss the possibility of “rent control”. Due to the state prohibition against this policy, in all likelihood any rent control policy in Seattle is many years away.  Additionally, many economists argue that rent control policies tend to have unintended “perverse” effects of actually raising rents for uncontrolled units. Many even put the blame for elevated rents in New York and San Francisco on the fact that they have rent control.

In a crisis, we need “all hands on deck”, and so some combination of all of these above policies is needed and warranted to address the problem. In particular, I would advocate for significant increases in the Housing Levy and the Housing Trust Fund. What I am proposing here, however, is that all of these policies are undermined and made less effective by what some call a regime of “Exclusionary Zoning” that currently dominates land-use policy in Seattle.   This is because of supply and demand.

Research into the Economics of Housing

The central argument of this paper is that the primary driver of increased housing costs in Seattle is that a lot of people want to live here, and there aren’t enough available homes. Harvard economist Edward Glaeser, in his recent book Triumph of the City: How Our Greatest Invention Makes Us Richer, Smarter, Greener, Healthier, and Happier writes of New York, London, and Paris: “Robust economies and abundant pleasures have made these places highly desirable. People want to live there, and when there isn’t enough housing to satisfy demand, prices can soar” (Glaeser, 2011).   As an increasingly “global” city attracting people from around the world, Seattle is subject to these same forces.

In a capitalist economy, housing is a commodity and is subject to market dynamics (Yglesias, 2012).  The most prominent and well understood of these dynamics is the three-way relationship between the supply of a given commodity, the demand for that commodity, and its price. In this relationship, price acts a regulating mechanism allocating access to the commodity.  If the demand for a commodity exceeds the current supply, one of two broad things can happen. The first is that producers of that good can increase the supply to meet the demand. This is called supply elasticity.  However, if for some reason the producers of the desired good are not able to increase supply sufficiently (in-elastic supply), then prices will rise so that only those with either the means to pay the elevated prices will have access (Mangin, 2014).

When rents and housing prices are going up, there are two broad systemic means by which they can be lowered. The first is to reduce demand by making the city a less desirable place to live. Unfortunately we have observed too many “natural experiments” which have proven the cruel efficacy of this approach. For though not the result of intentional municipal policy, this is in fact exactly what happened in cities across the industrial Midwest that were decimated by global economic shifts in the latter half of the 20^th century.  In Cleveland, St Louis, Baltimore, and most dramatically Detroit, just to name a few, the pattern was repeated: the economy collapses and people stop moving in and start moving away. This causes a steep decline in demand for housing, so much so that demand for housing falls below the level of available supply, and housing prices drop dramatically. Thankfully, no sane public official would advocate this path to housing affordability (though in fact many of these cities have recently begun rebounding economically and culturally precisely because their cheap housing stock is now attracting creative people priced out elsewhere (Florida, 2010)).

The second way to stabilize prices on housing is to build enough new housing supply to meet the growing demand. This is the path advocated here. Given the deeply unjust and worsening impacts of rising housing costs discussed above, the rational and just course of action for public officials in Seattle is to move swiftly and boldly to increase the supply of housing by any means necessary.

Some will point to the fact that we are actually in the midst of a building boom in Seattle, with approximately 5,000 new housing units (mostly studios and one-bedroom apartments) having been built in the last couple years, and several thousand more in the pipeline to become available in the next couple years.  Why hasn’t all this new housing supply caused prices to fall? If Seattle were experiencing a less extreme rate of population growth, with its accompanying housing demand, all these new units would in fact be meeting demand and prices would stabilize. But prices are a function of neither absolute supply nor absolute demand, but a rather a function of the relative relationship between the two. So it is very possible to have a high level of supply of something and still have prices go up if demand is extremely high. The fact is we need to build even more than we currently are if supply is to fulfill demand and stabilize prices. So, why aren’t we?

David Moser works on housing at Neighborhood House, a local non-profit. This post is a draft of an in-process working paper and was selected as a finalist in Seattle University’s Policy Incubator Competition, part of it’s Master of Public Administration program. We’re posting the paper in two parts, today and tomorrow. All notes will be at the end of the second post.