#35%

I recently took a trip to the Midwest for vacation (because Wisconsin in April is perfect vacation for me). I drank beer, bowled, ate food, and chatted with a lot of folks in rural parts of the state. What was fascinating: many of these people were looking to see growth in their towns and cities (and, in some cases, villages), and wanted it concentrated to keep from encroaching on farms, forests, and rivers. 

I bring that up for no specific reason. Just an interesting observation. 

Back in Seattle, however, the 25% thing continues to rage (or at least that's what I heard). For those not paying attention, I've quibbled about this 25% MHA proposal here and here. Specifically, I take issue with the assertion that we don't have programs designed to meet a Below Market Rate goal of 25% (when, in fact, it's upwards of 35% in some parts of the city). Adding in the comparisons to cities like San Francisco, New York City, and now Boston, I remain unconvinced that politicians are being intellectually honest with voters. 

Don't get me wrong - I get it. This is politics. Sell big, push the envelope, and make shit happen. But that assumes that goals presented are achievable. Politicians have a heightened responsibility to enact promises, which means a heightened responsibility to be honest and clear about what the hell they are proposing. It's not always sexy or headline grabbing, but with our current President, I think we have seen what happens when you promise things that are literally illegal. 

What Does "Affordable Housing" Even Mean?

This is one of the big issues that we have - how do we define affordable housing? Who are we, as a city, aiming to ensure can afford to live in the city (beyond those with means, or those who purchased property 10+ years ago)?

80% Area Median Income - This is the one that is sometimes referred to as "Workforce Housing." Typically, folks at this income level are left to their own devices, unless they are able to get in on the MFTE program. Seattle Housing Levy dollars don't really get this group. For an individual, we're talking a yearly income of about $49,000 ($23.56/hr), or nearly $70,000 ($33.65/hr) for a family of four. Some examples for a single person: Nonprofit managers, paralegals, some social workers, and so on. 

60% Area Median Income - About 1/3 of Seattle Housing Levy dollars help to produce housing at this level. This is also the income level that the Mandatory Housing Affordability program provides housing for. For an individual, we're talking about $38,000 per year ($18/hr), or just over $54,000 ($26/hr) for a family of four. Some examples for a single person: LPNs, office support staff, janitors, many more social workers, teaching assistants. 

30% Area Median Income - This is where the majority of the Housing Levy goes - and still there is a huge need. This includes folks making $19,000 per year for a single person, to $27,100 for a family of four. That's below minimum wage if you're keeping track, which often means folks who can't get full-time employment, or might have employers taking advantage of immigration status. Also folks on fixed incomes. 

As a rule, the idea is that "affordable" means no more than 30% of monthly income is spent on rent and utilities. So with rent-restricted units - whether through Levy funds, Low Income Tax Credits (LITC), Multi-Family Tax Exemption (MFTE), Incentive Zoning (IZ), or Mandatory Housing Affordability (MHA) - that's where we see rents set. For folks at 30% AMI and below, it's nearly impossible to build or maintain something and still have a profit, even with a tax break, which is why most housing for the very low-income necessarily is through non-profit organizations utilizing grants, LITC, and tax dollars.

One limitation of "making developers pay" is that they still have to be reasonably expected to realize a profit from the unit. It's a U.S. Constitution thing about property rights and a taking under the Takings Clause. While there are some who argue that zoning is in and of itself a "taking," the U.S. Supreme Court disagrees. Notably stating that government compensation is not required where regulations "substantially advance legitimate governmental interests," and so long as the regulations do not prevent a property owner from making "economically viable use of his land." Agins v. City of Tiburon, 447 US 255 (1980).

What Rule Should We Use?

This is the dilemma we face in Seattle. Who do we want to ensure affordability for, and what are willing to give up in exchange. What has allowed various mandatory affordability programs to survive constitutional muster has been the compensation to the landowner in various ways to ensure that the use of land remains "economically viable." Requiring a private property owner to subsidize someone's rent is wholly unconstitutional without that compensation, after all. 

In New York, that compensation is pretty substantial. Doubling of building heights, a 20 year property tax break, and use of LITCs to private, for-profit developers, leading to a 25% MHA requirement for income levels up to 150% Area Median Income. In San Jose, 15% MHA comes with property tax breaks and increases in building heights and bulk of buildings. 

In Seattle, we are basically looking at private developer production like this:

MFTE - 20-25% of units set-aside with rents affordable to folks at 80% AMI (a higher % for non-family size units). The compensation: 12 years (re-newable to 24) of a property tax break. (optional)

IZ - I don't remember the exact percentage, but the alternative is $22 or so per square foot into the affordable housing fund. The compensation: a building height and FAR bonus. Only applies to downtown and South Lake Union (optional)

MHA - 7-9% throughout most of the city (2.1-5.5% in downtown and SLU, which also have IZ) of units set-aside with rents affordable to folks at 60% AMI. The compensation: 10 foot building height limit increases (and/or comparable FAR increases) in all LR and NC zones throughout the city, plus some changes to zoning in areas from RSL/SF to Low Rise. (mandatory)

Levy funds and LITCs go to non-profit developers, where we see the majority of units constructed for folks at 30% AMI and below, and a chunk at 60% AMI (with some homeownership opportunities through land trusts for folks at 80% AMI). 

So What Does It Mean?

I am a fan of diversity in revenue streams. MHA and IZ are diversification of streams in a way. 

I am also a fan of pushing the envelope to maximize what we can get by way of affordable housing in the city. With constitutional limitations, this basically leaves us with options for folks in the 60-80% AMI range (and may well get up to 120% AMI if we don't get enough housing built to meet the need in Seattle at market rate). Looking above, the question does become: what exactly should that breakdown be. 

Our current model has us approaching 35%, with 7-9% being mandatory. Looking at utilization of MFTE, there are a fair amount of units online (over 3,000) through this optional program. Similar with the Inclusionary Zoning program. Can these be strengthened? Damn right. And funding must be made available for adequate enforcement of existing regulations. 

When people talk about 25% MHA requirements, if we are assuming that they mean the existing affordability framework, then we are saying 25% of all private development must be set-aside for people making 60% AMI, with compensation of just 10 feet (by example, in New York, that doubling is going from 7 to 14 stories in many cases). 

At the same time, we are asking developers to set-aside 20-25% of their units for people making 80% AMI (with a tax break as compensation). There continues to be calls for impact fees to help pay for schools and parks. So put another way: we are asking people to set aside 45-50% of the units of housing they produce and, in exchange, we will give them a property tax break for 12 years, and allow them, in some instances, to build one more floor. In a mid-rise area, that's maybe a dozen more units of housing. 

This raises questions. First: would it even be legal? Is the compensation enough to ensure that the landowner has "economic viability" with their property given that the compensation for the 25% is a whopping ten feet? 

Second: would developers ever take advantage of the MFTE? As a city, is it important to us to ensure folks at 80% AMI have a place in our community, or is that the group that is expendable? What are the environmental impacts of pushing a large bloc of the people that make our city work to the suburbs? 

Third: Would developers just give up on Seattle? Is this what we want? If people won't build in the city, then prices will simply go higher as more people with good paying jobs move to Seattle. While developers are the enemy to some, the reality is the production of housing is a need not just for today's affordability, but for the "naturally affordable" housing to come online down the road. The government can't do this alone, unless we are talking major tax increases, which will also price more people out of the city, with a disproportionate impact on communities of color. 

I don't think that developers would give up, but if a 25% MHA for folks at 60% AMI were deemed constitutional, I do believe you can kiss the middle class in Seattle goodbye. One of the benefits of Seattle's multi-level approach is that we are ensuring people in the middle have an opportunity for housing in Seattle. 

This doesn't mean that there isn't room for some sort of hybrid system. A 25% MHA with 15% for 80% AMI households, and 10% for 60% AMI households. Compensation: 20-30 foot height increases in all NC and LR zones, duplexes and triplexes in SF areas, and a 10 year tax break if the affordability is guaranteed for 25 years, 20 year tax break for 50 years, and an option to get LITCs for for-profit developers. Here, we get more missing middle, minimal aesthetic impact on existing LR and NC zoned parts of the city, and that sweet 25%. Is this economically feasible? I don't know. But it's a helluva lot more detailed plan than just saying 25% and missing all of the rest of the pieces. 

In the meantime, I think we should be happy with 35%, while continuing to find the pathways to get more housing that is affordable to the folks that help keep our city great.