By Lauren Craig
Puget Sound Sage joined as one of five signatories with affordable housing advocates, labor, and environmental organizations to an op-ed last week expressing our support for the Housing Affordability and Livability Agenda (HALA) committee’s recommendations to increase zoning density in conjunction with affordable housing strategies. Continue reading “The HALA Recommendations, Why We Support Them, and Why it is About Race”
By Lauren Craig
The time to act is now – Tell City Council to implement the HALA recommendations as soon as possible. Continue reading “The HALA Recommendations That We Support (Among Others)”
A local urbanist, Owen Pickford, in a popular urbanist magazine literally called “The Urbanist,” recently published a call to urbanist action to support linkage fees. His article provides the strongest evidence yet that a linkage fee will build a better Seattle. Pickford methodically unpacks somewhat misleading arguments we’ve heard for a decade and half from big property owners and developers. He then calls on his fellow urbanists to heal their myopia and see the bigger picture:
“(w)e can remain the smallest voice in this debate. We can continue to conflate regulatory costs with housing limits. We can continue to ignore the problem of increasing land values. We can continue advocating only for policies that lead to displacement and segregation. We can expend our energy fighting against regulatory costs when we should be fighting for reduced housing limits. We can continue to use narratives that explain-away evidence rather than seeking to understand. We can continue to give people the perception that we are adversaries of affordable housing and integration by opposing a policy that evidence shows would be beneficial.”
What’s an urbanist?
Urbanism is defined by Miriam Webster as “a) the characteristic way of life of city dwellers, or b) the study of the physical needs of urban societies,” but is often understood as a movement for urban density, walkability, public transportation, and other modern urban “aesthetics.” Much appealing to the urbanist aesthetic is a value known as “vibrancy” which often goes hand-in-hand with the value of diversity, a.k.a. integration. However, the land-use and other policy decisions required to support both racial and economic diversity are often an afterthought, rather than a priority of decision-makers.
In our most recent op-ed, Puget Sound Sage also made the case for inclusionary housing programs by demonstrating a linkage fee will help prevent us from perpetuating land use patterns that perpetuate de facto segregation. De facto segregation is segregation inherited from a time of de jure segregation, like racial covenants or redlining. Linkage fees ask developers to set aside a small portion of new units as affordable or contribute to the city’s affordable housing fund. Because it would be applied broadly across the city, it requires only a modest contribution, but would become one of Seattle’s best tools to create affordable homes for low and moderate wage workers and families, because it would create new affordable housing within city limits, and mitigate the impacts of rising rents. Therefore, a linkage fee helps to prevent displacement, and contribute to the racial and economic diversity that both urbanists and social justice advocates hold dear.
The Growing Together Coalition, co-led by Puget Sound Sage and Housing Development Consortium, represents hundreds of individual signatories and over 50 organizational endorsers, including the some of the largest human service providers, faith, labor, housing, environmental, and social justice organizations in Seattle. All believe that the City of Seattle must pass an inclusionary housing program like the linkage fee, which would enable Seattle’s workers and their families to live near their jobs in the city.The Growing Together Coalition is pro-economic-growth, pro-density, pro-transit, pro-public investment, as well as pro-integration.
Pickford’s urbanism mirrors that of the Growing Together Coalition. Pickford highlights that linkage fee opponents have been detrimental to the plight of urbanists because they conflate height and density limits with regulatory costs like a linkage fee. He says this is a “mistake [that] has been detrimental to urbanists’ goals, creating an adversarial relationship between urbanists and affordable housing advocates. Furthermore, blurring the lines between housing limits and regulatory costs induces urbanists to overlook the most important factor in housing affordability: land values.”
In fact, Pickford’s article (which we will explain in layman’s terms in a separate post): 1) demonstrates that regulations like a linkage fee actually reduce land values, the increase of which contribute to our housing crisis for everyone, not just the extremely low-income; 2) provides evidence that linkage fees do not reduce supply of market-rate housing, but increase affordable housing production; and 3) calls on urbanists and social justice advocates to stand together because they ultimately share the same values.
This concept is not new – urbanists like Mike O’Brien, who sponsored the linkage fee legislation and others have long-supported social justice policies. If a linkage fee is not passed, the city would miss a significant opportunity to create thousands of permanently affordable homes where persons of color and people with lower incomes are experiencing displacement, like Southeast Seattle. This means that Seattle will not be “vibrant” or diverse, values that urbanists hold dear. In fact, demographic changes indicate that Seattle is becoming less diverse.
Last, Mayor Murray’s goals of creating 20,000 new affordable housing units in the next decade cannot be realized without a developer contribution program, even with the much needed renewal of the taxpayer supported Housing Levy. It is time to put to bed how linkage fees will end density as we know it, for good, if we want to live our values as urbanists and support economic growth, density and integration.
If you would like to stand with the 50+ organizational endorsers and individual petition signers in support of a linkage fee, visit our coalition website today!
By Lauren Craig and Howard Greenwich
A City Council Committee just recommended a promising new policy approach to Seattle’s housing crisis, authored by Councilmember Mike O’Brien. Called a “linkage fee,” the policy establishes a reasonable city-wide fee on construction of new buildings that links job growth associated with development to increased demand for affordable housing. Many cities in the U.S. have adopted linkage fees for affordable housing and multiple studies show such a fee can work in Seattle. Listening to critics, you would think that a linkage fee is the scariest thing since Nightmare on Elm Street, and will frighten away the timid investors who have been paying above top dollar for property in Seattle.
The policy was voted out of the Planning, Land Use and Sustainability Committee yesterday and is headed to Council next week. However, it’s only a resolution that directs staff to write the final ordinance for adoption next Spring, which is two seasons away. So, we though it ‘twas the season for a little debunking of scare tactics being employed by critics of anything asking developers to pay their fair share.
The best part about the linkage fee is that that the City must demonstrate – for both legal and policy reasons – a causal connection between new job growth associated with a project and the need for affordable housing that it creates. In other words, the fee is used to mitigate an impact that can be “linked” back to the developer, hence the term linkage fee. The policy calls on developers to pay their fair share towards the public bill of creating adequate affordable housing for our growing low- and moderate-wage workforce. Yes, developers pay taxes like everyone else, but their impact on affordable housing is basically an “externality” – a cost they don’t have to bear in making a profit. This is also why it is a mitigation fee, and not an illegal tax.
This myth is premised on a simplistic explanation of housing markets and why they contract or expand. Even amidst one of the biggest real estate expansions in Seattle history, for-profit developers are simply not building housing affordable to low-wage workers (60% median income and below). Why build at the lower end when so much profit is available at the higher end? How can linkage fees result in less affordable housing when private, unsubsidized production is already near zero?
Furthermore, fees and regulations have a marginal effect on housing markets – market swings drive real change in supply and demand. David Paul Rosen and Associates conducted a study over a twenty year period in California to determine the impact of inclusionary housing programs (which, like linkage fees, require developers to contribute to affordable supply) on housing production. In larger cities, housing production increased, sometimes dramatically, after the passage of similar ordinances.
The report also found that in no case did the adoption of an inclusionary housing program slow housing production. Based on the City’s own economic analysis, Councilmember Mike O’Brien has designed the proposed linkage fee so that developers will still make significant returns on equity. For example, a tiered fee model is built into the resolution so that slower-growth areas will be subject to a lower fee. Also, the fee level will be reassessed regularly and adjusted for market conditions.
This “invisible hand” argument assumes that developers and investors would be willing to build in the lower-end of the housing market if only costs were cheaper. However, housing prices in strong markets are mostly determined by high-end demand. Most new market rate buildings target well-off urban professionals, such as Amazon, Google and bio-tech workers, because those consumers are willing and able to pay top dollar for housing. As a result, Seattle’s overall market is skyrocketing, with average rent increases of 33% just since 2010. As long as Seattle continues to attract and sustain high-paid professionals, developers and investors will continue rational, profit-maximizing decisions to cater to their housing needs.
Moreover, developers will never be able to build enough new supply to a point where prices will meaningfully drop. Even if they could build a fictional, unlimited supply of housing, other counter-forces can slow investment just as lower-end housing becomes interesting to investors. For example, interest rates often rise to cool hot markets, making it more expensive for developers to finance new construction. Production of housing is just as likely to slow for reasons unrelated to local regulations and prices will remain high.
As we have most recently seen with the massive housing market crash, a lack of regulation is often the problem, not more regulation. Regulation can act as a buffer to unpredictable and imbalanced markets. In fact, regulatory requirements to protect the environment, workers and consumers have often led to an increase in economic activity.
With a reasonable amount of funds to build affordable housing, the City can provide assistance to those negatively impacted by the swings of financial markets and the gross inequality they create. Even in San Francisco.
Suppose there are two developers building identical buildings with the same market-rate rents. All costs are equal, but one developer took a higher interest loan than the other. Will the higher interest loan developer pass the cost onto renters? If she did, her rents would be higher and tenants would go to the second developer. The term “market rent” is precise – it represents the most a landlord/developer can charge for a given product. If a landlord could charge more in a given market, they already would – a City linkage fee will not change market rents or housing prices.
Further, over time, the cost of the regulation is largely absorbed into the price of land, not the cost of development on top of the land. When cities impose new requirements on buildings – such as safety, health or environmental regulation – it puts a damper on the increases in commercial land value. The property owner does end up absorbing the cost; however, landowners in Seattle have been enjoying exponential growth in value and benefit from business expansion, population growth and massive public investment in infrastructure.
Currently, developers can gain bonus density to build higher and bigger through the City’s multiple incentive zoning programs. The linkage fee does not take away any of these incentives – developers would be allowed to continue to access the bonus density. Also, existing incentive zoning ordinances will be amended with a provision allowing for the payment of the linkage fee as satisfaction of the incentive zoning program.
Additionally, the relative cost of a linkage fee reduces as developers build to a greater density. Here’s why: shorter buildings (under 85ft) are built primarily with wood. Above that, much more expensive materials are used – concrete and steel. For example, say that a developer is choosing between a seven story, wood-frame residential project and a 24 story concrete and steel structure in South Lake Union. The linkage fee per square foot would be the same for both buildings. As the developer builds higher, the fee decreases as a proportion of total construction costs per square foot. In other words, the linkage fee becomes relatively cheaper the higher you build.
While I am on the subject of the environment, the linkage fee will actually help reduce our carbon footprint by preventing displacement of low-income households from the city to the suburbs.
Developers have not been left out of the discussion or debate. Consultants have been studying how to improve on the City’s Incentive Zoning policy for an entire year with many occasions for public review and discussion. The economic and financial feasibility assumptions forming the basis for the linkage fee have been informed by developers in multiple venues.
More importantly, growth is happening now and we need more affordable housing now. There is no time to wait. City Council should adopt the strongest linkage fee feasible and the fastest timeline possible.
Martin Luther King once said something that is scarier than these scare tactics: “we must learn to live together as brothers or perish together as fools.”
Last week, Councilmember Mike O’Brien introduced a proposal to strengthen Seattle’s incentive zoning (IZ) program: a “linkage fee” rather than recommend tweaks to the existing IZ policy. If Seattle is serious about not becoming a city only for the elite and serious about carbon reduction, the linkage fee proposal is a no-brainer.
We have been long critical of the City’s IZ program. Under the current IZ policy, developers built affordable units or paid a reasonable fee to the City in exchange for permission to build to a greater density. Because developers volunteer to participate, the affordable housing requirements only kick in for a portion of a new building and applies to only a few neighborhoods that have undergone upzoning, Seattle’s program is considerably weaker than those in other cities. To date, the IZ program has only produced an estimated 714 units since 2001.
Unlike IZ, a linkage fee policy requires all new residential office or commercial development above a certain size to contribute to an affordable housing fund. The policy, as adopted in several major cities in the U.S., is premised on a link between new development and a subsequent increase in demand for low-income housing.
So, why do we need to pass this fee now? There are many reasons developers should pay their fair share of affordable housing, the most important of which is absolute necessity. Growth is happening now. People are being displaced now, and 40% of Seattle will not be able to live here if we do not create and preserve affordability now. We need more money to build and preserve more housing now, and into the future.
We have written about the housing crisis in Seattle. Affordable housing is not available for low income people and families. It is well-documented that low-income people and families mainly consist of communities of color, immigrants, refugees and single mothers. Demographic changes in Seattle and South King County indicate that people of color have been displaced from Seattle as rents have risen over the past ten years. Rents have increased even more dramatically in the past year, and Seattle is currently the fastest growing city in the country. In order for Seattle to walk a path of justice, we need more affordable housing now.
A linkage fee is necessary to prevent displacement, is good for the environment, and good for Seattle. It is only fair that developers, who profit from our infrastructure investments, pay their share for affordable housing. Stand with Puget Sound Sage and the Growing Together Coalition and urge City Council to pass a linkage fee in October!
Seattle’s housing crisis has gone from bad to worse. Over the next 20 years, we will simply not have enough housing for the number of people who need and want to live and/or work in Seattle.
Right now, 40% of Seattle’s residents are low-income – and our city is becoming too expensive for nearly half of our population. The influx of new workers in high-paying, largely tech jobs, combined with the development of high-end (and more expensive) housing, has caused housing prices to skyrocket, driving up the cost of rent by 33% since 2010 in some areas of the city.
While 2 out of 5 people in Seattle are low-income, only 1 in 5 newly built homes are affordable to them and their families. Making things worse, higher and median-income people are forced to compete with lower-income residents for the lowest priced housing in Seattle. This is called “down-renting” and squeezes lower-income people out of housing that should otherwise be available to them. These pressures are displacing low-income people – mostly immigrants, refugees and people of color – out of Seattle to the suburbs – where there is limited public transportation.
Seattle has a few policies in place that attempt to address this crisis. One small slice of this policy pie is called “incentive zoning.” It requires market-rate developers to build affordable units – or pay a fee in-lieu of building the units on-site – in exchange for permission to build a taller/bigger building. Developers often choose to pay the fees, instead of building affordable housing on-site. However, incentive zoning has resulted in very few affordable homes, because the program is voluntary, restricted to only a few neighborhoods, and it is often not as profitable for developers to build affordable housing in order to build bigger and higher.
On Monday, the Seattle City Council Planning, Land Use and Sustainability Committee, chaired by Councilmember Mike O’Brien, presented two policy options that could address our housing crisis. The first option would increase the fees for developers who participate in the voluntary incentive zoning program: resulting in a bigger bucket of money for affordable homes, and ideally, encouraging developers to build affordable units instead of paying the in-lieu fee. The City’s economic analysis suggests that the success of this option would be incremental.
The second policy option is a “Linkage Fee,” which is a mandatory fee for potentially all new projects across the city, regardless of density or location. The revenue from the linkage fees would be used to build affordable housing at designated locations throughout Seattle. In other words, it could result in significant amount of new affordable units. In order for the fee to be legal, it must be based on a study that connects the impact of development with the need for affordable housing. This study, called a “nexus” study, will be released from City Council shortly. This study will also determine the amount of the fee and locations of Seattle where the fee will be implemented. It is too soon to tell how the money will be used, and for what purpose. We will hopefully have more information by early September.
