low income – Page 2 – Puget Sound Sage

Developers Should Pay Their Fair Share

As we mentioned early this week, over the next 20 years Seattle needs to add approximately 28,000 more homes to meet future demand. We do not have enough units to meet current demand because 40% of Seattle’s residents are low income and are being pushed out of the Seattle housing market.

Seattle voters have a long history of supporting affordable housing, and have approved a Housing Levy every year since 1981. The levy has paid for 10,000 affordable apartments for seniors, low- and moderate-wage workers, and formerly homeless individuals and families, as well as providing down-payment loans and rental assistance. However, it is not enough to meet future demands. As we mentioned in our last post, Seattle is considering implementing new fees for developers who are poised to profit off of Seattle’s growing housing market and infrastructure investments.

Puget Sound Business Journal, “Developers move forward along Seattle’s waterfront,” Marc Stiles, Jul 28, 2014.

Developers claim that if they are asked to participate in an affordable housing program that requires them to pay a fair fee to build in Seattle, this will disincentivize growth. In other words, they will take their marbles and go somewhere else. But has that really happened since Seattle, adjusting for inflation, added a 43% increase to its in-lieu incentive zoning fee for residential developments, and a 22% increase for commercial developments last year?

Just this year, Chris Hansen has spent nearly $64.7 million for around 7.3 acres of land in SoDo. Mill Creek Residential is starting two apartment projects here this year, one on Dexter Avenue in South Lake Union. The University of Washington Board of Regents approved two 80-year ground leases and a pre-development agreement for a 1.15 million-square-foot mixed-use complex on Rainier Square. These are just a few examples from a very long list of new development projects cropping up in and near downtown Seattle. In reality, there has been a feeding frenzy of development in Seattle, and investors from all over the world have plans in the works. This means that investors will continue to be attracted to Seattle, even with continued regulation.

Seattle does need an influx of housing, but the housing market needs to respond to the full housing demand of Seattle’s current and future residents. New apartments in Seattle are already outside what low-income people and families can afford, and an unregulated housing supply will leave low-income people – who are mainly people of color, immigrants and refugees – displaced from Seattle. They will be forced to commute long distances to work in Seattle, and travel back to suburbs with less investments and limited time to contribute to the health and well-being of their communities and children. Private developers contributing their fair share could go a long way in closing the affordable housing gap as our city grows.

Seattle City Council Introduces New Affordable Housing Policy Options

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.

Seattle is now 40% Low-Income (Makes Less than 80% of the Area Median Income). Data provided by Seattle City Council Housing Needs Data Report–Existing Conditions: Workforce and Affordable Housing — 40% of Seattle’s residents are now considered low-income. They make less than 80% of the Area Median Income. (Data provided by Seattle City Council Housing Needs Data Report–Existing Conditions: Workforce and Affordable Housing)

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.

Seattle City Council Committee Approves $15 Minimum Wage

A Seattle City Council committee unanimously voted today to pass the Mayor’s proposal for a $15 minimum wage. The ordinance passed out of committee will phase in the minimum wage over the next three to seven years. Specifically, it will require large businesses (500+ employees) to pay $15 by 2017 or 2018, and small businesses (less than 500 employees) to pay $15 by 2019 or 2021.

This historic vote represents a huge victory for workers, communities of color, and progressive leaders through the U.S. The final vote in Council is expected to occur next week.

$15/hour minimum wage proposal passes through Seattle City Council's committee with a unanimous vote. — Seattle’s $15/hour minimum wage proposal passes through City Council’s committee with a unanimous vote.

In the end, City Council did not make some of the dramatic changes recently rumored in the media, but they did make some modest amendments that alter the deal struck by the Mayor’s Income Inequality Advisory Committee.

Below, we highlight and explain some of the most significant changes:

Amendments that support workers:

Council strengthened the power for the City to enforce the minimum wage throughout the ordinance. The City of Seattle is undergoing a separate stakeholder process that will determine how the City handles all labor enforcement strategies; however, the amendments passed today allow for stronger mechanisms than in the Mayor’s proposal. They include:

Extending the period a worker has to report a violation after it has occurred, from just 180 days to three years, which dovetails Washington State law.
Ensuring that, if wage theft occurs, employers must not only pay back wages to wronged workers, but they may be subject to a penalty up to $500 for first time violations, $1000 for second time violations, and $20,000 for subsequent violations.

Councilmember Sawant successfully inserted a provision that codifies the City’s intent to identify additional funding for non-profit organizations.

Amendments that weaken the ordinance for workers:

Council pushed back the effective date to April 1, 2015 from January 1, as originally proposed.

The City will allow employers to pay a sub-minimum wage (85% of the minimum) to 14 and 15 year old youth, people with certain disabilities, and apprentices. Employers must apply for a waiver granted by the Department of Labor and Industries – a practice already done under State law. This provision will potentially allow for discriminatory wage practices that are currently allowed under State law. However, the employer will also have to apply to the City for a permit as well. Between the two permits, the requirement for a waiver will create transparency for workers and the public about which employers are requesting and have received permission to pay sub-minimum wages.

Implications of the Mayor’s Proposal for a $15 Minimum Wage

What is the Income Inequality Committee’s proposal to raise the minimum wage?

If the Council approves the Mayor’s proposal to raise the minimum wage, low-wage workers in Seattle and our local economy will see significant economic gains.

46% of Seattle’s low-wage workforce, who work for large employers, will make $15 by 2018.
Local small businesses and small non-profits will have 5 to 7 years to phase in the minimum wage to $15, and will reach parity with big businesses in 2025.
After all businesses have phased-in the minimum wage, the minimum wage standard will be equivalent to roughly $14.30 in 2015 dollars.

Table 1. Mayor of Seattle’s Minimum Wage Proposal

The Mayor’s proposal phases in the minimum wage in four separate tiers: A, B, C, D. As of January 1, 2015, the minimum wage for most businesses in Seattle will be $11/hr. The minimum wage standard will be tied to inflation starting on January 1, 2018. By the end of 2025, all businesses in the Seattle will pay the same exact minimum wage: an estimated $18.13/hr with a 2.4% adjustment for inflation.

Table 2. Phase-In Tiers For Proposed Minimum Wage

Who Will Benefit from the Mayor’s Income Inequality Proposal (And When)?

Who will see a wage increase, and when, depends entirely on who you work for and what types of benefits you receive. Combining government data with a report produced by the Center for Economic and Policy Research, we estimate that nearly half of Seattle’s 102,000 work for large businesses, and 26% receive health-care coverage. For exact breakdowns of workers for each tier of minimum-wage phase in, see Table 3.

Table 3. Number Workers affected by Tier of Minimum Wage Phase-in

How much more money will workers earn?

Over the next 10 years, low-wage workers will earn nearly $3 billion dollars more than their current wages (assuming current wages rose in line with inflation). Our recent report shows that Seattle’s low-wage workforce earns an average of $11.95 per hour and works roughly 32 hours per week. We estimated their new earnings based on the difference between the proposed minimum wage and the current average wage of a workers making less than $15 an hour. The table below shows that how much more in earnings workers affected by the policy will make in each year of the phase-in. For example in 2017, when large businesses who do not provide health insurance reach $15 per hour low wage workers will earn nearly 150 million more in 2017, than if their wages had only increased with inflation. Over the 10 year phase-in period, the cumulative earnings for affected workers would be $2.9 billion dollars.

1 Our recent report showed that roughly 102,000 workers earn below $15 an hour. Using Economic Census data to estimate that 46% of workers are employed by large businesses with more than 500 employees anywhere in the nation. A national report, from the Center for Economic and Policy Research, indicates that only 26% of low wage workers receive healthcare coverage, and our own analysis of Census MicroPUMS data indicates that there are nearly 10,000 tipped workers in Seattle.