City Re: The Morning Headline Police
posted by July 26 at 14:06 PMon
Not that I’m one to defend the mayor, but I think his proposal to expand a tax-exemption program to include people at higher incomes may make a lot of sense.
The mayor’s new plan encourages landlords to rent to people with higher incomes than is currently allowed under the city’s housing program. Currently, landlords get tax breaks when they set aside a certain amount of units for renters making 70 percent of the median income. Nickels wants to extend the tax break to landlords who rent to those making 90 percent of the median. Translation: Landlords would now get the tax break for renting to individual renters who make $49,000 a year rather than $38,000 a year.
There are certainly some good things about Nickels’s idea. First, he’s making the tax breaks available in more neighborhoods; expanding it from 17 neighborhoods to 39. Second, he wants to add couples into the plan.
Actually, Nickels’s proposal would give developers (those building new residential units; not all “landlords”) a 12-year break on their residential property taxes if they agreed to make between 20 and 25 percent of their units affordable to people making between 80 and 100 percent of median income. (Commercial space would still be subject to full property taxes).
Currently, the system provides the tax incentive to developers who keep between 20 and 30 percent of their units affordable for people making between 60 and 70 percent of median. The problem with that system is that it doesn’t provide enough incentive to make it worth developers’ while to take advantage of the program; it may not be politic to say so, but developers operate in the free market, and they aren’t going to build affordable housing if it costs them more than building housing at market rate. Since the program was started, in fact, just 11 projects with affordable units have been built.
Moreover, contrary to what John Fox claims, the city isn’t giving individual developers “millions of dollars.” The total annual cost of the program, according to the city, is just $620,000; that’s an average subsidy of $131 per unit per year. The median homeowner pays $2.26 a year to fund the program.
Subsidizing middle-income housing makes sense, particularly for families. The larger the apartment, the larger the differential between “affordable” and market rate. For example, in one project being built in the University District under the current program, full-price one-bedrooms go for $1096, and apartments for those making 70 percent of median income go for $954—a $142 break. The break on two-bedrooms is much larger: $1,112 for a subsidized unit, versus $1,386 for an unsubsidized unit—a cut of $274.
I’m not disagreeing with Josh that the mayor’s plan doesn’t solve the problem of affordable housing for very low-income people. But it never has been aimed at low-income people (unlike other city programs, such as the housing levy), and Nickels isn’t making any pretense that it is. In fact, the mayor sent out a press release saying as much, stating that the program is aimed at “middle-income wage earners … priced out of the market with few places to turn.” The city should do more to fund low-income housing, but we have a middle-class housing crisis, too; my rent, for example, costs me almost half my monthly income, substantially more than the 30 percent that housing folks agree is “affordable.”
The one place I definitely disagree with the mayor’s proposal (sorry to be so contrary, Josh!) is the expansion of the program throughout the city. Originally, the program targeted neighborhoods where affordable housing was most scarce; because the availability and definition of “affordable” differs throughout the city (White Center vs. Capitol Hill, for example), applying a broad brush citywide (and allowing developers to build $1000 apartments in parts of the city where the average unit might be closer to $700) makes no sense.
As an aside, almost none of the City Council candidates who’ve spoken to the Stranger’s editorial endorsement board over the past couple of weeks came even close to guessing the median rent for a one-bedroom apartment; most guesses fell hundreds of dollars shy of the true median of $1,010.