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Thursday, July 26, 2007

Re: The Morning Headline Police

posted by on July 26 at 14:06 PM

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.

Josh wrote:

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.

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Fact Check - "only" 11 projects that used this subsidy were built - but far more were built that rent at comparable levels without taking advantage of this particular program.

Also keep in mind that the median rent the City likes to quote is based on Dupre and Scott's work - which is skewed toward newer and larger buildings because that is who they survey. Lots and lots of units go for less, at least until they are torn down because subsidies like this make it a lot more profitable to do so (as does allowing all kinds of projects that are dubious under the existing land use code, but that's a separate problem).

Posted by Mr. X | July 26, 2007 2:19 PM

It depends on what the meaning of middle class is.

If you mean people like me who make as a single person (with one son) more than the median family of four ... sure.

Otherwise, you effectively accelerate the forcing out of truly middle class families and let people like me get subsidized rent.


Posted by Will in Seattle | July 26, 2007 2:23 PM

Hmmmm, I wonder who Mr. X is? Erica, thank you for being the voice of reason here. Josh was clearly regurgitating the rhetoric of a certain Seattle activist without doing much thorough research.

I'd like to point out something that the "sensationalists" don't want you to understand...this is ONE of MANY incentive programs the government can use to encourage affordable development. ONLY ONE. Tailoring this toward middle income folks will not be the end of the world for very low income folks, who MOST ALL the government programs are REQUIRED to serve by State and Federal law.

This is one measley program with very little fiscal impact to the Seattle citizen that we could TRY, just TRY, to use to help middle income folks who are currently fleeing from the city because they cannot afford a home on their pretty damn decent salary. And that's sad.

Posted by Corliss | July 26, 2007 2:33 PM

i see ecb's point, but the problem is not this small project alone, but the trend and the new move to make the new fight the fight for workforce housing, "work force" housing is the new sexy term for politicians and neighborhood leaders to say theyre doing something about housing. it is a way to hide disdain for the non voting poor and to hide their nimbyism.

the problem is also that the number of politicians who will stand up to this trend is getting smaller. Most of the projects are workforce housing, just like the new one that is going up by the stadium. It is the trend thats the problem. housing authorities are moving away from their commitments to the poor by taking on new hope 6 plans which studies show due cause a loss of units. seattle has lost thousands of units with the convention center and all the goofy glitz that went up. those units were never replaced.

make no mistake, this is the way of the future, build housing for those future voters and let the poor live on the margins, the days of subsidies for people that dont vote are coming to an end, and it makes it easier for them to put the poor in the back burner, because lets face it, most voters here-or anywhere- do not want to subsidize low income housing, they just will not admit it. the pronlem with this is that your councils become more and more spineless and next thing you know they will sell historic buildings to developers to build 5 star hotels.

fox and the ever shrinking housing cadres are fighting a losing battle, but we are all lucky that they are out there fighting.

Posted by SeMe | July 26, 2007 2:56 PM

Nice post Erica. I feel we have to look to help house the residents of Seattle who are close to the median income, both above or below it. I know some activist are focused almost solely on the poorest, who already receive a lot of help, but at the expense of ignoring the working poor. What a loss if Seattle continued down the road of only the richest and poorest of citizens.

Posted by StrangerDanger | July 26, 2007 2:57 PM

Note to poster #3 and #5-

Look in the newspaper classifieds or on Craigslist - there is NO crisis for people looking at finding rentals "affordable" to those at 80% and above of median income. None, nada, zip.

I make a lot less than $48k/year but consider myself to be reasonably well off, and have no expectation that the City ought to subsidize me. However, it would be nice if they didn't actively subsidize the demolition of the remaining places that I and people like me can actually afford without government assistance.

Posted by Mr. X | July 26, 2007 3:04 PM


I entirely agree with your points, but Mr. X brings up a useful point in the other thread:

Doesn't this potentially subsidize the destruction of low-income housing to make way for middle-class housing? I would be more comfortable with this proposal if it specifically omitted that kind of project.

Posted by MHD | July 26, 2007 3:37 PM

What Mr X said in #6. It seems that ECB's defending efforts against a crisis that doesn't necessarily exist, or at best isn't as bad as the housing situation is for the poorer working classes.

The Mayor is misfocusing his efforts. Is he doing so intentionally?

Posted by Gomez | July 26, 2007 3:40 PM

No subsidies for people who can work (such as Stranger staff.)

Subsidize only "defenseless populations."

Posted by David Sucher | July 26, 2007 6:54 PM

How many years do the builders get the tax breaks under the current system? If they get them for the 12 years mentioned for the new program, would that be $7.2 million and wouldn't that be millions of dollars of subsidy as John Fox claims? I'm not sure it matters one way or the other but if he's right, he's right.

The problem seems to be that Seattle is just too damn popular. If we would just cut back on transit and bike lanes, leave the viaduct up, tear down popular bars, build condos without balconies and have a bad attitude towards nightlife maybe people wouldn't want to live here.

Posted by whatever | July 26, 2007 9:15 PM

I disagree with Erica, Josh, and the Mayor. Sucher is close.

The Mayor's program and its expansion turns the tax code into swiss cheese. It is actually a tax shift from the developers of targeted housing to all other property owners in Seattle. The various levies are targeted to raise the same amount.

Who pays the property taxes not paid by the targeted developers? The rest of use, both owners and renters alike. Renters pay higher property taxes through higher rents. The tax shift is silent and helps the targeted developers and a few members of the select housing type.

Many poor unsubsidized households would pay higher rents because the tax was shifted to their units from the Mayor's favored new developments.

The program is not very fair, as so few benefit at the expense of many and the integrity of the property tax. How are those tenants or new owners selected? There are many low income or moderate income households facing rising rents and prices in Seattle.

The program is not very efficient and gets little affordable housing bang for its buck because much of the development would have occurred anyway (economists would term this the consumer (or in this case, developer) surplus).

Newness is an expensive characteristic in housing. This is appreciated by John Fox. He pushes this to the extreme is asking that all affordable sticks be preserved.

The most powerful tool for affordable housing that Seattle city government has is the zoning code. They used it last year: the allowed tall skinny building downtown and allowed new multifamily structures in urban centers with less parking. That was good. They could do more. More than 70 percent of Seattle is zoned single family. It could be more dense by allowing cottage housing and detached accessory dwelling units. Any single-family zoned land on 15-minute headway bus routes could be upzoned to low rise multifamily. Most multifamily and commercial zones could be upzoned. Northgate, Roosevelt, U District, Capitol Hill, and MLK Jr. Way South could be upzoned around LRT stations.

The SHA is discussing Yesler Terrace. It should be significantly upzoned to be similar to downtown or First Hill. The SHA would gain significant value and it could use its returns to subsidize housing throughout the city. Yesler Terrace would be a great place for tall multifamily housing: next to downtown and the hospitals with good transport. SHA could afford to provide more subsidies on less costly land elsewhere.

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