The HALA Recommendations, Why We Support Them, and Why it is About Race

Source: http://www.hks.harvard.edu/centers/rappaport/events-and-news/op-eds/regulation-the-real-culprit-in-our-housing-crisis

-By the Staff of Puget Sound Sage

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.  Sage supports these measures because there is an affordable housing crisis, and we need more affordable housing.  We support increased density, so long as upzones are implemented in conjunction with affordability measures, like a linkage fee or mandatory inclusionary housing.

As a result of years of advocacy, including co-leading a coalition of organizations fighting for inclusionary housing policies, our Mayor is now advancing a strong inclusionary housing policy — a commercial linkage fee, in conjunction with a mandatory inclusionary housing policy for residential development.  The inclusionary housing policy is only one of seven recommendations we actively support. And we hope you join us in advocating for implementation of  the HALA recommendations as soon as possible at upcoming City Council meetings.

The time to act is now – Tell City Council to implement the HALA recommendations as soon as possible. 

But, let’s dig in a little more about why inclusionary housing is necessary, and why it is about race.

In the past few weeks, a magnitude of articles written by city news sources have accused the city of Seattle of “playing the race card” in justifying increased density in single-family zones.  In an article by the Seattle Times Editorial Board, published on July 22nd, Seattle City Councilmember Bruce Harrell was quoted as saying, “Housing policies are largely governed by socioeconomic patterns . . .[y]es, we can agree there’s a huge overlap between poverty and communities of color.  But to suggest that in 2015 there’s a conscious attempt to exclude in terms of zoning decisions based on race — that almost distracts from the issue.”

We would have to agree with Harrell, there is not a current ordinance that racially restricts zones.  However, the key word in Harrell’s quote is “conscious.”  Just because it is not “conscious” does not mean that the impact of current zoning laws that result in the exclusion of communities of color from certain zones is not racist.  Actually, this is called de facto segregation, and we wrote an op-ed back in March about how development in accordance with a history of racially-restrictive covenants contributes to its perpetuation.

The “socioeconomic patterns” of development, in Seattle, as well as nationally, have largely been governed by five factors: 1) a history of racially restrictive covenants; 2) redlining; 3) lack of jobs available to people of color; 4) exclusionary zoning; and 5) poorly regulated economic growth and gentrification that lead to displacement.  For the purpose of this blog, we will not delve into these factors.  However, in a July 28^th article, the Stranger paraphrases Seattle Civil Rights and Labor History Project by stating “racist covenants were merely a convenient substitute for racist zoning, which was outlawed.” This truth offers fodder for those who love to trump the semantic argument “but the zoning wasn’t actually racist, it is classist. This conversation isn’t helpful.”

We disagree. We think this conversation is helpful, not to self-righteously point accusatory fingers or judge individuals, but to help us advance solutions for lasting affordability.  Placing a spotlight on current zoning impacts prevents an “out-of-sight, out-of-mind” mentality that passively allows for perpetuation displacement of communities of color and de facto segregation well into the future.

Exclusionary zoning like single family zoning is the historical implementation of facially “race-neutral” land use laws that were deliberately crafted to keep people out, such as the disallowance of multifamily homes, and single family homes affordable to low and moderate income people (we’re not going to even touch the environmental impacts of these policies). Coupled with discrimination by banks, landlords, neighbors, it is even more difficult for people of color to access single family neighborhoods that are also unaffordable.

Moreover, displacement due to rising rents and foreclosures disproportionately impacts people of color, putting access to single-family homes even further out of reach for many people of color.  Thus, the impact is disproportionately racist, and therefore, racist.  The City has taken steps to acknowledge the impacts of institutional racism through it’s Race and Social Justice Initiative, and eliminating racial disparities is going to take exactly the kind of thoughtful policy interventions outlined in the HALA recommendations.

So, back to the solutions.  Here are 7 policies from HALA, among others, we think are a step in the right direction.

The Housing Affordability and Livability Agenda Recommendations That We Support (Among Others)

The time to act is now – Tell City Council to implement the HALA recommendations as soon as possible. 

Questions? Email Ubax Gardheere at ubax@pugetsoundsage.org or Lauren Craig at lauren@pugetsoundsage.org.

Executive Director Rebecca Saldaña kicking off our July 14th Growing Together Coalition’s inclusionary housing celebration

1. Commercial linkage fee and mandatory inclusionary housing on residential development: Both are inclusionary housing policies. One mandates that affordable units be included in new housing developments or pay a fee, and the other requires that commercial developments contribute fees towards affordable housing, and provide an associated upzone or floor area ratio (FAR) increase.  Increased density – tied to affordability – can help mitigate the impacts of historically exclusionary policies by fostering inclusion and preventing displacement with the creation of new affordable housing (if all goes according to plan, 6,000 new homes).
2. Real Estate Excise Tax: HALA directs the state legislature to pass a law that would allow cities to impose an increased Real Estate Excise Tax specifically dedicated for affordable housing. This tax would create a stable source of funding by requiring sellers of properties to pay a percentage of their earnings towards a fund dedicated to affordable housing.  This increased REET would provide a source of funding for investments in affordable housing for low-income people, currently around 30% of the Area Median Income.
3. Anti-displacement toolkit: An affordable housing preservation tool that identifies areas vulnerable to displacement. Using this tool to guide City planning and decision-making would help mitigate the impacts of gentrification and rising rents. A related preservation strategy is to establish an expert advisory body or commission to lend specialized expertise and guidance to the City’s housing strategies, bringing together representatives of tenants, owners, developers and public agencies.
4. Preservation, generally: Our HALA recommendations request that the city leverage substantial financial resources and legislative authority to preserve affordable housing. Maintaining and preserving our current stock of affordable housing prevents further displacement and generally has a smaller carbon impact than building new.
5. Sustainable homeownership: Permanently affordable homes can stabilize low-income households and communities. New and leveraged resources should go towards land trusts, as well as preserving ongoing homeownership opportunities in an increasingly expensive housing market. Long-term affordability can only be ensured by including a revenue source to pay for adequate stewards, like community land trusts, to ensure long-term affordability.
6. Tenant relocation assistance: When buildings are demolished, displaced tenants have difficulty finding replacement housing in Seattle. The recommendation is to increase the effectiveness of the city’s current tenant relocation assistance program (TRAO) by offering additional protections for vulnerable populations and against landlords’ evasion of the program. Although we support this, we would like to see assistance implemented for those displaced by rising rents.
7. “Ban the box” provision: The recommendation to increase fair access to rental housing for people with past criminal records through local legislation, education and technical assistance is great, and we look forward to seeing it positively impact communities. A related provision directs the city to provide funding for tenant counseling and landlord education to combat displacement and increase access to housing.

Any Carbon Policy Must Meet the Equity Test

Revenue Investment is a Key Component to Socially Just Climate Policy

Puget Sound Sage advocates for a strong carbon pricing policy that re-invests revenue from a carbon-pricing mechanism (whether it be a cap and trade or a carbon tax) into targeted communities that need it the most. A cap and trade or a carbon tax offer both upsides and downsides for the environment and equity, which you can learn more about here. In Sage’s opinion, the merits of each policy comes down to how well it is implemented and whether or not there is a targeted approach to supporting people of color and people with lower incomes.

A targeted investment approach would create massive opportunity to:

• Identify which communities are the most in need
• Target those investments to communities who are impacted first and worst by climate change and environmental degradation

We looked towards California’s policy SB 535 – which first commissioned a study to understand environmental hotspots in California. Based on the findings it then had community and policy experts work together to reinvest 25% of the revenue into smart investments that simultaneously address poverty and environmental challenges. This policy has resulted in the largest investment in environmental justice communities in the country. California has already moved millions of dollars to create green jobs, build affordable housing, build up transit centers and invest in clean trucks (which is vital for the health of communities living along heavily polluted truck routes).

How do we evaluate any carbon pricing policy? We start with equity and look towards investing in communities with the most need – but we should be clear about what equity means. This chart can be helpful to explain the difference.

Does Carbon WA’s proposal meet the equity measure?

Carbon WA’s proposal is to tax carbon and use the revenues to 1) reduce the sales tax by 1%, 2) give tax breaks to specific industries, and 3) put the rest towards funding a working families tax rebate. On the surface, this seems like good policy. But let’s examine their approach through a social justice lens.

Ultimately, the core concept to Carbon WA’s carbon tax proposal is “revenue neutrality,” where we greatly increase tax on one thing (carbon) but reduce taxes on other things (general sales). The problem with this is what the revenue neutral approach is about giving everyone the same via a tax reduction. Even at a 1% lower sales tax, this policy solution does not address the severe regressivity of our state’s tax policy – people with lower income pay more in taxes in Washington than any state in the country.

To their credit, Carbon WA included a portion of the revenue to the Working Families Tax Rebate a good policy similar to the Earned Income Tax Credit that gives working families larger refunds at tax return time. However, this solution does not take into account the fact that some communities live in closer proximity to environmental degradation and thus bear worse consequences. In addition, it leaves out large swaths of people with low incomes: specifically, people who lack documents to work in this country, single people, and people on fixed incomes.

For the future of our planet and for the people already experiencing the consequences of climate change, any policy must reduce carbon pollution. A successful and socially just policy will include revenue investments that create good jobs, prepare our region for climate change and incorporate the needs and input of communities of color and communities with lower incomes. We believe Carbon WA’s revenue neutral approach falls short of this measure.

Urbanists and Advocates Agree that Linkage Fees are “An Essential Tool for Affordability”

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.”

Source: The Urbanist, May 7th, 2015, “Why Urbanists Must Support Linkage Fees. . . “

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!

Seattle’s Minimum Wage Starts in Two Days (4/1/2015)

Seattle’s Minimum Wage Kicks in April 1^st 2015

With Seattle’s new minimum wage kicking in just two days, and tons of speculation about the impacts, I’d like to break down what it means for workers, businesses and our economy in some hard numbers.

What does Seattle’s minimum wage mean for workers?

Everyone in Seattle should be earning at least $11 per hour starting on April 1^st. Depending on the type of business you work for, the compensation package may look different. If you work for a large employer (500+ employees) like Target, McDonalds or Amazon, your paycheck should reflect an hourly wage of $11 per hour. If you earn minimum wage ($9.47) today, then in two days you should earn $1.53 per hour more before taxes. If you work 32 hours a week and are paid every two weeks, your paycheck should show an increase of $91 before taxes. By December 31^st 2015 you should have earned $1,836 more before taxes. That is enough money to buy a quality bed, put down a deposit on an apartment, or spend $10 on lunch three times a week for an entire year.

If you work for a smaller business (500 or less employees) your paycheck should reflect at least $10 in direct wages per hour, and $1 dollar in either tips or health care benefits. If you don’t get tips or healthcare benefits, you should be earning $11 per hour as your wage. So for example, if you are a tipped worker, your wages should reflect a $.53 cent increase AND your employer should show that you have earned least $1 in reported tips or they have contributed at least $1 per hour you worked towards a health care package. If you work 32 hours a week and are paid every two weeks, your paycheck should show an increase of at least $31 in pre-tax wages and at least $60 in compensation in the form of tips or healthcare benefits. By December 31^st 2015 you should have earned $636 more before taxes.

What does Seattle’s minimum wage mean for the economy?

The University of Washington[i] estimates that nearly 37,900 people are currently earning minimum wage in the City of Seattle. As we’ve already estimated, each person will earn between $636 and $1,600 more this year if they work 32 hours per week until December 31st.[ii] If we look at the aggregate increase for all 37,900 workers earning minimum wage – minimum wage earners in Seattle could earn between $24 million and $69 million more in 2015 than they would have without a higher minimum wage. That represents a significant increase in buying power for Seattle’s lowest wages workers. That’s enough money to buy between 2.4 million and 6.9 million $10 lunches.

What does Seattle’s minimum wage mean for businesses?

Every business has a different model and labor costs can represent a different percentage of your total labor costs. The implications for restaurants have been dominant in the media, so we’ll explore what the implications are for a Seattle restaurant. Using the Washington Restaurant Association’s break estimates of a typical budget breakdown featured in the Seattle Magazine, we can get a sense of the total operating costs.   According to Anthony Anton, CEO of the Washington Restaurant Association: 36% of funds are devoted to labor costs, 30% to food costs and 30% to everything else. These restaurants then operate on a 4% margin.[iii]

If we look at a $1 million dollar business, labor accounts for 360,000 of their total operating costs. Assuming all workers earn minimum wage (which means this estimate is looking at the largest possible increase to labor costs as the typical wage for cooks in our region is $11.27 per hour and the typical wage for dishwashers is $10.45 per hour)[iv] their labor costs should increase between 380,160 (if all workers are tipped) and 417,600 (if no workers are tipped).  It’s safe to say that the total labor costs will be somewhere between those two numbers.  Assuming 50% of work hours are tipped and 50% are non-tipped).  The largest possible increase to labor costs for this business would be 398,880 – representing a 10.8% increase in labor costs. However, what is that increase compared to total operating costs? With a 10.8% increase in labor costs, total operating is no longer 1 million, but 1,038,880 – a 3.8% increase in total operating costs.  A restaurateur could conceivably raise prices by 3.8% to make up the difference.  For a $10 meal, that is a 38 cent increase.  In short – in two days 38,000 people should see increases to their paychecks and some prices may marginally increase. By the end of the year – millions more dollars will have gone to the people who drive our economy – workers.

[i] https://www.documentcloud.org/documents/1096119-uw-evans-report-on-15-minimum-wage.html

[ii] By comparing the number of FTE’s in Seattle (Employment Security Department Data) to the total number of jobs in Seattle (Puget Sound Regional Council Data) we were able to come up with a rough estimate of the typical hours worked for an employee in Seattle – 1600 hours per year or 32 hours per week.

[iii] http://www.seattlemag.com/article/why-are-so-many-seattle-restaurants-closing-lately

[iv] According to 2014 occupational wage data at the Employment Security Department the median wage for cooks in the Seattle Metropolitan region is $11.27 per hour and the median wage for dishwashers is $10.45 an hour.

A Vision for Community-Supported Equitable Development in Southeast Seattle

It is not a coincidence that Southeast Seattle has the greatest incidence of people with low incomes and possesses the highest poverty rate in the city.  In Southeast Seattle, affordable housing and quality jobs are increasingly hard to find for low-income people and families, who are disproportionately people of color, immigrants, and refugees as a result of the history of segregation.  However, the face of Southeast Seattle, and the country, is changing.  As of 2012, a majority of the nation’s infants were people of color, which now puts the white population of the country in the minority.

South Communities Organized for Racial and Regional Equity and Puget Sound Sage organizing for equitable development in SE Seattle

Currently, Seattle is the fastest growing city in the country – average rents have increased even more dramatically in the past year and the trend does not show signs of slowing.  Demographic changes in Southeast Seattle and South King County indicate that people of color have been displaced from their communities as the cost of living in Seattle has become unsustainable for them.  As a result, low-income communities and communities of color are relocating to resource-poor suburbs while a largely white and wealthier population remains in Seattle. This segregative effect in major metropolitan areas are deepening racial disparities in this city – disparities we have long sought to change.

However, smart planning, policy and investments in the community can mitigate or even reverse this trend. The opposite of gentrification-fueled displacement is “prospering in place” – where low-income people and families can afford to stay where they are, access the region’s economic opportunities and deepen cultural roots in their existing communities.

Low-income communities and communities of color in Seattle have known this far too long and all too well.  This past fall, approximately fifty people participated in a convening and survey through the city-sponsored, community-led equitable-development-focused Community Cornerstones program.  Six multi-cultural coalitions, two foundations, four business associations and eight city staff from five departments were convened to share equitable development plans and accomplishments, deepen collaborative relationships and explore opportunities to coordinate ongoing efforts.

Through synthesis of the surveys and convening notes from community coalition participants, several overarching themes emerged that Sage was able to connect to project and policy next steps, in a report informed by community.

Themes:

• Growth must be place-based and culturally relevant.
• Cultural anchors and community-supported economic development must be prioritized.
• Government entities need to understand community vision in order to facilitate positive growth and increase capacity to align programs and funding that make those visions happen.
• Community leaders need to be part of decision-making processes.
• Multi-racial, multi-cultural equitable development coalitions have emerged and are currently working directly with the city as a resource. These community organizations must be adequately resourced to take ownership of their vision and actively participate in shaping development.
• Community organizations expressed a desire for regional cohesion, and that organizations be adequately networked, working across cultures and sectors to become more effective, powerful and farsighted. Only then will meaningful change stem displacement and grow significant economic opportunity in the Rainier Valley.

Click here for the full report. For more information, to get engaged in the community-led equitable development movement as a community leader, or are a foundation looking to resource communities already doing equitable development work, contact the authors of the report, Ubax Gardheere and Lauren Craig .

What does the Carbon Pollution Accountability Act do?

By: Dimitri Groce, Community Research Fellow

As a result of climate change, our region can expect increased wildfires, extreme weather and heat waves, which will have a disproportionate impact on people of color and people with lower incomes.

Since our last post, we have advocated with leaders committed to economic and racial justice to ensure tangible benefits for people of color and people with lower incomes from the Governor’s Carbon Pollution Accountability Act (CPAA).   Below, we break down exactly what the CPAA does and what it means for people with low-incomes and people of color.

First – the bill sets a limit on carbon pollution and targets big polluters in Washington State.  In order to meet this limit, industries that pollute more than twenty-five thousand metric tons of carbon dioxide or more per year will bid on emission “allowances”.  The amount of allowances a facility may have per auction will be capped, and the prices of the allowances will gradually increase every year until 2026. The bill prohibits free allowances ensuring that every big polluter participates in an effort to reduce our regions carbon pollution.

What’s the specific benefit for communities of color and people with lower incomes? In addition to reducing carbon pollution, the state will generate $1 billion in revenue from these auctions, which will be used to create clean energy jobs, invest in education, fund more affordable housing, and fund working families tax rebate.

Most importantly for local communities most impacted by climate change, the bill includes a provision for “hotspot” mapping that will show how the disproportional impacts of environmental degradation intersects with communities of color and communities with lower incomes.  Additionally, the CPAA creates an Economic Justice and Environmental Equity advisory committee, which allows leaders who are the most impacted by pollution to monitor the CPAA and advise the Department of Ecology on how to spend revenue, creating a pathway for the solutions to climate change to be informed by and benefit the communities most impacted.

Linkage Fee “Scare” Tactics Debunked: The Halloween Edition

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.

Lead Coalition Organizer Ubax Gardheere testifying in support of the linkage fee to City Council October14th

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.

MYTH #1:

Developers are being unfairly demonized. They pay taxes just like everyone else.

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.

MYTH #2:

A linkage fee will result in less affordable housing being built, not more.

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.

MYTH #3

Over-regulation is strangling housing supply. If we got rid of regulations, the private market could build our way out of the crisis.

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.

MYTH #4

If you increase costs for developers, they will just pass that onto renters.

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.

MYTH #5

Linkage fees are a tax on density. Developers now have less incentive to build up, resulting in lower-density growth.

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.

MYTH #6

Developers did not have time to weigh in. We should slow down.

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.”

 

A Green and Brown City: Why we need Equitable Growth and Climate Justice

On Monday, I made the case that climate change is one of the biggest threats to social, economic and racial equity. But, how, specifically could climate change impact Seattle? And what does this mean for low-income people and people of color?

As a coastal city, Seattle will be directly affected by climate change. We can expect more extreme heat in the summer, more rain in the winter and the possibility of severe storms. But even more startling, by 2100, just 85 years from now, scientists predict sea levels will rise in Elliott Bay by 6 to 50 inches. If nothing is done to mitigate climate change, land area with substantial value will be lost. This includes parts of downtown Seattle, parts of West Seattle, South Park, Georgetown and the Port of Seattle. Georgetown and South Park are two neighborhoods where the population is disproportionately people of color and lower-income families.  In addition, local, good-paying maritime jobs and our food sources are at risk as port facilities, seafood beds and fishing fleets are threatened.

Despite these impacts, scientists say our region will fare much better than many other regions across the country. In fact, climatologists predict that our region will be one of the ideal places to move to avoid the extreme weather and unbearable heat we can expect across the country. Clifford Mass predicts that the Pacific Northwest will become a “potential climate refuge”. If this is true, our region must not only prepare for the impacts of climate change, but also for population growth over the next 80 to 100 years.

But even before we see an influx of new residents as a result of climate change – Seattle is already grappling with a dramatic growth of higher-income earning households moving to the city, resulting in a shortage of apartments and skyrocketing rents. On the supply side, developers are largely building new housing for the upper end of the rental market, leaving a massive gap at the middle and bottom. As a result, Seattle is already seeing displacement of communities of color – especially immigrant and African American communities – to the suburbs.

This displacement is occurring just as Seattle has emerged as one of the nation’s most sustainable cities. Seattle is a leader on curbing carbon emissions and preparing for the worst of climate change affects. We’ve launched large-scale energy efficiency building retrofits, implemented sustainable building practices, invested in light rail and streetcars, expanded bikeways, planned for transit oriented development, piloted urban farming and food forests and crafted an ambitious Climate Action Plan.

Which leads us to wonder, are we investing public resources into a climate-resilient city just in time for communities of color to be forced out? This future is possible, but not inevitable. If policy makers, environmentalists and equity advocates plan together to adapt our city for both growth and climate change, we can build a green and brown city, where all families can live and prosper.

What is a Linkage Fee and Why Do We Need it Now?

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.

AN AFFORDABLE HOUSING DEVELOPMENT IN WEST SEATTLE. Photo: Kaizer Rangwala (Courtesy of Marty Kooistra’s Op-Ed in Crosscut, September 16th, 2014)

Why is a linkage fee vastly superior to any revision of the City’s IZ policy?  Below are some top reasons:

1. More Affordable Housing: a linkage fee allows the City to ensure production of far more units on a faster timeline than IZ.
2. Fair to Developers: linkage fee is fair to developers because it distributes the responsibility of contributing towards affordable housing evenly and removes uncertainty about costs of projects.
3. Fair to Individual Taxpayers: linkage fee is fair to taxpayers who already generously tax themselves for the housing levy and are investing billions in new infrastructure that benefits developers. Seattle taxpayers have paid their fair share since 1981. Through the Housing Levy, they have paid for 58% of all affordable housing stock to date. Private developers, through the incentive zoning program, have contributed 11%. Also, renters will not absorb the cost of these new fees because Econ 101 dictates that developers would charge more now if they could.
4. Encourages Urban Sustainability: linkage fee increases overall urban sustainability by making the most of public transit investment and is not contingent on density.

 

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! Click here to take action now.