The Housing Levy is also Symbolic

Written for the March 2009 issue of Housing Washington.  Housing Washington is a statewide newsletter published by the Low Income Housing Institute. Housing Washington focuses on the politics and events surrounding affordable housing in Washington state. http://www.lihi.org/housingWashington.html

The Housing Levy is also Symbolic

The Seattle Housing Levy is important for two reasons. First, the levy provides funds that preserves existing affordable housing and produces new affordable housing, improving the quality of life of our neighbors and community. Second, the levy is a highly symbolic act where citizens ratify efforts to address Seattle’s shortage of affordable housing.

While the numbers seem large, housing levies would have a very limited impact on the availability of affordable housing without leveraging federal, state, local and private resources. We are so short of affordable housing that no effort to solve the problem by building new permanently affordable housing appears possible without a historic shift in public outlook. In Seattle, a $100 million levy dedicated to building new permanent housing outright would build perhaps 400 housing units over five to eight years against a shortage of many thousands today. The current recession will put us further behind. The inability to focus on permanently affordable housing is unfortunate because the public receives the greatest benefit (return on investment) from permanently affordable housing – subsidized housing owned by the public or mission-driven nonprofit organizations.

All levies feature a bewildering variety of solutions carefully crafted to maximize leverage from other funding entities. Strategies include financing permanently affordable housing, supporting the private development of term-limited affordable housing, home buyer assistance and rental assistance, among others. The objective of most affordable housing programs is to provide quality housing at an affordable price relative to income. A subset of affordable housing is targeted to groups that need a combination of housing support and services that together may exceed the cost of free housing, including housing the homeless. However, providing free housing to extremely disadvantaged or troubled individuals and families has been shown to save money when the social and economic costs of not providing decent housing, such as emergency services, is included. Understanding this paradox is the historic shift in public outlook we are working towards. Like the closely related issue of health care, education by circumstance may be the only meaningful agent of change. If our current recession persists and worsens, our common education may be at hand.

Two issues related to affordable housing levies remain relatively unexamined. First, how do we move more term-limited affordable housing into the permanently affordable column? Much can be done in this area. For instance, all publicly supported term-limited affordable housing should feature a transferable option for public purchase at a pre-set price and first right-of-refusal on subsequent sales. We should not buy the same affordable housing benefits over and over. Second, how does the Byzantine myriad of housing standards impact our ability to provide decent housing now? While publicly-supported affordable housing standards typically exceed the actual conditions of lower-income households, the discrepancy is glaring for homeless individuals and households. Our high-minded standards are a huge barrier to providing publicly supported permanent or semi-permanent housing to the homeless. Secure and comfortable tent cities are not only possible, they are provided to refugees all over the world. We can do far better than overnight shelters without getting anywhere near HUD standards – and it’s time we do. There are times we should temporize standards in favor of a higher good.

In recent times, Seattleites have shown a willingness to invest in their future, voting for libraries, parks and transit when measures have clearly articulated future benefits that serve the common good. The generosity of Seattleites in their support of housing levies has been good, passing long-term levies in 1981, 1986, 1995 and 2002. Seattleites even supported the failed over-reaching $150 million county-wide levy in the midst of the 1992 recession. The symbolism of the levy can not be overstated.

Direct citizen support for levies creates momentum for change, gives politicians cover to support affordable housing efforts beyond levy funding, and upholds our view of Seattle as a compassionate place – however short we fall in execution. In addition, the high quality of publicly financed affordable housing provides an aspirational standard for all housing.

In formulating a new housing levy, we need to keep these principles in mind:

  • The bulk of benefits should be targeted to the least fortunate
  • Deal terms should provide opportunities for future public purchase (when the housing supported is not permanently affordable)
  • High standards should not interfere with providing homeless people a permanent address

And since the need is so great, the levy should be as large as we believe the public will support.

David Schraer

David Schraer is a Seattle architect with in-plain-air architects and was the first executive director of the White Center Community Development Association.  See www.inplainair.com and www.wordpress.lightandair.com for his work and writing.

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Housing at Risk (longer, unpublished version)

The Puget Sound Regional Council projects nearly half a million new residents in the coming decade. Where will they live? Seattle’s housing supply is at new risk from the combination of population growth, a slowing economy and a growing array of rapidly changing bureaucratic processes that increase building costs. When housing is in short supply, why are we making it more complex and expensive to build?

For over a decade, Seattle has experienced an unprecedented building boom during which prices were always up, money was cheap, and wealth was inflated by rapid appreciation. The boom followed the anti-tax, anti-immigrant movements that slashed government revenue and led to policies requiring new developments to pay for every imaginable impact. Planning and building departments were ordered to cover their costs through fees, creating many new hurdles and passing the costs on to developers. Fees, professional services and interest now add thousands of dollars to the cost of every new home, apartment or condominium.

Cities once understood that development generates community wealth through sales and property taxes, construction wages and new economic activity. Permit fees were low, impact fees unknown and cities funded their planning and building departments from general revenues. Municipalities considered streets, sidewalks, utilities and public services as investments that would generate community wealth over time.

In contrast, Seattle now wants a cut up front, before anyone makes a dime. The city penalizes new development rather than waiting patiently for taxes that flow in their wake. There are problems with the pay-to-play approach. First, additional fees and processes increase the initial project risk and costs. These costs are marked up and passed on to the buyer or renter. Second, the higher risk and costs inhibit development and reduce market supply, further increasing prices. Third, the city’s enthusiasm to off-load costs to the private sector results in policy gimmicks, such as Incentive Zoning.

If enacted, Incentive Zoning will trade increased zoning height for the increased development of workforce housing. The goal is great, but Incentive Zoning is just one example among many flawed gimmicks fostered by the pay-to-play policy approach. Incentive Zoning creates new bureaucracy, is boom-dependent, and hinders housing development by increasing costs. Worse, complex zoning gimmicks invite mischief by inserting city hall directly into the marketplace. A too-relevant example: for years Seattle doled out increased height for downtown office buildings in return for ‘public space’ that mostly resulted in private profit.

The elephant in the room is the private sector provision of affordable older housing. New homes are not the most economical path to increased workforce housing. Almost all workforce housing has been and will be provided by older homes and apartments in the private sector. The only way to create older homes is to build new ones. We need to remove barriers to housing development and build the large numbers of new housing units required to moderate rents and housing prices. The housing sector is the one place where trickle-down economics work.

Public and philanthropic investment should focus on providing permanent affordable housing that maximizes the return on our investment, such as land trusts and mission-driven, nonprofit-owned housing. Only permanent affordable housing justifies public investment at the local level. Funding for permanent affordable housing should be simple, reliable and transparent. Housing levies, the primary traditional mechanism for local funding of affordable housing, are a good example. Seattle residents have overwhelmingly supported housing levies, leaving no justification for an end-run around voters in expanding public support for affordable housing to workforce housing.

During an economic downturn, pay-to-play barriers cobbled together during the boom will reduce our housing supply and rapidly inflate prices. With political will, Seattle can dramatically increase the supply of housing through policy changes. Significant increases in zoning capacity, new clarity and stability in codes, and a return to funding infrastructure through broad-based taxes are all measures that will increase housing supply and moderate prices. Lowering the risk and cost of developing housing lowers the cost of building mission-driven affordable housing too.

There is no reasonable expectation that the Incentive Zoning benefits will outweigh easily foreseen negatives. Even the studies cited by Seattle City Council* finds that Incentive Zoning increased overall housing costs in one of two cities studied. Rent control comes to mind when thinking about potential unintended consequences from Incentive Zoning. Another idea rooted in good intensions, rent control wasn’t expected to lead to widespread slum development and private enrichment Despite wide understanding of its dysfunctional nature, rent control is virtually impossible to eliminate once implemented due to the powerful vested interests it creates. The comparable thicket of potential unintended consequences from Incentive Zoning is unexplored. What if Incentive Zoning creates many affordable housing units but makes housing overall much more expensive? Will Incentive Zoning improve the overall housing situation for poor and middle income households? Will the public be lulled into believing that housing levies are no longer required to support affordable housing?

We don’t need indirect solutions supported by more complexity in our bureaucracies, we need a direct strategy to create and maintain broadly affordable housing. Our primary strategy for affordable housing must be to build as much quality housing as possible to increase supply. Our secondary strategy should be to directly fund as much affordable housing as possible, all in permanent ownership by public and not-for-profit housing agencies. Public policy that increases the cost of developing dense, green, quality housing equals more expensive housing overall and less affordable housing. There are times for cities to be pro-development. When the world, country, state and city are in recession, or worse, and housing is in short supply, that time is now.

*The Effects of Inclusionary Zoning on Local Housing Markets: Lessons from the San Francisco, Washington DC and Suburban Boston Areas, Center for Public Housing, March 2008

Housing at Risk (shorter published version)

Housing at risk in Seattle

Published in the Seattle Post-Intelligencer  Thursday, December 4, 2008

http://seattlepi.nwsource.com/opinion/390514_housing04.html

By DAVID SCHRAER, GUEST COLUMNIST

When housing is in short supply, why are we making it more complex and expensive to build?

For more than a decade, Seattle has experienced an unprecedented building boom during which prices were always up, money was cheap and wealth was inflated by rapid appreciation.

The boom followed the anti-tax, anti-immigrant movements that slashed government revenue and led to policies requiring new developments to pay for every imaginable impact. Planning and building departments were ordered to cover their costs through fees, creating many new hurdles and passing the costs on to developers. Fees, professional services and interest now add thousands of dollars to the cost of every new house, apartment or condominium.

Cities once understood that development generates community wealth through sales and property taxes, construction wages and new economic activity. Permit fees were low, impact fees unknown and cities funded their planning and building departments from general revenues. Municipalities considered streets, sidewalks, utilities and public services as investments that would generate community wealth over time.

Today, Seattle penalizes new development rather than waiting patiently for taxes that flow in their wake, generating three problems.

First, additional fees and processes increase the initial project risk and costs. These costs are marked up and passed on to the buyer or renter. Second, the higher risk and costs inhibit development and reduce market supply, further increasing prices. Third, the city’s enthusiasm to offload costs to the private sector results in policy gimmicks, such as incentive zoning.

The elephant in the room is the private sector provision of affordable older housing. Almost all work force housing has been and will be provided by older homes and apartments in the private sector. We need to remove barriers to housing development and build the large numbers of new housing units required to moderate rents and housing prices.

Public and philanthropic investment should focus on providing permanent affordable housing that maximizes the return on our investment, such as land trusts and mission-driven, nonprofit-owned housing. Housing levies, the primary traditional mechanism for local funding of affordable housing, are a good example. Seattle residents overwhelmingly have supported housing levies, leaving no justification for an end-run around voters.

During an economic downturn, pay-to-play barriers cobbled together during the boom will reduce our housing supply and rapidly inflate prices. With political will, Seattle can dramatically increase the supply of housing through policy changes. Significant increases in zoning capacity, new clarity and stability in codes and a return to funding infrastructure through broad-based taxes are all measures that will increase housing supply, moderate prices and lower the cost of mission-driven affordable housing, too.

Our primary strategy for affordable housing must be to build as much quality housing as possible to increase supply. Our secondary strategy should be to directly fund as much affordable housing as possible, all in permanent ownership by public and not-for-profit housing agencies.

Public policy that increases the cost of developing dense, green, quality housing equals more expensive housing overall and less affordable housing. There are times for cities to be pro-development. When the world, country, state and city are in recession, or worse, and housing is in short supply, that time is now.

David Schraer is a Seattle architect with in-plain-air architects and was the first executive director of the White Center Community Development Association.