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Welcome To The Affordable Housing Policy Twilight Zone

2013 October 23
by dan bertolet

Though I’ve done no small amount of keyboard clacking questioning the sanity of taxing new development to fund affordable housing (see here, here, here, and here), I’ve not delved much into the official rationale offered up to support it. Not pretty, that rationale. And for a prime example, check out this language on “incentive zoning” in the City of Seattle’s land use code:

The purpose of this section is to encourage development in addition to that authorized by basic zoning regulations (“bonus development”), provided that certain adverse impacts from the bonus development are mitigated. Two impacts from additional development are an increased need for low-income housing to house the families of downtown workers having lower-paid jobs and an increased need for child care for downtown workers.

Further down the page, the intent is restated:

[Affordable] housing provided through the bonus system is intended to mitigate a portion of the additional [affordable] housing needs resulting from increased density…

In other words, those who develop new buildings are being held responsible to help pay for housing and daycare for people who get downtown jobs that are created as a result of that new development. In other words, creating housing and jobs in downtown is a bad thing that must be mitigated by those who do it. Never mind that creating housing and jobs in transit-rich urban centers such as downtown Seattle happens to be a universally established imperative for sustainability.

For an analogy, it’s as if we exacted a special tax on computer manufacturers to subsidize internet service, the rationale being that an additional need for affordable internet service is an adverse impact caused by the production of computers.

In that scenario we’d no doubt hear plenty of protest over how such a tax would increase the cost of production and make computers more expensive for everyone, and how higher prices would hit poor people the hardest and negate the benefit of the subsidized internet service. And I suspect that people would also be a lot more likely to ask why computer manufacturers should be singled out to bear the burden of subsidizing internet service when they are already providing public benefit by making computers.

For the case of affordable housing parallel objections apply, but it’s even worse than the computer analogy because there’s also the risk that developer fees will impede development and suppress housing supply, which will drive up prices even further. Assuming the need for subsidy is real—which in the case of affordable housing I believe it clearly is—the obvious solution to both scenarios is to develop alternative sources of subsidy that don’t compromise the original intent. But since that is likely to involve significant effort, the first step is a come to Jesus about what’s wrong with the current approach (hence my recent obsession).

If  downtown Seattle grows, math dictates that there will be more people with downtown jobs, including those with “lower-paid” jobs. Since the City of Seattle has adopted a plethora of goals and policies to promote growth in downtown, then the City of Seattle as a whole should bear the burden of “impacts” such as increased need for affordable housing. By building in Seattle’s urban centers, private developers are only doing what the City supposedly wants them to do, and the fact is, they are the only ones who can do it. In this light, regulations that penalize development—that essentially say “growth is bad” and ignore all the public benefits—are pure schizophrenia.

I acknowledge that the land use code quoted above was a well-intentioned effort to justify a source of much-needed affordable housing subsidy. But can we really afford to ignore the twisted paths down which that rationale leads us? In addition to the fundamental flaws described above, my mind goes dizzy with the implied questions:  What would happen to all those “lower-paid” workers absent the new development? Would they be better off somewhere else? Would the City or region be better off if those jobs were somewhere else, say, low-density, car-dependent suburbs? On the other hand, does new development somehow coerce workers into taking downtown jobs? Why stop at housing and daycare? Pretty much everything is more expensive in downtown Seattle—should developers also be subsidizing parking, or lunch?

Another wacky feature of incentive zoning is that it only charges developer fees on the “bonus development.” That means the rest of the building gets off scot-free, even though any perceived adverse impacts related to affordable housing caused by the rest of the building are exactly the same as those caused by the bonus development. (There are legal reasons for this, but that doesn’t make it any less incongruous.) On top of that, in Seattle the relative portions of the building charged versus not charged a developer fee varies widely, depending on what particular zone you happen to be in.

Might it be that a policy that has a baseless rationale, an inherently inconsistent application, and the potential to exacerbate the very problem it’s intended to address, is a policy that needs to go the way of the dodo?

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(In a future post I plan to address other commonly cited rationales for placing the burden of affordable housing on new development, including upzones, infrastructure investments, inclusive neighborhoods, and greenhouse gas emissions. Next step: a public discussion on better alternatives for funding affordable housing subsidy.)

 

 

 

12 Responses leave one →
  1. paulh permalink
    October 24, 2013

    Why so much angst? Its fairly simple, Dan. It is easy and profitable to build for those who have. The cost of construction for affordable housing is essentially the same as it is for “luxury,” in that the price point between p-lam and quartz is your only real delta. The need is there, but the market does not have the “incentive” to build it.

    Look for a moment to Mercer Island whose incentive zoning code might be considered progressive compared to Seattle. You must provide a public amenity to build above 2-stories in their town center. I’d suggest that would be a great bar for Seattle to start with: 2-stories, do what you want; if you want to go taller then provide an amenity. On Mercer Island, if you want to approach the height limit, there’s a menu of choices including volumous plazas, new pedestrian connections or affordable housing to get you there — and they keep building.

    We have set our expectations so low for developers in Seattle to give back that it is ridiculous. Zoning is only the first big give. Spend some time looking at the street overlays that are required on the eastside, the impact fees, the cost of setbacks in lost SF.

    Growth is good, build-baby-build! But while we’re at it, lets build a city of everyone whether they have a voice or not.

  2. dan bertolet permalink*
    October 24, 2013

    Paulh – thanks for the thoughtful comment. The reason for the “angst” is spelled out in the four previous posts linked in the first sentence of the post. Based on your comment, I have to assume that you haven’t read them.

    • paulh permalink
      October 26, 2013

      Indeed, I read most of your posts — back from the days of HugeAssCity. I first started following you writing because I would to give a shout of “hell yeah!” at the end of each article. Interesting (for me) to track how our opinions of the city have increasingly diverged. Now I read and bite my tongue.

      We live in a city and state that has the most regressive taxation system in the nation, and as a result, infrastructure is built on the backs of the poor. I’m growing weary of seeing the exciting developments happen on the east-side. Bellevue, Kirkland, Redmond are all doing a better job at finding a balance that Seattle is. The developers are doing fine, they’ll build where there is demand. It is up to the city to determine what it wants to become.

  3. October 24, 2013

    paulh: True, they keep building on Mercer Island — but not as high as they would were it not for the amenity requirement. By definition, that adds to the cost of development. That’s not a judgment one way or the other. Just a fact.

    Still, your point that it’s easy to build for higher-income residents is well taken. I think we all share your goal of a city for all, and economics fails us when it only measures willingness to pay and not *ability* to pay. But a de facto tax on increased supply can’t be the only way to provide this public good. It has too many side effects.

    • paulh permalink
      October 26, 2013

      Wrong. Buildings built on MI over the last decade are built to the zoning height limit. Yes it adds cost to development. So what? Will development stop? On the contrary, it is my experience that tougher zoning brings better and more sophisticated development teams.

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