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Workforce Housing in Seattle: Myth vs. Reality

2014 February 12
by dan bertolet

For the better part of the past decade, both advocates and policymakers have been decrying Seattle’s perceived lack of housing affordable to people with incomes in the lower-middle range—so-called “workforce housing.” As a result, Seattle has implemented and is continuing to expand a program known as Incentive Zoning intended to create subsidized workforce housing through fees imposed on new development.

But there’s one rather important thing wrong with this picture:  Available data show that there is no shortage of workforce housing in Seattle.

For reference, workforce housing is typically defined as housing that is affordable to households with incomes between 60 and 100% of area median income (AMI). In Seattle, 80% AMI corresponds to $49,440/year ($24/hour) for a single-person household. Assuming the standard that 30% of income is spent on housing, that translates to an “affordable” rent of up to $1342 per month.

For all the attention workforce housing gets, there’s surprisingly little up-to-date, hard data available on how much housing is out there priced at workforce affordability levels, compared to how many households there are that need it. King County analysis based on a 2009 survey of market-rate rentals found that a whopping 83% of units in Seattle were affordable to a household earning 80% of AMI. For 50% AMI, 37% of Seattle’s rental units were affordable. Across King County and the greater region, data reveal a similar pattern of excess housing supply at workforce income levels, along with a sharp increase in need the further income drops below workforce levels.

Based on the raw numbers there would seem to be plenty of existing workforce rental housing in Seattle, but one complicating factor is that some households may be renting housing that is cheaper than what they could afford according to the standard 30% formula. This “downrenting” has the effect of reducing the availability of housing that is affordable to lower incomes. The affordable housing advocacy group Housing Development Consortium has published some analysis by the Seattle Office of Housing on downrenting, and the results are summarized in the table below:

workforce_housing_data_2009_Seattle-450

Looking specifically at households with incomes between 50 and 80% of AMI (yellow column)—which is the lower portion of the workforce range—there was a surplus of over 32,000 housing units with affordable rents. Put another way, for every 100 households in the 50-80% AMI range, there were 219 affordable rentals in Seattle.

After subtracting the number of units being rented by households earning more than 80% of AMI, there is still a surplus of 4,745 rental units affordable and available to 50-80% AMI households; for every 100 households in the 50-80% AMI range, there were 118 affordable and available rental units in Seattle. In other words, even when downrenting was accounted for, there was still no shortage of workforce housing.

Since 2009 housing costs have risen faster than incomes, so current data would likely show some reduction in affordability. And rents vary significantly between different neighborhoods. But even with those caveats, it’s hard to imagine how anyone could interpret the available data as proof of a dire need for programs to subsidize workforce housing in Seattle. Yet currently Seattle City Council’s affordable housing efforts are focused on an extensive examination of how to do exactly that using Incentive Zoning. Here’s how Council justifies it:

For example, a public school teacher’s starting salary of $42,000 suggests that he or she should not pay more than $1,050 per month (30%) for housing. Yet the average rent in Seattle for a 2 bedroom / 1 bath apartment is $1,466.

That’s right, we have a workforce housing crisis because a single person earning far less than the City’s average income can’t afford the City’s average rent for an apartment with an extra bedroom, never mind the half of the housing stock that rents below the average. And so apparently therefore we need to exact a toll on new development through Incentive Zoning so that someone making up to $49k can live in a subsidized apartment in a brand new downtown high rise. Seriously—if any of you reading this were in those shoes, would you feel entitled to that?

Meanwhile Council balks when it comes to solutions that would support meeting workforce housing needs through private development—no public expense necessary—such as microhousing, accessory dwelling units, meaningful upzones in lowrise zones, removing off-street parking requirements, and other strategies that could reduce the cost of producing housing.

In previous posts I have pointed out the numerous flaws in Incentive Zoning—how it defeats its own purpose by restricting supply and increasing the cost of housing production, how it’s based on an outdated paradigm that sees dense development as negative impact to be mitigated rather than a critical sustainability solution, and how its inherent limits preclude it from ever generating more than a drop in the bucket relative to the need.

Now we can add to that list of flaws the fact that Seattle’s Incentive Zoning Program was designed to subsidize workforce housing, even though the data indicate that the City already has enough. Available workforce housing may not be brand new housing. But even if new housing has rents higher than workforce affordability levels, it will still help preserve the availability of workforce housing by absorbing demand from a high-income renter who would otherwise be competing for, and driving up the prices of existing housing.

The City’s real housing need is at the deeper affordability levels, as the data clearly show an increasing deficit of affordable rentals as incomes drop below 50% AMI (see data table above). And yet another pitfall of Incentive Zoning is that even though it doesn’t address the real need, it creates the false impression that electeds are taking meaningful action to solve a housing problem. That is, Incentive Zoning is a politically expedient distraction.

To sum it up succinctly: Why are we applying an counterproductive tool to solve a problem we don’t have? We can and must find better solutions to address Seattle’s actual affordability needs.

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P.S. For brand new info on the ineffectiveness of Seattle’s Incentive Zoning Program, check out this presentation by the City’s consultant, who found that 62% of of projects eligible for the incentive have opted not to develop the additional floor area. In other words, for most projects the Program is not an incentive because the fees are already too high.

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This post originally appeared at Smart Growth Seattle.

 

5 Responses leave one →
  1. Mike Eliason permalink
    February 13, 2014

    Dan,

    There are some bad assumptions with this that have permeated other developer blogs. Yes, there is critical need for low-income housing (a need that the free market is not able to meet) but there is still insufficient workforce housing in the city.

    Go back and read the report. Over half of all earning under 70% AMI are paying MORE than 30% of income on housing. And this was in a report written 2 years ago, rates have not been level or decreased in that time period, so it is safe to assume the percentage paying more than 30% of their income on housing has gone up.

    Also, what do to have against those making less than 80% AMI living downtown, close to their jobs? Pushing the poor to the periphery makes for bad urbanism.

    Incentive zoning isn’t a bad idea. It’s one step in many to ensure the city is more affordable and open to a large swath of the population, not just those making 6 figures.

  2. dan bertolet permalink*
    February 13, 2014

    Mike, here’s what City Council’s affordable housing consultant, Rick Jacobus with Cornerstone, said in a private email to a colleague of mine a couple days ago:

    “We heard a lot from people in Seattle about the need for “workforce” housing but my read of the data is the same as Dan’s – at least today, that is not where the need is.”

    I guess that makes him a developer shill too?

    I agree with you that the cost burden data show that some households can’t find housing that is cheap enough. Keep in mind that 70% AMI is the lower portion of the workforce range of 60%-100% AMI, as defined by the City. I would also add that some households freely choose to pay more than 30% of income on housing, for example someone who decides to forgo the expense of a car and spend more on housing to live closer in. The 30% of income target is a very blunt metric.

    I am all for economic integration throughout the City. But I also know that it will take a huge amount of housing subsidy to make that happen. So we’ll have to make cost-benefit choices, since we don’t have endless public funds. I would suggest that subsidizing someone who makes $49k to live in a new downtown highrise is pretty low on the priority list, when that person could easily find unsubsidized housing in a cheaper Seattle neighborhood and take the bus to work downtown, just like tens of thousands of Seattleites do every day.

  3. townhouseowner permalink
    February 13, 2014

    Dan, while I agree with most of your policy solutions, my issue with this piece is that it defines the “workforce” as if workers cease to be in the same demographic the moment they have kids. You risk leaving behind a lot of persuadable readers because of this. Perhaps that’s a problem with how everyone is defining this demographic. For anyone planning 9 months or more ahead, there is a serious shortage of housing that meets the needs of families in the city at the median income level, as you have previously written. You do a good job of identifying the issue of downrenting and the lack of 3BR units in your post below. There is effectively more than one market here because families are competing over a tiny fraction of the available housing units. So comparing everyone at 80% of median leaves out a big part of the picture. I’d be interested to hear your thoughts on the planning commission report & the tiny sliver of 3BR units shown therein.

  4. james in the CD permalink
    February 14, 2014

    You have pasted 2005-2009 data from the US Census – more updated data is available. As a planner performing a study you should know and acknowledge rents in Seattle are up 5% from jsut last year – regardless you opted to use outdated data that seemingly supports a preconceived idea.

    Also you say:

    That’s right, we have a workforce housing crisis because a single person earning far less than the City’s average income can’t afford the City’s average rent for an apartment with an extra bedroom, never mind the half of the housing stock that rents below the average. And so apparently therefore we need to exact a toll on new development through Incentive Zoning so that someone making up to $49k can live in a subsidized apartment in a brand new downtown high rise. Seriously—if any of you reading this were in those shoes, would you feel entitled to that?

    Your conclusion is based on a single person – however – the data you are using is for a household – the average household size is Seattle is 2.06 persons – so that means that the household of 2.06 persons are making $49k a year – NOT necessarily a single person.

    Good try – but your conclusion is invalid.

    • dan bertolet permalink*
      February 14, 2014

      James:

      At the time I wrote this, the 2005-2009 data was newest that the City of Seattle had analyzed to assess need. As of yesterday, they are showing updated analysis for 2006-2010 data:

      http://clerk.seattle.gov/public/meetingrecords/2014/plus20140213_1a.pdf

      Your complaint about insufficient data should be with the City, since they are the ones actually implementing policy. Or why don’t you do the analysis yourself so that you have something other than conjecture to claim that my conclusion — and the conclusion of the City’s affordable housing consultant (see my comment above) — is “invalid.”

      I should have made this more clear (now corrected), but $49k is the standard for a single person household. If you look at the HUD data linked in the post, you will find higher 80% AMI incomes for larger households, e.g. $56,480 for 2-person, $63,520 for 3-person, etc. That means those households would be entitled to subsidized units at even higher rents.

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