It’s Time for a Biden-Era Mandatory Housing Affordability Plan

by Josh Feit

The report is out. Mandatory Housing Affordability: Fail.

With such solid results, how can I say that?

It’s true, the numbers are impressive. MHA dollars accounted for 45 percent of the city’s affordable housing spending in 2020, or $52.3 million. (MHA actually brought in $68.3 million total last year, and the city will carry over the additional $16 million in MHA money for 2021 affordable housing projects.)

And while the longtime Seattle Housing Levy’s $56.7 million accounted for more of 2020’s affordable housing spending, 48 percent, MHA actually created 110 more rent-restricted units than the venerated levy—698 funded by MHA versus 588 funded by the levy.

In short, this brand-new inclusionary housing mechanism, which came online in 2019 after five years of old-school neighborhood lawsuits and challenges, more than matched the levy, a 40-year-old property tax program that cost homeowners a median of $122 a year in 2016.

MHA is an affordable housing mandate that upzoned a sliver of Seattle’s exclusive single-family areas while requiring developers to either pay a fee, which goes into an affordable housing fund, or build a percentage of affordable units on site. MHA applies to every new multifamily or commercial building in the city. And it costs you nothing. Oh, and the $52.3 million for 698 units doesn’t even include the 104 on-site affordable housing units that MHA created; the city does not track on-site units as affordable housing dollars.

So, with such glowing stats, why “fail?”

I mean it the same way Obama’s $800 billion stimulus package was a failure and Democrats are now applauding Biden for going big on his $4.1 trillion infrastructure plan. In other words, if we’re getting a nearly-$70 million-a-year bang for our buck on affordable housing dollars from the polite MHA upzones the council passed in 2019, it’s time to do a Biden and go bigger.

If a bumper-bowling upzone was able to create a fund comparable to the Housing Levy without raising any taxes, imagine what a grown-up upzone would do for affordable housing.

MHA only upzoned 6 percent of the city’s single-family zones, which make up around 65 percent of the city’s developable land. Under MHA, the city also did some earlier upzones between 2017 and 2019 in parts of six  neighborhoods where some density was already allowed, such as downtown, the University District, South Lake Union, and 23rd Avenue in the Central District

Back when the council passed the final pieces of MHA two years ago, the city’s two at-large council members, Lorena González and Teresa Mosqueda, were already playing Elizabeth Warren to the mayor’s Larry Summers. Caving to pressure from the slow-growth Seattle Times, former mayor Ed Murray scrapped his initial MHA upzone proposal, which would have raised the ceiling on height regulations in single family zones at large.

“For some, this housing affordability legislation goes too far,” González said from the council dais when the council passed MHA in March 2019, “for others it does not go far enough.” It was clear which side González was on. “So, let’s chat a little bit about that dynamic,” she said. “Contrary to the name of the Select Committee on Citywide MHA, this legislation is not even close to citywide. This legislation impacts a total of only 6 percent of existing areas currently and strictly zoned as single family home zones. That means even with the passage of MHA legislation, approximately 60 percent of the city of Seattle is still under the cloud of exclusionary zoning laws.” She went on to give a history lesson of racist housing covenants in Seattle.

Councilmember Mosqueda sounded the same note. “I’m sad that we’re not actually having a conversation about citywide changes,” she said. “I think that’s the next conversation to have. Larger changes that create a more inclusive Seattle. Again, this is just an effort to look at 6 percent of the single family zoning in our city.”

González is running for mayor this year, and Mosqueda is backing her. Here’s hoping González is actually committed to doing something about “the cloud of exclusionary zoning.” Not only because it will help create a more inclusive city, but according to the numbers, it would be good affordable housing policy.

Think about it. If a bumper-bowling upzone was able to create a fund comparable to the Housing Levy without raising any taxes, imagine what a grown-up upzone would do for affordable housing. While we created 1,300 units last year, we should be building a total of 244,000 net new affordable homes by 2040, according to the King County’s Regional Affordable Housing Task Force, or about 12,000 a year.

Another important stat, one that’s not in the report: $10 million of all MHA proceeds to date have come from developments within the sliver of city land that used to be zoned exclusively single-family.

Upzoning the rest of the city—the part that remains exclusively single-family—would certainly help. Another important stat, one that’s not in the report: $10 million of all MHA proceeds to date have come from developments within the sliver of city land that used to be zoned exclusively single-family.

This is noteworthy. Here’s why. There are three main streams of MHA money: first, payments from developments in selected multifamily hubs that became subject to MHA in 2017, including parts of 23rd Ave. in the Central District, the University District, and Uptown; next, payments from developments in all multifamily zones, from the new MHA legislation that took effect in 2019; and also payments from developments in the upzoned sliver of former single-family zones.

Over the four years between 2016 and 2020, the hub upzones, which went into effect earlier, have generated about 60 percent of the money from MHA, most of that in 2020. But since 2019, when MHA dollars started flowing in from the multifamily areas and the former single-family areas, nearly a third of the additional money from those new revenue sources—$10 million of $36 million remaining total—has been from development in the sliver that used to be single-family.

That outsized stat indicates just how attractive these formerly verboten zones, which sit on the edges of existing urban centers and urban villages, are for new housing. If we actually upzoned all of the city’s exclusive single-family areas, instead of just six percent, we’d have a better chance at generating the money to build the affordable housing stock this city needs.

While the upzoned former single-family zones did generate $10 million for affordable housing, there is another MHA fail. None of the on-site MHA housing was built in those areas. That needs to change. Opening up the entire city to multifamily housing, as opposed to the begrudging 6 percent allotted in MHA, would create more options for on-site multifamily development in these zones themselves. Hopefully, the next conversation about upzones will address how to actually put multifamily housing in amenity-rich SFZs.

The name of this column is Maybe Metropolis. My verdict on MHA?  Emphasis remains on “maybe” until we do mandatory housing affordability right and make it actually citywide.

Josh@PubliCola.com

3 thoughts on “It’s Time for a Biden-Era Mandatory Housing Affordability Plan”

  1. I did a quick find for the word “land” and didn’t see much. Not sure how long it will take to sink in but without affordable land, there is no affordable housing. Once that’s understood we can talk about solutions.

    One solution is to focus on the state constitution’s Uniformity clause that classifies all property the same. If we can — as the king county tax rolls already do — separate land from improvements, we can tax them so that land is assessed more than what get built on it, discouraging idle/underused land (parking lots, brownfields) and encouraging development. An income tax is a non-starter: anyone subject to it will simply move to Bellevue or anywhere outside the catchment area. A capital gains tax is the right idea but the wrong approach: tax all the land, rather than a few people’s investments.

    I suspect the Uniformity clause was added to short circuit any attempt to turn speculative assets like land into productive developed land. If you want an example, you can look at any surface parking lot downtown or the old SPD headquarters parcel, still undeveloped after 15 years or so — a full city block in downtown Seattle, reduced to a hole in the ground when it could have been a thriving mixed-use or other development, contributing jobs and taxable commercial activity.

  2. Where do I sign on to push this?

    However, I would argue for upzoning without making developers pay fees or provide set asides for low income housing. Costs are ultimately passed on to renters in increased rent or indirectly in higher rents as fewer units are built. To bring down costs and have as much housing built as is needed, the fewer the impediments to more housing the better. Less subsidized low income housing will be needed if housing prices are lower and what is needed should be paid for by taxes, not indirectly only by renters. But this is a minor disagreement. City-wide zoning reform is the way to make Seattle possible for people of all income levels whatever the details.

  3. Interesting piece Josh. That would be exciting to see a grown-up upzone. Although a point of clarification, SFZs technically do not exist anymore in Seattle because lots can now have a main house, and AADU and a DADU for a total of three more affordable units where there was just one. We are starting to see examples of developers building all three units on spec in SFZs.

    Is there data available yet on if the MHA payments have increased market rate housing? The general hypothesis would be that if you make developers pay more to build, they will pass that cost on to the consumer until supply meets demand. This would create an even less affordable housing market unless the system were able to reach a stasis in the future where the number of affordable units could meet the demand. And like you are saying, it would stratify Seattle even further because high rent units will be built onsite in the amenity rich hubs and affordable units will be outsourced to neighborhoods with less access to opportunity. But I can only speculate without data.

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