Maybe Metropolis: The Impact of Housing Scarcity, Not Housing Development, is the Problem

By Josh Feit

Urban environmentalists—that is, pro-housing groups and transit advocates—have been correctly pointing out a serious shortcoming of environmental impact statements: Environmental review has been commandeered by slow-growthers and anti-housing groups to thwart green transit projects and even modest density, such as backyard cottages.

Can we please look at the bigger picture? Adding density not only translates into a better return on infrastructure investments, such as new transit, by improving efficiency and adding riders, but it also reins in sprawl and its accompanying high-carbon commutes. Framing new housing along these lines makes one wonder why we don’t do environmental benefits statements for new development.

Unfortunately, as Erica reported on Monday, the city council is preparing to weaponize the notion of impacts yet again, amending the city’s comprehensive plan to queue up new impact fees on development. Proponents of impact fees say they would fund the new transportation infrastructure needed to accommodate new housing. The populist idea, which unites the council’s right flank (sponsor Alex Pedersen) and left flank (socialist Kshama Sawant) over their shared reactionary utopianism, is a see-through ploy to slow development—also known as housing. Developers—who you might think were manufacturing opioids, not new housing stock, given the blanket animosity they inspire—already pay sales taxes, real estate excise taxes, and Mandatory Affordable Housing fees. In fact, Pedersen’s proposal could cost developers up to four times as much as the annual property taxes on new development, according to a potential fee schedule introduced at a recent council hearing on the comprehensive plan amendment.

Instead of prescribing impact fees on new housing, the council should tax the impact of non-development by authorizing a fee on property owners who live in the vast tracts of our city, 75 percent of Seattle’s developable land, where prohibitive zoning forbids apartments. The city’s current development ban has put inflationary pressure on housing, fueling the affordable housing crisis and creating a disproportionate impact on renters and potential first-time buyers. Meanwhile, homeowner wealth grows. Between 2012 and 2022, the median cost of a house in Seattle rose from $420,000 to $1 million. During the same period, according to data from Zillow, median rents in Seattle rose from around $1,250 in 2012 to $2,350 in 2022.

Critics of new development like to point out that brand-new housing is never affordable to low- and middle-income people. But they seem to miss the fact that the developments they’re criticizing are being built now, under Seattle’s current zoning regulations—not in the up-zoned dystopia that exists in their minds. In other words: It’s the current rules against more density that are raising the price of housing, not some pro-development free-for-all.

Making new housing even more expensive by charging an impact fee for transportation (when we’re already investing in transit through several other streams) is a regressive canard, not a fair policy. Pedersen argued that impact fees could allow the city to lower the next transportation levy, reducing property taxes, but as Erica correctly pointed out, it would simultaneously harm renters by making the cost of new housing more expensive; a majority of the city, around 55 percent, rents.

The pro-housing advocacy group Sightline sent a letter to Mayor Bruce Harrell and the council last week that warned about the regressive effects of existing impact fees in Oregon, where they’re called System Development Charges. Noting that scarce housing markets are likely to make impact fees “fall on renters and new homebuyers,” Sightline cited research that concluded: “Homebuyers and renters in tight housing markets likely bear a greater share of SDC costs than landowners.”

An impact fee on non-development—as opposed to a tax on development—makes sense because you can see the harsh impact of Seattle’s restrictive, status quo zoning laws every day: Gentrification, rising rents, and development that’s clustered along busy, polluted arterial streets.

The Oregon data also concluded that fees kill development (rather than raising any money from it). Sightline’s cautionary letter to Mayor Harrell and the council goes on to argue that impact fees put a disproportionate burden on affordable housing. In Oregon, they wrote, “smaller entry-level homes, lower-cost middle housing and apartments, and communities with weaker markets are disproportionately affected by SDCs. High-end single-family detached housing is generally impacted least.”

Conversely, an impact fee on non-development—as opposed to a tax on development—makes sense because you can see the harsh impact of Seattle’s restrictive, status quo zoning every day: Rising rents; gentrification; development clustered along busy, polluted arterials (about the only place where developers can build dense housing). The regressive status quo forces renters to bear the carcinogenic brunt of the car culture that our suburban-style homeowner zoning promotes; and, because bus routes don’t pencil out in the vast majority of our low-slung city, we’re stuck with an inefficient transit system. Indeed, the best thing we could do for transit isn’t levying a tax on development, but adding more development that would support robust transit.

The council is holding its public hearing on their impact fee proposal on November 7.  I agree they should pass an impact fee, but not one that exacerbates our affordable housing crisis.  The council should take up the impacts of our current zoning system—the one that’s responsible for forcing people to flee the city’s overpriced housing market—and they should propose an impact fee on the deleterious impact of Seattle’s longstanding, NIMBY prohibition on building homes.

12 thoughts on “Maybe Metropolis: The Impact of Housing Scarcity, Not Housing Development, is the Problem”

  1. ST3 is bullying neighborhoods, from CID to North Seattle, Lake Forest Park and Bothell Way. Are progressives intrinsically joined with transit “planners” even if their plans are no longer valid?

  2. It’s incredible to be lectured in this article by somebody who seems to think real estate development is some sort of benevolent society instead of an industry whose main goal is to make profits. It’s also funny to berate people for *gasp* criticizing an industry for its practices, as if you’re sticking up for some poor orphan that’s being unfairly maligned. You don’t seem to realized that being a shill for and industry that makes profits off of high real estate values is not the same thing as advocating for lower income housing. It’s actually an unseemly look.

    It’s about the same as someone in the comments here said, “let the free market heal itself,” and saying it in the same breath as “home owners should be on the hook for this?” I don’t think this person knows what “let the free market heal itself” means when it comes to making housing affordable. Because go ahead and ask any homeowner in town, particularly any of the truly “free market” fanatics in their rich homes, and they will tell you their home property value is quite “healthy,” and making it it more affordable (in other words lowering their property values) is the opposite of “healing.”

  3. “All of the solutions you brought up have already been tried in California, and yet, California is worse off housing-wise than Washington State.”

    I know that CA has IZ: “In California alone, more than 170 jurisdictions have implemented inclusionary zoning policies resulting in the addition of an estimated 30,000 newly constructed affordable homes in higher-opportunity neighborhoods in California since 1999 — bringing the total number of Californians living in housing produced as a result of inclusionary programs to 80,000. Inclusionary zoning can help reduce racially concentrated areas of poverty, which tend to negatively impact residential health, educational achievement, and economic mobility.” (no date, policylink dot org)

    The only 1:1 ordinance I’m aware of is in L.A. County. I haven’t tracked implementation.

    I’m sure there is substantial non-profit/social housing. I haven’t tracked those numbers either.

    CA also has state-wide rent control, applicable to buildings older than 15 years (good summary at cal dot lawsoup dot org). And some cities have even stronger ordinances.

    Are you suggesting we should bother with doing these things until “the free market heals itself”?

    Free market capitalism will never ‘heal itself.’ That is a fantasy. Advocates for truly democratic equity (i.e., both political and economic–they can’t be done separately) need to keep pushing for policies that diminish inequity and the power of capital. IMO it is immoral that billionaires and multi-millionaires are even allowed exist.

  4. Nice to see the Seattle Left continues their find tradition of policies to squeeze the middle class to pay for the poor, while the wealthy are allowed to skate. Or does Josh really believe these impact fees of his will be more than a minor nuisance to the actual rich folks with lake/sound views?

  5. Hmmm, the particular questions you ask are probably unanswerable because of the reality of housing being a still mostly-laissez-faire profit-making enterprise. We don’t have the legal structure that allows the state, counties, or municipalities to either prevent the sale of a property on the basis of community welfare, or to force buyers of that property to keep it as is for the benefit of low-income renters.

    1. @Sally no we don’t, but incentivizing more density without mitigating impacts to these populations goes the wrong direction. I’d love to see this enter the discussion more.

  6. I’m all for developing more housing, but there is a reality of fancy new buildings displacing older, more affordable ones and those affordable units don’t come back. If we do away with impact fees and light a fire under development, how will we build in resources to retain longtime low income renters, or why should we accept the collateral damage of those renters being forced out of the city or go without housing altogether? How do we protect legacy homeowners from the pressures of being taxed out of their properties? Why does urbanism need to accept the outcome of a net benefit to those further up the economic ladder? It’s nice for middle and upper income folks to see rents softening, but what about the segments that are never served by these development-centered approaches?

    1. If you ban “fancy new buildings,” all that happens is that the same people take over the “older, more affordable ones,” paying higher rents than the previous residents could afford. Even more of them are displaced. You can’t stop people from coming in by stopping construction.

      The only proven way to retain low-income renters is to accelerate construction dramatically so there are units enough for everyone. You will also need transition measures in order to prevent displacement out of the area as buildings are replaced with much bigger ones.

      1. The problem is the Young Liberal thirst for “diversity”. I worked remodeling apartments all over Capital hill, First Hill and Beacon Hill for a big chunk of the 1990s… Young Liberal professionals love, love, love old funky apartments and “diverse neighborhoods”. Young Liberal professionals are also the cause of gentrification and skyrocketing rents. You can’t be the solution if you are the problem.

        As far as new construction solving the Seattle housing crisis…. no, that’s not ever going to happen. The more units built in Seattle, the more well healed out-of-Staters move in. The construction industry caters to only well off people and especially well off people from out of State. Low income folks need to know the score and just move somewhere else.

      2. “The only proven way to retain low-income renters is to accelerate construction dramatically so there are units enough for everyone.”

        This is a totally inaccurate statement. There are other “proven ways to retain low-income renters.” Here are a few:

        • Significantly increase non-market housing. Cities with a high percentage of social housing have lower market rate rents. These include land trusts with ownership as well as non-profit rentals. Seattle’s new social housing entity should eventually help increase the percentage.

        • Require replacement of currently affordable housing (aka NOAH—”naturally occurring affordable housing”) when it is torn down to be replaced by market rate buildings. Sometimes called 1:1 replacement. Los Angeles County has such an ordinance. I have watched numerous units of NOAH housing be bulldozed in Fremont to be replaced by million buck townhouses or market rentals or high per sq ft tiny ‘apodments.’

        • Don’t give up zones without capturing a major portion of the huge resulting increase in property value by requiring way below market housing as part of the increase in housing allowed on the property. This is called inclusionary zoning/housing. Numerous cities have versions of mandatory IZ; Seattle does not. MHA is not “mandatory inclusionary housing” as Mayor Murray initially claimed when announcing it. He dropped those words almost immediately.

        • Rent stabilization and rent control.

      3. louploup2,

        Because housing is national problem, it’s close to impossible to solve it at the local level. All of the solutions you brought up have already been tried in California, and yet, California is worse off housing-wise than Washington State.

        And in all honesty, maybe Washington State’s biggest housing problem, one without a solution, is just being near California. There’s no way to turn back Californians at the boarder. There’s no way to keep tech companies from moving to Seattle.

        Blame Big Tech if have to blame something. First Big Tech wrecked the Bay Area housing market, then San Diego and Seattle. Wherever you find lots of tech jobs…. you find unaffordable housing. Where Liberals get it wrong is the idea that after Big Tech messes up a housing market like Seattle, the government needs to come in with social housing, land trusts and zoning changes to “fix” things. Amazon ruined the Seattle housing market…. and yet tax payers (home owners?) should be on the hook to fix this?

        The solution is to let the free market heal itself. There are still communities in the USA where teachers can afford to buy a house. If you’re a teacher, this is where the free market points you to live. Teaching in Seattle? Housing prices make it a losing deal, so you got to move. At some point Seattle may not have enough teachers, janitors or baristas to function… things might change then. But asking tax payers to repair the damage to housing market caused by Amazon and the like? Not going to happen.

      4. louploup2, that is pretty much the exact mix of housing policies that have been tried in San Francisco – which until very recently had the highest housing price appreciation in the nation.

        They have failed.

        tacomee, do you think there is an infinite supply of “well healed [sic] out of staters?” There’s not. You can build enough to satiate them. We just haven’t ever tried doing so.

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