By Erica C. Barnett
The city will award far less money to affordable housing projects this year than it has in previous years—just $53 million, compared to $147 million last year. Those funds will pay for just four projects, including two in north Seattle, one in the Central District, and one in Beacon Hill. In comparison, last year’s awards—known colloquially as the “NOFA,” for the Notice of Funding Availability that starts the funding process each year—funded 12 projects across the city.
Another 18 projects that applied for funding this year will not receive it.
City officials, including Mayor Bruce Harrell and Office of Housing director Maiko Winkler-Chin, announced the awards yesterday at El Centro de la Raza in Beacon Hill; the event also included announcements about homeownership programs that are not part of the affordable-housing NOFA.
PubliCola reported on the reduction in funding on Tuesday; the Seattle Times had its own story on the awards yesterday.
A primary reason for the reduction, Winkler-Chin told PubliCola Wednesday, is the need to “backfill” projects that are unable to pay their construction loans due to issues like the increased cost of labor and construction materials (which went up 15 percent last year), the concrete strike, interest rate hikes, and “operational issues,” like tenants failing to pay their rent.
Typically, an affordable housing project gets a certain amount of funding from OH—say, $10 million— based on a set of assumptions about what the project will cost to build and how much revenue the project will take in from rents once it’s up and running. Those assumptions then inform the size of the loan the developer will be able to get from a bank after construction is complete and the building is leased up.
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If those assumptions are wrong—if, say, construction costs spike, there’s a concrete strike, and 20 percent of the tenants aren’t paying rent—the bank will reduce the size of the project’s “permanent” loan based on the new numbers, leaving a gap. If an expected $10 million loan gets reduced to $8 million, the Office of Housing will step in to fill that gap. And when that happens, say, 50 times, the gap works out to around $100 million—about the size of the reduction between 2023’s awards and this year’s.
Ben Maritz, an affordable-housing developer whose proposal the Office of Housing did not fund this year, said unpaid rents have become “the biggest problem” for providers who need those revenues to pay their construction loans.
Rents in subsidized housing, which are set by the US Department of Housing and Urban Development based on local median, have climbed much faster than wages for low-income people, making it harder and harder for tenants to keep up, Winkler-Chin said. “A lot of people are unable to really recover and pay their rent, and that does have an impact on how much of a loan a developer can get as they’re building up their housing.”
Another reason for the lower award amounts, Winkler-Chin said, was that the city had already “forward-committed” funding from the JumpStart high-earners payroll tax and the housing levy in previous years—guaranteeing funds for projects that were in the works but wouldn’t begin construction until later. About 43 projects funded in previous rounds of funding are currently in the works, the Office of Housing confirmed.
The JumpStart fund, most of which is supposed to go toward low-income housing, has reportedly been frozen as part of Mayor Bruce Harrell’s effort to address an estimated budget shortfall of more than $220 million.
But there may be other factors contributing to this year’s relatively paltry awards.
The JumpStart fund, most of which is supposed to go toward low-income housing, has reportedly been frozen as part of Mayor Bruce Harrell’s effort to address an estimated budget shortfall of more than $220 million. Projects already funded through JumpStart will continue moving forward, but revenues from the payroll tax are reportedly not being dedicated to new projects, reducing the overall pool of funds for affordable housing significantly. Last year’s city budget, for example, included $138 million for affordable housing from the payroll tax.
Asked about the reported freeze on the use of JumpStart funds for new projects, Harrell spokesman Jamie Housen said the City Budget Office’s “direction to the Office of Housing (OH) is to use JumpStart [Payroll Expense Tax] funds on housing. Payroll tax is one of several large revenue streams in the OH budget, and the annual NOFA opportunities are just one of the ways OH makes investments in the community. Other investments include supporting operations, maintenance, and services (OMS) for affordable housing providers—including wage increases for staff who work in affordable housing buildings—and providing support for increased costs on previously awarded projects.”
Every year since its inception, Seattle mayors have used JumpStart funds to fill budget gaps and fund priorities that aren’t in the JumpStart spending plan; last year, about $89 million in repurposed payroll tax revenues allowed the city to pile the budget with new programs (like the police surveillance system Shotspotter as well as generous police recruitment bonuses). This year, given the size of the deficit, it’s probably that the new council and Harrell will again view JumpStart as a solution to help close the revenue gap without cutting pet programs or laying off large numbers of city workers.
If the the payroll tax is converted, at some point in the future, into an all-purpose funding source for city needs, that would represent an abandonment of its official, legally codified purpose: Building new housing, funding small businesses, and supporting climate-friendly economic development.
Ben: yeah, it’s simply impossible to suppose that affordable housing becomes a bigger budget item as the need becomes more pressing. Why imagine that straightforward human response when you could suppose a self admittedly nonsense theory that increased housing spending causes homelessness? Medical costs are also rising in this country, and health outcomes are going down.. you don’t suppose it’s time to spend less on your own healthcare do you? It’s simple correlation, my friend, you better spend less to be healthier.
It’s fitting, too, that you boast of being here since 2005. I’ve been here four decades and watched people like you flood this town and treat it as their own plaything, all as people who have actually been born and raised here are squeezed out of their own home. The article makes the cause very plain. Housing costs have gone up faster than wages. Transplants from elsewhere taking high paying jobs is exactly how that process works.
Finally, evidence that “tenants failing to pay their rent” is a bad thing. Sure, some of them simply cannot afford rent in these heavily subsidized, affordable housing projects. But there are a whole lot more who, starting with the pandemic, stopped paying because there were NO CONSEQUENCES on them. Even now, these freeloaders can go at least 6 months without paying before any action can be made to boot them. But now that it’s the government that’s getting hurt (by projects getting their loans cut, so the Office of Housing has to keep forking money over), maybe the narrative will change.
We do have 3 housing authorities in King County; Seattle Housing Authority, King County Housing Authority, and Renton Housing Authority. These agencies combined serve over 100,000 people monthly in HUD (federally subsidized) permanent housing. All three housing authorities serve people in privately owned rentals, and also have their own facility based housing.
You could and many do have people living in your building, on your block, or in your neighborhood who are HUD subsidized. The housing authorities are not treatment providers, but can work collaboratively with other professionals serving clients.
The housing authorities are not the answer to all things about housing or homelessness, but to those 100,000 people/month they are invaluable.
Thank you,
Bill
Affordable housing isn’t affordable; we need subsidized housing.
This is subsidized housing. The piece is literally saying that the City can’t afford to subsidize as many projects as it subsidizes in a typical year.
Affordable housing should not be given for free. Don’t many affordable housing tenants receive voucher, large rent discounts or other aid? They can also benefit from reduced utilities and internet, food banks and free orca cards. Not to mention Medicaid, Medicare and Apple health. If they cannot pay with all that, then give the rental to those who can! This is our taxpayer money we are talking about!
You’re suggesting that those who are completely destitute should remain as campers on our streets, parks, greenways, etc. That won’t work. We need to address homelessness in a meaningful way, with housing, not just shelters, and certainly not with the status quo. Just sweeping the homeless from one place to another is expensive and counterproductive. All those vouchers and discounts are what makes affordable housing affordable. Some pay what they can, and some get a free ride, depending on their capability. If they get free rent initially, and then recover and go to work, they pay 30% of their income toward rent. It’s a good deal. Also, Apple Health and Medicaid are the same thing in Washington.
Mark, I have lived in Seattle since 2005 and the problem has consistently become larger even as more money is spent. Housing is not always “less affordable” although that’s the narrative. The homeownership rate is currently higher than the 70’s, 80’s, and 90’s. Housing became relatively inexpensive before the GFC, then it bubbled, then became cheap again and now is expensive again. Despite these undulations, the problem of homelessness constantly grows in parallel with the money allocated to the problem. In fact, if you looked at the problem graphically, it would seem as if the allocation of additional resources increases the number of homeless people. That doesn’t seem right intuitively, but those two numbers continue to grow at the same time.
Tenants of these units pay rent – typically a much bigger monthly payment than long time homeowners.