By Erica C. Barnett
Although a proposal to temporarily slash the Mandatory Housing Affordability fees paid by developers in most residential zones appears dead for this year, the City Council’s land use chair, Eddie Lin, said to expect legislation early next year that will address what housing developers have identified as a critical problem: The fees, which pay for affordable housing, have become make-or-break for new housing projects thanks to the skyrocketing price of construction since MHA passed seven years ago.
As we’ve reported, developers sought a two-year, 80 percent reduction in MHA fees earlier this year, arguing that the development “pipeline” in Seattle is drying up; without the temporary cut, they argue, they won’t be paying any MHA fees because new housing simply won’t get built.
Mayor Katie Wilson had planned to propose a bill backed by the Housing Development Consortium, a large coalition of affordable housing developers and advocates, when the deal fell apart. Groups like the Seattle Renters Commission argued that cutting MHA fees would eliminate a key source of funds for affordable apartments, and council support for the bill also seemed on the verge of evaporating when Wilson pulled the bill.
Lin, who supported Wilson’s proposal in principle, said he supports both short-term MHA. fee relief and long-term reform. “MHA was never supposed to be a completely static thing. … It should be more responsive to updates in our zoning, updates into the housing ecosystem.” But, Lin added, “that’s going to take years, and we need to do something in the short term. And I think the pressure for that is only going to continue to build as permits continue to plummet.”
So far this year, according to the city’s housing dashboard, developers have filed permits have been filed to build just 1,137 new housing units citywide, down from 8,600 during the same period in 2020, when new permits were at their peak.
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“Hopefully we’ll be able to do something in early 2027” to provide a short-term solution to MHA fee pressure, Lin said.
In a bit of positive news, the latest report on MHA, from the city’s Office of Housing, shows that fees brought in about $47 million last year, reversing what appeared to be a long-term decline. But the gains are likely short-term, for a couple of reasons. First, more than half of last year’s MHA fees, around $24 million, came from just four large apartment buildings, according to the report—and nearly half of that amount, $10.6 million, came from a bond-financed senior housing project for the nonprofit Horizon House, a large windfall from an unusual type of project.
The second reason next year’s MHA fees are likely to drop off is that most of the remaining 2025 money, more than $20 million, comes from new housing (generally townhouses) in areas zoned for low-density developments. These low-rise (or LR) zones are almost certain to see a major drop-off in new housing permits thanks to legislation, passed last December. that allows up to eight apartments per lot in former single-family areas, which are not subject to MHA fees.
The Office of Housing report acknowledges this new reality, noting that “MHA-applicable townhome development could fall off going forward,” as developers start building in neighborhood residential areas to spare themselves the expense of MHA fees.
“Until we update MHA, especially in the LR zone, we’re going to see development in neighborhood residential, for better or worse,” Lin said. “Because why would you build an LR if you can build the same thing in neighborhood residential?”
Interest Rates, Interest Rates, Interest Rates. That is cause of the decline. Developers cannot expect 20% profit margins throughout the entire economic cycle.
““Until we update MHA, especially in the LR zone, we’re going to see development in neighborhood residential, for better or worse,” Lin said. “Because why would you build an LR if you can build the same thing in neighborhood residential?””
Wait, what? We’ve been following the messaging that we’re in a housing crisis, need all kinds of units in every neighborhood, especially “missing middle,” and now we’re going to levy fees (tanking affordability and supply) on townhomes too? Feels like bait and switch to me.
MHA doesn’t need to be modified, it needs to be repealed. Residential construction during the boom years would have been greater still, had MHA not existed. And now during the bust years? There is absolutely no justification. Let the market set rents. High rents will encourage greater development. It really is that simple.
Erica, why don’t you provide a list of the members of the Housing Development Consortium and see how many are actual developers/providers of affordable housing, and how many are law firms, market rate developers, engineering consultants, architects, banks, and other private equity brokers looking to polish a thin veneer of caring about affordable housing. Find out how many of them are meeting their MHA requirements with onsite production? How many are getting a cushy 12-20 year MFTE property tax break? What percent of their development costs are attributed to MHA fees and what rate of return they must pay their LLC funders, then a clearer picture will emerge about the need to modify MHA.
Some of this can be answered with public data.
On HDC membership composition: HDC’s current member list is publicly available on their website. Of 214 members, 39 (18.2%) are actual affordable housing developers or providers. Another 44 (20.6%) are nonprofits and supportive services organizations. The remaining 99 members (46.3%) are firms in the professional services ecosystem — 30 architecture firms, 14 construction companies, 16 banks and private lenders, 22 engineering and development consultants, 4 law firms, 5 accounting firms, and 4 insurance companies — whose revenue is tied to development volume, not affordability outcomes. An architect gets paid the same whether a project pencils at 80% AMI or 50% AMI. A bank gets paid the same. A construction firm gets paid the same.
This isn’t a conspiracy — it’s membership composition producing predictable advocacy outcomes. An organization where 46% of members profit from construction activity regardless of affordability level will naturally advocate for policies that maximize construction activity. The MHA Accelerator reduces the affordability requirement so more projects get built. More projects means more work for those 99 members. The 39 actual affordable housing developers are a minority voice.
On MFTE: Seattle’s MFTE compliance records — obtained via public records request — show 337 properties with 8,052 designated affordable units. Of those units, approximately 75% are designated at 65-85% AMI. In Seattle’s current market, 80% AMI for a single person is roughly $72,000 in annual income. These are not affordable units in any meaningful sense for the people who actually need affordable housing.
The program gave developers a choice of affordability level within program parameters. They chose the highest allowable band. This is not surprising and it is not a failure of character — it is rational behavior in response to a program design that handed them a choice and then subsidized whatever they chose. The 11-year property tax exemption flowed to a $50M building with units designated at 80% AMI exactly as it would have flowed to one with units at 50% AMI. The developer had no financial incentive to choose the lower band and every financial incentive to choose the higher one.
That is the program working as designed. The question is who designed it that way and why. Or consider the Shirky Principle which states that institutions often end up preserving the problem they were created to solve, making it harder to fully resolve the issue.
691 of those designations expired through 2025. The city’s own compliance tracker — maintained by a single staff person in a spreadsheet with a hidden empty column — has no documented post-expiration review process. Nobody checked what happened to rents when the exemption lapsed. The public subsidized a decade of moderate-income designations, the clock ran out, and the buildings returned to market rate without a paper trail. The developers were not obligated to do otherwise. They were never asked to.
On MHA fees as share of development costs: at current fee levels, MHA runs roughly 1-3% of total project cost on a typical multifamily development. The HDC Accelerator proposes reducing that by 80-90% — saving perhaps $400,000-$900,000 on a project where land alone may cost $10 million or more. The piece doesn’t explain why a 1-3% fee reduction is what determines feasibility when land cost is the dominant variable that nobody in the HDC piece is allowed to name.
The member list, the MFTE data, and the MHA math are all public. The picture they paint together is the one the commenter suspected.