By Josh Feit
Councilmember Dionne Foster > Mayor Katie Wilson
You couldn’t have a clearer juxtaposition. Mayor Wilson tried to cut a deal between housing developers and the affordable-housing left to accelerate housing production. And Councilmember Dionne Foster tried to cut a deal between housing developers and the affordable-housing left to accelerate housing production. Wilson put it off.
The city currently has an affordable housing program known as Mandatory Housing Affordability (MHA) which makes developers either add affordable housing to their projects or pay into an affordable housing fund whenever they build new projects. Ironically, the MHA program seems to have slowed housing production. Since MHA kicked in back in 2019, housing applications are down 94 percent and permits issued are down 66 percent. This means less housing supply, which increases rents for everybody—while also bringing in less money for affordable housing. To get production going again, developers wanted to cut MHA fees by 80 percent for two years on projects that are already in the pipeline but have stalled due to the fees. Their argument: A smaller fee on some production will generate more money for affordable housing than a hefty fee on minimal production.
Wilson’s efforts ended with a plan to convene a task force (with a goal of cutting a deal on the fees in early 2027). Enter Foster. She brought the parties together and surfaced math that showed two things: MHA revenues had dwindled to a minuscule portion of the Office of Housing’s affordable housing budget (6 percent down from 39 percent a few years ago) and millions in revenue were being left the table from unrealized development. Developers estimate that lowering the MHA fee would trigger about $24 million in affordable housing funds by greenlighting projects they already have cued up, but can’t move forward thanks to the fee. This is millions more than the anemic $11.7 million MHA has brought in so far this year at the full fee, and down from $67 million in 2020, before developers started forgoing projects.
That would also bring in an estimated $225 million in new construction sales tax and create up to 6,700 new units. Oh, and it would create new construction jobs, which is why labor packed a meeting of Foster’s housing committee on Friday to support her legislation to lower the fee by 80 percent for two years.
Despite the obvious boon for affordable housing, you still can’t convince the left that developers should get tax breaks. And so Foster’s deal—which, of course, still has to pass—includes keeping the full MHA fee in place on any new projects in vulnerable neighborhoods such as Beacon Hill, the Central District, and the Chinatown-International District where development is often considered synonymous with displacement.
It’s worth noting, though, that almost all the projects developers are trying to get moving again under the 80 percent discount are on vacant lots or lots that aren’t currently residential.
Wilson applauded Foster on her proposal. From the sidelines.
Inclusionary Zoning > No Inclusionary Zoning
So says Foster herself, who has added a resolution to her MHA-holiday ordinance clarifying that despite the temporary reduction in the MHA rate, she believes developer fees need to be a “core part” of the affordable housing equation in the future. Using developer fees to fund affordable housing is known as “inclusionary zoning,” a policy that conditions issuing permits for market-rate projects on the production of affordable housing.
Foster’s resolution calls for adding inclusionary zoning requirements in neighborhood residential zones—formerly single-family zones—that are currently exempt from MHA fees. Her resolution directs staff to “develop legislation implementing an inclusionary requirement for new market rate residential development in Neighborhood Residential zones … [and] estimate how an inclusionary requirement for new market rate residential development could … contribute to meeting the need for housing affordable to lower income households.”
This startled some urbanists who cheered her MHA holiday ordinance, but then wondered why she’d do a 180 by adding the fees where they currently don’t exist. Given the slumping post-MHA housing production numbers, urbanists ask why Seattle would tax something its wants to encourage—housing.
Foster, who wants to be “transparent that [her] vision” supports inclusionary zoning, says she doesn’t believe MHA is solely responsible for the falloff in housing production; she cites Trump’s tariffs, for one. However, she also says she wants to make sure the fees don’t stall development and wants staff to “recalibrate” MHA fees “to find the right balance.” (As Erica reported last week, Foster differentiates her resolution from a council proposal last year that would have simply applied the MHA fee structure as is.)
“Right now we are doing a short-term fee reduction to help get development back on track in the midst of lots of negative macroeconomic factors we weren’t facing a decade ago,” Foster said when asked about the seeming contradiction in her approach. “And as we look towards the future, I believe inclusionary zoning should continue to be a part of how we build a city that works for everyone. We just have to get the dials right. The resolution focuses on determining the right path to include neighborhood residential in that recalibration.”
The MHA fees are a small percentage of development costs. The issue is timing of collection – upfront. A consultant analysis of the MHA program suggested a better approach. Pay in full but later in the cycle when projects are completed and leased up or sold.
Also who thinks that having two small bedrooms in a 700 SF apartment with zero outdoor space is “family housing” ?
A 700 SF 2 bedroom unit is absolutely family housing! In 1950 the average family house was under a 1000 square feet. The PNW is chock full of older 2-3 bedroom houses that are 700-850 square feet. If people aren’t ready to live in the same sort of space we did 75 years ago… maybe they should just move away from Seattle? Try Houston, houses are huge in Texas.
In 1950, the USA had something like 330 SF of housing space per person, most often a shared house split among a family. Today’s “housing shortage” has little to do with the square feet of housing recently built. The problem is a mix of 2000-3000 ft homes for rich couples and single people living in apartments close to size of older family homes.
Tacomee – which neighborhoods in Seattle are “chock full” of 800 SF homes (2-3 bedroom with one bath)? Unfortunately these have been razed (along with all their yard space and trees) and replaced with stair tower homes, that are decidedly non-family friendly. Preserving larger SF homes for multi-family or multi-generational living is a great idea but the code is a disincentive to that use.
To me, solution is to not subsidize housing, period. If the rich folks who live in Seattle make it too expensive for low- and moderate-income people to live within working distance, then all of a sudden they won’t have those services that are provided by low- and moderate-income folks. They will have to pay them more money for their services, to the extent that living in Seattle becomes affordable for them.
I lived in DC for a decade before moving back to Seattle. In that time, the conservative mayor eviscerated the IZ program, spent no money on enforcement of housing development tax incentives & gave away millions in tax deferments to developers that are not being paid back. Many of the things people in these comments are advocating for. And you know what happened in DC? Housing production stalled, rents skyrocketed & more people became homeless between 2019 and 2024 than in the previous 2 decades.
What Montgomery County MD has done since the 1970s. Remember folks Seattle is more libertarian than liberal.
https://montgomeryplanning.org/planning/housing/affordable-housing/moderately-priced-dwelling-unit-mpdu-program/
Maybe the “affordable housing left” is skeptical that paying developers to do what they should want to do anyway is not working as expected and might just be a game of arbitrage where the city is continually on the back foot? Giving away tax credits on Seattle’s most valuable and irreplaceable asset doesn’t make much sense. If Seattle really wants to get things built it needs to tax un[der]developed land that has been zoned for much higher uses, like the little parking lots downtown that used to have a building on that land but since the holding cost – the property taxes — can be met with a few cars a week, where’s the incentive to develop them?
People love to hate on developers but they are ones building the things we saw we want and need. No one says a mumbling word about the speculators and out of state investors who bank land like Seattle is the Cayman Islands. It’s not me saying it, either.
“The reality is that for decades, Washington state has played a role kind of like the Cayman Islands — we have been a tax haven. That’s what the evidence shows. And so at some point you have to ask: How the heck do we pay the bills around here?” — Jacob Vigdor, University of Washington economist, quoted by Danny Westneat, The Seattle Times, April 2, 2025
Good comment, but:
“People love to hate on developers but they are ones building the things we saw we want and need.”
Meh. The problem is housing is prioritized as an asset before it’s prioritized as shelter. Prices are high because high cost assets have become an integral part of growing our economy. Depicting developers as some sort of do-gooders for their role in this infernal machine is misplaced, to say the least.
Neither the Council or the Mayor will ever get the dials right.
The correct answer is to eliminate the MHA fees for every residential development in every neighborhood, forever.
That was the correct answer when Ed Murray started MHA as well, by the way. Imagine how much extra housing Seattle would enjoy today if that boneheaded proposal had never been adopted.
I applaud Foster for proposing this reduction in MHA fees but MHA should be eliminated. We need more housing. Estimates are that MHA fees prevent 5-6 or more new units from being built for every unit it funds. Research shows that is the total amount of housing that lowers rent, including rent for the lowest rent apartments, not just building subsidized affordable housing. It is silly and counterproductive to tax what you want and need more of.
Publicola’s is not the real definition of inclusionary zoning. It is in fact, the one that the Downtown Development Association handed us housing advocates as their preferred solution. And it’s not working.
Here’s Publicola’s definition of inclusionary zoning:
“Using developer fees to fund affordable housing is known as “inclusionary zoning,” a policy that conditions issuing permits for market-rate projects on the production of affordable housing.”
That’s incorrect. The AI generated common definition takes inclusion literally.
“Inclusionary zoning is a local land-use policy that requires or encourages developers to set aside a percentage of units in new residential projects as affordable housing for low- or moderate-income households, often in exchange for incentives like density bonuses, tax breaks, or expedited permitting.”
In other words, and in most cities, housing developers have to actually include and produce the rent-limited apartments, not pay about one-quarter of the cost of having the city produce them somewhere else, on cheaper land, four years later using our tax money as “leverage.”
In fact, the MHA was originally named Mandatory Inclusionary Zoning (MIZ). The City quietly changed it about five months later because of the irony of having an opt-out provision. Today, over 90% of MHA projects pay the fee instead of including low-income units in their multifamily projects.
Surely you can see that inclusionary zoning can’t possibly apply to single-family homes or small low-rise projects. This is where the Seattle City Council went off the rails. Experience in other cities tells us that projects smaller than about 20 units should be excluded from inclusionary zoning requirements.
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In-lieu fees are common for pretty much any city with a policy like this. See Portland (https://www.portland.gov/phb/inclusionary-housing/fee-lieu). MSRC has good resources on how cities in Washington have approached the topic (https://mrsc.org/stay-informed/mrsc-insight/march-2026/inclusionary-zoning).
MHA is inclusionary zoning. The definition used in this article is slightly imprecise, as the policy itself is typically to set aside units in the development as affordable. But that is a fairly minor imprecision that has no real bearing on the discussion at hand (if Inclusionary Zoning is good policy).