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 on thanks to the fee. This is millions more than the anemic $8 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 neighborhoods like 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 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.”
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.