April 15, 2015

Business coalition offers ideas on how to increase housing in Seattle

A coalition of business groups and real estate developers has weighed in on plans to create or preserve 20,000 affordable housing units in Seattle over the next 10 years.

The affordable housing is part of Mayor Ed Murray's ambitious goal to create up to 50,000 housing units to accommodate the city's growing population. The mayor's total also includes 30,000 market-rate units.

A 2014 forecast by the Department of Planning and Development predicted the number of Seattle residents will blow past the 700,000 mark sometime in the early 2020s. The current population is estimated at 652,000.

Despite the furious pace of apartment construction in Seattle, average rents have been increasing.

The developer group, which calls itself the Coalition for Housing Solutions, said reaching the affordable-housing target would require a range of incentives and subsidies.

The group released a report on Tuesday by ECONorthwest that recommends a number of measures, such as creating a multifamily property tax exemption for existing housing, using city-owned land for affordable housing, and extending the multifamily property tax exemption for expiring units. Current tax exemptions expire, with a maximum of 12 years.

The group said with these measures, the mayor's goal could be reached.

Murray announced his 50,000-unit goal in March and charged a 28-member task force he created last year called the Housing Affordability and Livability Advisory Committee with coming up with a plan by the end of May.

The Coalition for Housing Solutions wants to influence the committee's recommendations by expressing its own preferences.

Jon Scholes, president and CEO of the Downtown Seattle Association, said yesterday that the intended audience for the ECONorthwest report is the mayor, City Council and the housing task force.

The coalition commissioned the report in January. Coalition members include the Downtown Seattle Association, NAIOP, Seattle Metropolitan Chamber of Commerce, Building Owners and Managers Association, Smart Growth Seattle, and firms such as Vulcan Real Estate, Kauri Investments and Gardner Economics.

Morgan Shook, a project director at ECONorthwest and an author of the report, said reaching the 20,000-unit goal for affordable units would likely require preserving existing units since new construction is much more expensive. A change in state law could allow existing units to participate in the multifamily property tax exemption program, he said.

The idea is to keep units available for low-income households that would otherwise be at risk of being sold or rehabilitated, generally leading to higher rents.

The mayor is calling for affordable units for households earning up to 80 percent of the area median income. A one-bedroom apartment would cost no more than $1,234 a month including utilities under this standard, according to the Seattle Office of Housing. The same unit for a household earning up to 30 percent AMI would cost no more than $505.

Other ideas in the report included increasing the city housing levy. The seven-year levy approved in 2009 generated $145 million. A new levy could kick in another $250 million to $300 million.

A city affordable housing fund could dedicate 1 percent of general fund tax revenues for affordable housing programs. Over the past 10 years such a fund would have generated $60.7 million.

An alternative idea would direct construction-related sales taxes toward affordable housing programs. Construction-driven tax revenues would have generated $386.4 million over the past 10 years, according to the report.

The report also made recommendations for achieving the mayor's goal for adding another 30,000 market-rate units. They include increasing capacity in transit-accessible areas, more low-rise zoning, expanding micro-housing, and reducing barriers in the city's design review process.

Another suggestion was to create an eight-year tax exemption program to support market-rate development in parts of the city that are struggling to produce housing.

One suggestion that didn't make the cut: enacting “linkage fees” that developers would have to pay if they don't include affordable units in new developments. The idea has been unpopular with developers, who say the fee would make development more expensive.