This afternoon, the Council will vote on important legislation related to urban growth, density, and affordable housing. The Council bill is the result of multiple committee meetings, public hearings, workshops, and dozens of conversations over the past year.
The legislation we vote on today provides robust incentives to builders in exchange for affordable housing. The legislation advances sound public policy—clustering of density with diversity of housing. And, the legislation reflects what our city desires—growth that is limited to select areas, contributes to our diversity, and is socially just.
I’ve put more time into this issue than any other. I’ve read countless articles, studies, books, and letters. I’ve listened to speakers tell me that this legislation is an excellent step and will spur the construction of much needed affordable housing. Others have said that this legislation will stifle development and put up insurmountable barriers to new construction. Still others believe the legislation is a give-away to developers.
While I’ve been torn on the best approach to achieve affordable housing, clustered density, and a strong and diverse city, I believe this legislation provides a pathway to achieving those goals.
Here’s why:
Seattle needs more affordable housing. City studies show a need for an additional 24,000 units of workforce housing. The legislation will spur development of housing units for those making 80% or less of Area Median Income (AMI), which is about $43,000. Our schoolteachers, office and retail workers, firefighters and other middle-income workers will benefit from this housing.
Incentive zoning trades benefits for the common good. Investors gain valuable property, while the City and its residents gain affordable housing. The core idea is this—You own property where land use codes allow you to build a 40-foot high apartment building. The City “up-zones” your property to 85 feet, which allows you to build a higher structure, greatly increasing your return-on-investment potential. In exchange for the up-zone, you agree to set-aside 17.5% of the “bonus” area for apartments for those making 80% or less of the current AMI.
I worked with my colleague, Councilmember Sally Clark, to amend the legislation to require affordable housing in buildings less than 85 feet in height, while allowing developers building over 85 feet the option of including the housing in the structure or making an “in lieu of” payment to build affordable housing elsewhere. We strongly believe that affordable housing should be integrated with market rate housing.
In response to some developers and property owners who think current economic conditions are not conducive to new construction, the legislation allows the director of the City’s Office of Housing to lower the 17.5% set-aside threshold to 15% under certain circumstances. The legislation also follows State law in allowing other incentives to be applied with the density-in-exchange-for affordable-housing incentive, such as the Multi-Family Tax Exemption (MFTE) program. The AMI will also be based on Seattle, not county-wide salaries, an adjustment that will likely allow slightly higher rental rates to be charged.
The key question in all this is—at what point, and with what incentives, do we tip the balance in motivating private developers to build affordable housing? I believe the legislation nudges us past that tipping point.
The policy supports density and growth for the common good. The legislation allows use of this density-in-exchange-for-affordable housing incentive only in select areas of the city—urban centers (like Northgate or South Lake Union), urban villages (like lower Queen Anne), and areas that qualify for the MFTE program. It will work to cluster density in areas identified as suitable for growth. The policy does not apply in single-family residential areas of the city.
This incentive zoning approach is common practice across the country. The first density-in-exchange-for-affordable housing incentive program was established in the United States in 1972. Seattle first adopted incentive zoning in 2006 for the downtown core. Well over 300 jurisdictions—cities, towns, and counties—across the country have some form of incentive zoning, many have practiced it for decades. Coincidently, this past Saturday, President-elect Obama named Shaun Donovan as his secretary for Housing and Urban Development. Today, Donovan holds a similar position with Mayor Bloomberg in New York City where he successfully introduced incentive zoning several years ago.
There are multiple studies on the practicality and effectiveness of incentive zoning. The opponents often cite these studies to bolster their arguments, but the studies clearly show that incentive zoning works if appropriate incentives are offered. Perhaps the most thorough and independent study was completed in March by the Furman Center for Real Estate and Urban Policy at New York University. In its conclusion, the Furman study stated, “. . . we found no evidence that IZ [incentive zoning] caused an increase in the price or a decrease in the supply of market-rate housing . . . These results suggest that adverse price and supply effects are not inevitable outcomes of IZ. . . it seems likely that the details of the policies—particularly the inclusion of effective cost offsets—matter considerably.”
The Furman study further states that “. . . adverse impacts on the price and supply of market-rate homes can be mitigated or even avoided entirely by providing benefits to developers that fully compensate them for losses associated with selling or renting IZ units at below-market prices. The most common compensatory benefits included in the IZ ordinances we studied was an increase in allowable density.”
For these reasons, I will vote in favor of this legislation this afternoon.