City Reflects on Seattle’s Affordable Housing Progress in 2019

Our city is facing a housing crisis. Before the onset of the pandemic, when the economy was humming and jobs were bountiful, we had thousands of our neighbors sleeping on the streets in the shadows of new office buildings and the doorways of new chic restaurants. We had thousands kept awake at nigh with the knowledge that that they are one rent increase or missed paycheck away from joining them. Now we face an uncertain economic future as we wait to see what emerges from our long quarantine. One thing is for sure though, those amongst us with the least will suffer the most.

It is safe to assume that the economic fall out has only compounded our city’s affordable housing shortage by increasing the need and slowing the delivery of new apartments for people of all levels. And while we are not doing nearly enough yet to ensure that all our residents current and future have dignified and affordable shelter, the city has been making large investments in rent restricted units.

Three recently issued report document the impact of the the city’s most important housing programs: The Housing Levy, the Mandatory Housing Affordability (MHA) program, and the Multifamily Tax Exemption (MFTE). The top line take away is that the City’s Office of Housing (OH) awarded $107 million for rental housing production and each dollar will be leveraged by $4.70 of additional state and federal money for $614 million in total investment. That funding supported the creation or preservation of 1,731 units of affordable rental housing including six new buildings with 785 units. In addition, 17 additional buildings are under construction and slated to open in 2020 and 2021 with more than 1,600 apartments.

All these new units serve a variety of needs, from people coming out of homelessness with no income, to working clas people with solid jobs who are cannot afford any market rate housing in Seattle’s frantic housing market. Below is the OH chart for what they think is affordable for different incomes.

The Housing Levy

In 2016, 70% of Seattle voters backed a seven-year $290 million dollar levy to produce and preserve, rehab, and operate affordable housing. It is only the most recent in a string of bond and five levies started in 1981 that have produced 13,000 affordable apartments, provided home ownership opportunities for 900 low-income families, and rental assistance to 6,500 households. In addition to the City money, the Office of Housing and their non-profit partners leverage this money with other state and federal programs to create more housing than would otherwise be possible with City money alone–nearly five times over in 2019.

When people think of affordable housing spending what they are most likely to imagine in new income restricted apartments. In 2019 $29.2 million in Levy funds was awarded to six housing development projects that will provide 887 affordable apartments. Other funding, particularly Low Income Housing Tax Credit equity, supplemented this funding and allowing the program to exceed annual production targets. The funded projects, which will begin operation in several years, include:

• Madison/Boylston – 362 units servicing seniors and veterans experiencing chronic homelessness, and families and individuals. First Hill
• The Eldridge – 125 units serving LGBT Seniors. Capitol Hill
• 12th and Spruce – 100 units of permanent supportive housing for people experiencing chronic homelessness. First Hill
• Ethiopian Village – 89 units serving the East African Community. Rainier Beach
• Hobson Place II – 92 units of permanent supportive housing for people experiencing chronic homelessness. Rainier Valley
• Nesbit Family Housing – 117 units serving families and individuals. Licton Springs.

Besides construction, the levy funds other programs including: $15.2 million to provide operating subsidies for up to 304 rental units and $2.07 million to provide provide services and rent assistance to allow 555 household to stay in housing and 126 households to move off the street and into housing. It also funded two developments for low-income, first-time home buyers on Seattle City Light land, and provided grants for 32 low-income homeowners unable to get conventional loans. Even with land and construction as expensive as it is on our city, the levy is on track to meet all its seven-years goals.

Mandatory Housing Affordability

One of the city’s biggest efforts to date to increase the production of affordable housing has been the Mandatory Housing Affordability (MHA) program. First implemented in its current form starting in the University District in 2017 and then adopted “citywide” in 2019, the program requires that new buildings in commercial and multifamily residential zones either set aside 5% to 11% of their units as affordable for 75 years–the performance option–or pay between $5.00 and $32.75 (2017 numbers) into a city affordable housing fund, which is the payment option.

The affordability requirements come in exchange for increases in zoning capacity usually amounting to an extra story or two in building height. The percentage and dollar figure depend on the scale of the upzone and where they are located in the city. The City aimed to balance the program so that extra development capacity allows builders to shoulder the additional development costs–and the affordability mandates temper spikes in land prices that upzones often cause.

The payment and performance options both offer unique benefits and are equally important to the success of MHA. With the performance option, a specified percentage of homes in new multifamily residential buildings will be reserved for income-eligible households and have restricted rents. These affordable homes will be comparable to market-rate units (e.g., size, number of bedrooms, and lease terms). With the payment option, developer contributions enable the Seattle Office of Housing to leverage other funds to produce more affordable housing overall. In addition, affordable housing funded with MHA payments is always built to Evergreen Sustainable Development Standards and can incorporate community-identified goals such as housing preservation, family-sized and family-friendly housing, wraparound support services, and more. (Check out the City’s webpage for more info.)

In 2019 the MHA performance path resulted in 12 affordable homes being placed into service with 64 additional affordable homes committed–meaning the agreement has been approved but the building has not been completed. The payment option generated $15,613,712 last year.

While many people disparage the payment option as a cop-out, the city used the money generated to leverage additional state and federal funds to produce more housing, and different types of housing, than would be achieved if everyone opted for the performance option. In 2019, the city committed $11.74 million in MHA generated fund, paired it with $43.16 million in additional city money and an unspecified amount of state and federal funds to support six projects that will provide 844 units. In addition, if all developers opted for the performance option, the housing created would be less flexible. Using “in-lieu” payments, the project funded multigenerational family housing targeted to folks at risk of displacement, a senior center, a childcare center, non-profit office space, a food bank, and other benefits that would not be found in a market rate building.

In addition, the city has a voluntary Inclusionary Zoning (IZ) program that predates MHA whereby developers could grain extra floor area by providing on site affordable housing or paying into a fund. The voluntary Inclusionary Zoning program is still in effect in some areas and also has some projects still working their way through the system. The IZ program placed 164 affordable performance units into service in 2019, received commitments for 60 more, and estimated payments of $15.1 million. $10.78 million of these payments were committed to projects expected to generate 668 more affordable housing units.

Multifamily Tax Exemption Financing

Beyond the Housing Levy, MHA, and voluntary IZ, the city’s other main program for generating affordable units it the Multifamily Tax Exemption Financing (MFTE). It is a program that allows private development to get a 12-year tax exemption on their residential developments in exchange for setting aside 25% of their units as affordable or 20% if the development includes at least 8% 2+ BR units, what the city considers family housing. The affordable units are for individuals and families making 40% to 90% of Area Median Income, depending on the type of unit, with smaller units requiring a greater level of affordability.

In 2019, 28 market-rate buildings entered the program with 578 rent and income restricted apartment and 62 additional rental buildings’ applications to participate in MFTE were approved, with final approval of tax exemption pending further review once they are closer to completion. Overall, as of the end of 2019 there are 5,447 affordable units in the MFTE program, another 1,670 in the pipeline, and 474 that have left the program, mostly by running out of their 12 years.

Need for Greater Investment

Listing Seattle housing programs may give the impression Seattle is doing enough to tackle its housing affordability crisis. But sadly that’s far from true. The 1,731 affordable homes created or preserved in 2019 still fall far short of meeting our housing needs and undoing decades of stunted and racist housing policies. The unrelenting homeless sweeps are proof of that.

King County’s regional affordable housing taskforce estimated 244,000 additional affordable homes are needed by 2040 to ensure no households are cost-burdened or without housing. “According to our estimates, we need 156,000 more affordable homes today and another 88,000 affordable homes by 2040 to ensure that no low-income or working households are cost burdened,” the taskforce co-chairs wrote in their five-year action plan.

In other words, the scale of the housing crisis is staggering. The city’s existing programs have helped, but a large dedicated source of revenue is needed to change the equation. This could take many forms: the passed and then repealed head tax, the regional tax proposed during the last legislative session, the revised payroll tax initiative being worked on, or some other way. No matter what though, if want to end homelessness and reduce the number of people who are one paycheck away from the street, we need to act. Luckily, it’s not without precedent–just look to our Cascadian neighbor to the south. Portland’s three-county metro region just passed a tax on wealthy individuals and businesses that will raise a quarter of a billion dollars annually to address the homelessness crisis. It’s high time Seattle stopped dragging its feet and followed suit.