To build higher, developers must pay more: That’s the idea behind Seattle’s Incentive Zoning Program, which allows developers to construct taller buildings in South Lake Union and downtown in exchange for including affordable housing or paying a fee for the city to build affordable housing elsewhere.
The Seattle City Council hired consultants to figure out how to improve incentive zoning. Instead, they recommended the city scrap the program altogether, replacing it with what is known as a mandatory linkage fee.
Cornerstone Partnership, a California consultant, told the Seattle City Council on July 21 that to make bigger gains in affordable housing, Seattle must collect money from every development, regardless of size or location.
Where incentive zoning was geared toward nudging developers to create affordable housing in their projects, the linkage fee’s primary aim is to generate a pool of money with which to build affordable housing. Developers are charged a fee, but in order to opt out, they are allowed to include affordable housing in the project.
Similar to impact fees some cities charge to new developments to pay for schools, the linkage fee is based on the idea that as a city grows, its need for affordable housing grows as well and captures money to meet the demand.
The point is to generate more funding by spreading costs around.
“It’s possible that you could raise more money for the housing program while charging each project less money, because you have more projects paying in to the fund,” said Rick Jacobus, a consultant with Cornerstone Partnership.
Incentive zoning falling short
The fact that incentive zoning is voluntary has limited its effectiveness in Seattle, Jacobus said. When developers decide not to take advantage of the additional height, they pay nothing to the city for affordable housing, nor are they required to create any.
When developers do decide to build higher, it’s cheaper for them to pay the fee rather than include affordable housing units in their buildings.
Research by Cornerstone and David Paul Rosen & Associates found that it was much more expensive to build affordable housing on-site than to pay the fee. For example, it would cost a developer $50 per square foot to build affordable housing downtown, but would only cost $21.68 per square foot to pay the fee.
Developers who participate in the program mostly pay the fee, but no one has any idea how many developers decide not to build higher in the first place, or why.
Incentive zoning created 700 affordable housing units from 2000 to 2013, accounting for about 10 percent of the affordable housing the city of Seattle created in the same period.
In other words, the program is responsible for a relatively small part of Seattle’s affordable housing successes.
“It’s a piece of the overall housing picture, but it’s not the centerpiece,” Jacobus said.
When it comes to scrapping incentive zoning, pro-density and pro-growth groups are on board — they just don’t want it replaced with any other fees.
The city should allow developers to build taller without hindrance, said Barb Wilson, government affairs officer for Vulcan.
She said the city is wasting its time with “all this hand-wringing for a program that does very little to address the housing need.”
Advocates for affordable housing say Seattle needs to charge developers a fee if it is to meet its goals for affordable housing. What’s more, developers can afford it, they say, citing the study by David Paul Rosen & Associates.
“We’ve seen in other cities that requiring more of private developers does not stifle development,” said Stephanie Velasco, outreach coordinator for the Housing Development Consortium, which has advocated for strengthening the requirements of the existing incentive zoning program.
Seattle’s comprehensive plan states that a third of housing in the city is supposed to be affordable by 2031, which means that people who earn 80 percent of the area median income would pay no more in rent than one-third of what they earn.
In spring 2013, when developers had an eye on the burgeoning South Lake Union neighborhood, the Seattle City Council anguished over how much to charge them to build taller buildings there.
The city council decided to allow buildings taller than 100 feet, but only if developers created affordable housing on-site or paid to build it elsewhere. Seattle City Councilmember Nick Licata wanted to require developers to set aside 10 percent of the additional square footage for affordable housing or pay a fee of $96 per square foot. Instead, the council voted to require developers to set aside 5 percent of the additional square footage or pay $21.68 per square foot.