July 9, 2014
Vol: 21 No: 28

News

As rents rise, City Council offers few fixes to housing policy

By Aaron Burkhalter / Staff Reporter

According to the city’s comprehensive plan, more than a third of Seattle housing is supposed to be affordable by 2031. Affordability is defined as rents that are no greater than one-third of the income of people making less than 80 percent of the area median income. Right now, only a quarter of housing in Seattle is affordable

For the most affordable apartments, the vacancy rates are lower. In the cheapest sector of units, the rate is 3.71 percent

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Seattle’s housing market is going in one direction — up.

Around King and Snohomish counties, rents average $1,284 a month, up $94 a month from a year ago and more than $200 a month since 2010. In the last quarter alone, rent prices jumped 4 percent.

By contrast, Seattle’s approach to housing affordability is diffuse.

“Seattle doesn’t have a single place where we house our housing policy,” Councilmember Sally Clark said.

Instead, the city’s housing affordability strategies — incentives to developers, fees and taxes — are scattered among policies and city departments.

“If we’re going to be successful, we’re going to have to be really intentional and more explicitly thoughtful than we have been about affordable housing,” Clark said.

Seattle City Council is poised to modify a few housing policies that will support affordable housing later this year. The city council is regulating microhousing — buildings with small sleeping units that attach to common living and kitchen spaces — this summer. In September, the city council plans to pass a resolution to expand incentive zoning, which allows developers to build taller buildings in exchange for affordable housing.

These are small solutions to a large problem, housing advocates say. The council also needs to find more funding and develop stronger policies to address rising costs, which have reached crisis levels.

“We would like to see real, impactful incentives and programs and new funding for affordable housing,” said Sharon Lee, executive director of the Low Income Housing Institute. “All we see is tinkering around the edges.”

Others argue that to create affordable housing, the city council needs to back off of regulating the private market. When developers can build taller apartment buildings with few restrictions, rents go down, they say.

“We’re never going to solve the whole housing affordability challenge with just the market,” said Roger Valdez, director of Smart Growth Seattle, a nonprofit funded by Vulcan and Touchstone that advocates for denser development in Seattle. “But if we suppress supply, we’re simply going to create competition for cheaper rents amongst people who have a lot more money to spend than the poor people.”


Vacancy rates down

As city officials adjust policies, Seattle’s poorest residents struggle to find housing.

Vacancy rates have dropped over the past several years. According to Apartment Insights Washington, a real estate research company, King and Snohomish counties have a vacancy rate of 4.17 percent, the lowest rate in the nine years the agency has tracked vacancies.

For the most affordable apartments, the vacancy rates are lower. In the cheapest sector of units, the rate is 3.71 percent.

The rental market hits equilibrium at 5 percent, said Tom Cain, principal of Apartment Insights Washington. Above 5 percent, rents start to drop; below 5 percent, rents rise.

Seattle’s growing economy and population growth is driving rents up, Cain said.

“There’s just a lot of pressure on the demand side,” he said. “Developers can’t keep up with the demand.”

City leaders are challenged to close a gap that’s widening all the time.

According to the city’s comprehensive plan, more than a third of Seattle housing is supposed to be affordable by 2031. Affordability is defined as rents that are no greater than one-third of the income of people making less than 80 percent of the area median income. Right now, only a quarter of housing in Seattle is affordable.

The city is also losing historically affordable housing as developers purchase properties and remodel them into luxury apartments.

Goodman Real Estate is preparing to buy The Theodora, a low-income apartment building in Wedgwood run by Volunteers for America.

In 2013, Goodman Real Estate bought Lockhaven Apartments in Ballard with plans to renovate them into luxury apartments with higher rents.

New development is fine, said Tenants Union of Washington State Executive Director Jonathan Grant: “It just cannot cannibalize the current affordable housing stock.”


All about incentives

Lately, the city council has relied on incentives to developers to create affordable housing.

Seattle’s incentive zoning program allows developers to build taller than current rules allow in exchange for setting aside a number of units for affordable housing or paying a fee into the city’s affordable housing fund.

Incentive zoning has had mixed results in Seattle’s housing market.

A little more than a third of eligible developments from 2000 to 2012 participated in the incentive zoning program, according to a study commissioned by the City Council. All but one of the developers that had the option chose to pay the fee instead of building housing on site.

Not everyone believes incentive zoning is the way to go.

“Giving incentives to private developers does not necessarily equate to better conditions for people who need affordable housing,” said Councilmember Kshama Sawant.


Role of developers

There may be one point on which housing affordability advocates and pro-density urbanists agree: that developers can’t be counted on to create all the affordable housing Seattle needs.

The city shouldn’t turn to developers to fund affordable housing, said Valdez of Smart Growth Seattle.

“The gap needs to be filled with public dollars and subsidies,” he said.

Housing advocates agree that the city should not cede the task of creating affordable housing to the market, but should pay for it as well, through increased funding and subsidies.

“If the housing market can’t realize that vision, then we have to consider policy tools that will get us to that place,” Grant said.

More than 10 years ago, the city reserved a portion of new property taxes and used it to create low-income housing. Lee said the city should reinstate the tax.

The city also has a number of unused properties that could be turned into affordable housing, including the city’s old street car barn on Fairview, a plot of land in South Lake Union and the abandoned Fire Station 39 in Lake City.


Future tense

City leaders have a number of opportunities to make these changes. In 2015, the city will revise its comprehensive plan. Councilmember Mike O’Brien wants the plan to include new guidelines on affordable housing.

“Well into next year we’ll be having those conversations,” he said.

This summer the City Council will receive more reports from consultants on how to reform the incentive zoning program, which has produced about 10 percent of the city-funded affordable housing stock over the last decade.

O’Brien hopes to have a resolution drafted by September, which would guide the legislative process. He wants a law completed in early 2015.

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