March 16, 2011
Vol: 18 No: 11

Community & Editorial

Seattle City Council gives sweet subsidies to developers, to the detriment of affordable housing

by: John V. Fox , Seattle Displacement Coalition

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The Seattle City Council recently voted unanimously to extend the Multifamily Tax Exemption (MFTE) Program, meaning millions more in tax breaks will be given away to developers in return for a handful of so-called “affordable” units priced hundreds of dollars above what most tenants in our city can afford.

City officials say developers are rushing to tap this program. No wonder; the amount of the subsidy they’ve received since 2004 under MFTE has reached $90 million. Between now and 2015, another $150 million likely will go to developers at the current annual rate it’s being used. One developer alone of the 250 unit Othello Station apartments received $7.9 million in tax breaks. Under our system of property taxes, what developers don’t pay is passed on to other ratepayers.

At community meetings, when I tell folks that we are rewarding developers with millions and all they have to do is “set aside” 20 percent of their units at the following monthly rents—$974 for a studio, $1285 for a 1-bedroom unit, and $1638 for 2-bedroom or larger unit—there is complete disbelief that our elected officials would even consider such a program.

If that wasn’t frustrating enough, before the council voted to extend the MFTE program through 2015, no one on the council dais gave voice, or even as a courtesy chose to articulate these concerns. No one said a word about the enormous subsidy and impact on taxpayers or what little we’re getting in return. Only developer’s voices were referenced. As an observer of Seattle City Council’s shenanigans for over 35 years, this council is coming close to being the most developer-dependent neighborhood-challenged bunch I’ve seen.

Assuming a household should pay no more than 30 percent of their income on rent—a common federal standard—you’ll need to be earning $39,000 or 65 percent of median to afford the studios, $49,000 or 75 percent of median for the 1-bedroom, and $63,000 or 85 percent of median for the 2-bedrooms set aside under this program. According to the 2008 King County Housing Benchmarks Report, there is a surplus in Seattle of 37,000 units offered at rents affordable at these income levels.

Units “set aside” at these monthly rates also are more than $100 above what the average tenant can afford in Seattle whose income is at or below 55 percent of area median. They’re also priced above average rents—the going rate—in nearly every single neighborhood of Seattle. Meanwhile, the real need in Seattle is for much lower-priced rentals affordable to those below 50 percent of median.

Resisting our call to drop rents down on the units set aside so they could serve those truly in need, Councilmembers Clark and Rasmussen openly quoted developers telling them they wouldn’t build at all in Seattle if required to lower rents on those 20 percent “set asides.”

When was the last time a developer ever argued for any piece of legislation or requirement that would result in less return for them?

The only exception might be highrise developer Martin Selig, who in 2005 supported Councilmember Steinbrueck’s revisions to the downtown bonus program, dropping rents on units developers would have to provide in exchange for the right to build taller buildings. Steinbrueck’s proposal ultimately passed over objections from both for-profit and non-profit developers. Funny, the developers who said they’d pack up and go kept right on building at record levels through mid-2008, only slowing when the national economy collapsed.

If councilmembers had taken any time to actually review reports on the performance of this program, they’d have found that many of the projects already built using MFTE now are offering all of their units at rent levels well below what the program allows them to charge on the 20 percent they must set aside. An oversupply at these rent levels required them to drop their rates.

According to every rental analyst and expert, expansion of the rental supply is already happening with many projects in the pipeline. In fact, the Urban Land Institute ranks Seattle one of the five healthiest rental markets in the country. We don’t need the MFTE program at all to spur growth. The added supply isn’t going to drop rents down below 50 percent of median, where the need lies, but it will free up even more units affordable to those between 60-80 percent of median, all without these MFTE handouts.

But again what’s really galling is that none of these concerns and issues coming from the community about the nature of this giveaway gets aired at all—not by one elected official. We simply have no voice. It’s all about what the developers think and tell them. How else can you explain why our local leaders would continue this egregious local version of “Socialism for the Rich?”

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