In 2024, Washington state communities will receive a record $312.6 million in new investments in affordable housing from the Washington State Department of Commerce (COM). The money will go to 73 different projects helping to create and maintain 3,443 units of rental housing and homeownership opportunities for 470 low-income families. This investment is aimed at alleviating the acute housing crisis, which has resulted in about 28,000 people experiencing homelessness in Washington at the end of 2023.
The infusion of new cash, which was authorized in the 2023-2024 state budget under the Housing Trust Fund, mirrors similar investments in Seattle. In November 2023, voters approved nearly $1 billion in new funding for affordable housing over seven years. The JumpStart payroll tax on big corporations has also netted close to $600 million for affordable housing since it was passed in 2020.
Even the federal government is starting to invest more in affordable housing. According to a press release from Sen. Maria Cantwell’s office, a deal to issue new tax credits in the next federal budget will enable the construction of 6,000 affordable homes in Washington and 200,000 nationally over the next two years. However, this amount is small compared to what the federal government invested in the 1970s, when an average of half a million affordable homes were funded each year.
Despite the new spending, demand for affordable housing far outstrips the rate of production in Seattle and Washington as a whole. According to a March 2023 report by COM, the state must build 1.1 million new homes over the next 20 years in order to resolve Washington’s housing crisis, translating to 55,000 a year. Additionally, department staff estimated that at least 60% of those homes must be affordable for people who have an annual income of 80% or less of the Area Median Income (AMI).
While homebuilding has increased at a steady rate since the Great Recession, it only briefly met the 55,000 goal in 2022. Since March 2022, the Federal Reserve has repeatedly hiked interest rates in an attempt to reduce inflation by slowing down the economy and increasing unemployment. Because construction is very credit-dependent, the hikes have sent Washington’s building rates tumbling to about 40,000 as of January 2024. Additionally, most of the homes being constructed are not affordable but rather market rate. The advocacy group Up for Growth estimated Washington is currently facing a shortage of about 100,000 total homes, a figure repeated by COM staff in an email to Real Change.
During a Jan. 18 press conference, COM director Mike Fong said that while the state’s investments were desperately needed, they will not be enough to make up for the ongoing shortfall.
“We’ve got to find a way to close that gap, and it’s not going to be closed with just the production through the Housing Trust Fund,” Fong said.
In the current political climate, affordable housing developers are facing contradictory headwinds. While political consensus is growing regarding the need to ramp up public investment and loosen land use policies to increase density, both the housing and homelessness crises seem to get worse as well. In December, the Department of Housing and Urban Development reported homelessness rose nationwide by 12% in 2023. Meanwhile, the federal government faces gridlock, with only incremental progress being made.
One nonprofit housing developer working to address the housing crisis is Homestead Community Land Trust. The organization operates off a unique model that originated during the Civil Rights Movement. In response to racist residential policies like redlining, Black communities pooled their resources to purchase land collectively. Families maintained private ownership of the homes built on the land. Today, about 225 different community land trusts exist across the U.S., providing 10,000 to 15,000 affordable homes and almost 20,000 affordable rental apartments.
Homestead currently has 245 homes in its portfolio, with another 200 in the pipeline. In November 2023, the organization acquired the Benson East complex in Kent. The Benson East homes, made up of 32 duplex units, were constructed as part of the Section 8 federal housing program in the 1970s and have remained guaranteed to people who make 30% AMI and less. The purchase was funded by a donation from Elaine Nonneman, a individual philanthropist.
Kathleen Hosfeld, the CEO and executive director of Homestead, said the majority of people who live in Benson East are Eastern European immigrants, with many residing in the duplexes for decades.
Like many community land trusts, Homestead emphasizes collective governance; a third of its board of directors are Homestead residents. Due to the acquisition, Benson East residents will collectively own their apartments and be able to make decisions about management and self governance.
“The intent was to create a new structure for them that would allow the tenants to have a role in governance, just the way our homeowners have their voices centered,” Hosfeld said. “And so Benson East was really special. I don’t know that there’s many other Section 8 rental developments in the United States that have a resident governance model like it [has].”
However, Benson East also reveals some of the drawbacks with federal housing policy. For example, tenants are unable to accrue equity like other Homestead residents, as they do not own the deeds to their duplexes. If their income increases over 30% AMI, they will have to leave — another federally imposed restriction.
Other housing developers, such as Seattle’s new social housing developer that was established last year, have learned lessons from the experience of organizations like Homestead. The new developer has a renter-majority board of directors and will opt out of applying for federal housing grants due to restrictions like those imposed on Benson East.
Nevertheless, a persistent challenge to resolving the housing crisis is the high cost of construction. Hosfeld said many of Homestead’s new affordable homes cost more than half a million dollars to build yet retail for between $270,000 and $330,000. The agency, which has a waiting list of 2,000 people, must make up the gap through external funding sources.
In an email, COM assistant director Corina Grigoras, who is in charge of the agency’s housing division, wrote that the state’s overall high cost of living and wages were big drivers of construction costs. For example, the average annual wage in Washington is $73,000, compared to about $52,000 in Germany, one of the highest-income European countries. She added that affordable housing developers leverage multiple funding streams, including grants from all levels of government, to make their money go farther.
In 2023, the Washington Legislature passed multiple bills aimed at increasing the availability of land for development and expanding density in cities and towns. One of these laws, House Bill 1110, requires cities to update their zoning codes to allow more homes to be built on a single lot. Whereas previously lots might only have allowed one house to be built, under the new law, up to six houses are allowed, depending on the size of the city and proximity to public transportation.
Some housing advocates say more inclusionary zoning will reduce the cost per unit constructed by requiring fewer lots to be purchased to build the same number of homes. However, Hosfeld said zoning cannot by itself solve the massive shortage and that public investment must continue to grow.
“I always am quick to say zoning alone will not solve the problem, because we can build more homes on pieces of land, but it still costs the same amount of money to build that home,” Hosfeld said.
Read more of the Jan. 24-30, 2024 issue.