City council member Lisa Herbold is proposing an amendment to mayor Ed Murray’s affordable housing “grand bargain” that is spooking developers and urbanists.

Now known as the “Mandatory Housing Affordability” plan, the grand bargain—the main plank and end product Murray’s housing affordability and livability agenda (HALA)—makes developers build affordable housing on-site or pay a fee into an affordable housing fund; either option—referred to as performance or “fee in lieu,” respectively, would be calculated based on the extra square footage developers are getting citywide in upzones. The council is working out the framework of that agreement right now, though the numerical details of the fees and the upzones will be hammered out upzone by upzone.

Along with a commercial linkage fee, a similar HALA policy recommendation that council already passed last year which gave commercial developments upzones in exchange for affordable housing dollars, the mayor is counting on creating 6,000 new affordable housing units from the grand bargain. (Murray’s overall HALA plan has a goal of 20,000 new affordable units, with the remaining 14,000 coming from a combination of doubling the housing levy, which is on the ballot right now, the multi-family tax exemption program, and housing preservation.)

Herbold’s amendment, which the council’s planning committee will take up on Tuesday, aims to account for the housing lost to displacement from upzones and development. In other words, creating new rent-restricted units is fine, but what about current affordable housing stock that exists on the market? Creating 6,000 new units is one thing, but the benefit would be minimized if existing affordable housing stock gets (literally) demolished in the process, Herbold believes.

The council summary of Herbold’s amendment reads: “Establishes Council’s intent to consider initial higher payment and performance amounts in areas identified as having a higher risk of displacement and identify, as a factor in establishing payment and performance amounts, replacement of affordable units identified as being at risk of demolition.”

Herbold characterizes her amendment as an “Environmental Impact Statement for housing.” (EIS studies traditionally gauge the environmental impact of major projects, regulating development with required off-sets to mitigate the development.)

Yesterday, Jack McCullough, an attorney who represents developers and a group supporting the HALA grand bargain called the Coalition for Housing Solutions, sent a letter to planning committee chair, city council member Rob Johnson, flagging Herbold’s amendment as being “a material change” to the grand bargain that could “limit overall housing supply.”

Rather than adding new fees (without adding more height per the grand bargain), McCullough says the city should allocate more money from the housing levy toward preserving existing affordable housing stock (“naturally occurring affordable housing” as opposed to the rent restricted units the grand bargain sets out to create) or trying to pass a preservation tax break for landlords to incentivize keeping existing affordable housing on the market.

Meanwhile, McCullough points out that the city’s own analysis challenges Herbold’s spin that upzones are the main engines of displacement. McCullough notes that while the city analysis said 40 units of existing affordable housing would be lost in the U. District due to potential upzones, the city also found that more units would be lost without them.

“The U District Urban Design EIS estimates that the upzone alternatives will results in a loss of 40 existing affordable units [a stat Herbold cites herself], but the ‘no action’ alternative results in a loss of 60 units—50 percent more than under the upzone alternatives,” his letter states.

This may sound counterintuitive, but it actually makes sense: Without upzones, developers can't meet the demand for housing just on the land that's available and, in turn, have to buy up more and more property, demolishing existing housing along the way. Quoting the city’s own analysis, McCullough’s letter says: “As explained in the EIS, this is due to  ‘more efficient use of land allowing for higher concentrations of housing’ in the upzone alternatives. Less land is utilized to meet the same market demand for new development in the upzone alternatives than in the ‘no action’ alternative.”

The environmental urbansit group Sightline also sent a letter this week protesting Herbold’s amendment, writing that it “Incorrectly place the blame for displacement on demolition caused by new development, ignoring that new development actually reduces overall displacement.”

Herbold is unfazed by the criticism, noting: “if he [McCullough] is right, the displacement analysis will show that and as a consequence no harm, no foul, no increased obligations for developers.”

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