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Bruce Ramsey Gets it Wrong on Housing Levy

By Erica C. Barnett October 28, 2009

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In his column today, Seattle Times columnist Bruce Ramsey calls PubliCola out for our endorsement of the proposed $145 million housing levy, accusing us of ignoring the fact that it's actually "a 68 percent tax increase" compared to the last levy, passed in 2002.

He writes: "Nice try, progressives. The expected rate per $1,000 of assessed value is the same. The amount to be taken from property owners the next seven years, $145 million, is up from $86 million in the past seven."

That's true—in the same sense that if you pay ten percent sales tax on a new pair of jeans now, it'll work out to more dollars than that same tax would have seven years ago, because the price of jeans has gone up. The proposed housing levy would tax homeowners at the same rate as the existing levy—but, since houses are more expensive now than they were seven years ago, the total number of dollars produced by the levy is higher. (Admittedly, the increase in housing valuations has increased more than the rate of inflation, but that's because construction costs have gone up, and because Seattle is a desirable place to live.) Conversely, if levy planners had kept the levy at $86 million, those "same" dollars would pay for less new housing than the current proposal, because it costs more to build housing now.

Keeping the levy at $86 million, in other words, would represent a net reduction in the total amount of housing the levy would buy.

This is Econ 101 stuff—2002 dollars don't equal 2009 dollars, and vice versa. Things—cars, houses, apples, whatever—tend to go up in price over time even when they stay the same in real dollars. If Ramsey has ever bought a gallon of milk, or gone to a movie, he should know that.

[caption id="attachment_17389" align="alignnone" width="550" caption="The Pantages on Capitol Hill—a housing levy-funded project"]The Pantages on Capitol Hill—a housing levy-funded project[/caption]

After getting it wrong on the cost of the housing levy, Ramsey goes on to propose a "solution" that's just plain cuckoo. He suggests that the city just buy up apartment buildings and rent them at reduced rates to poor people.

This is bad, unworkable policy on several levels. First of all, the city isn't in the landlord business—private developers, like Capitol Hill Housing and the Low Income Housing Institute, as well as separate government agencies like the Seattle Housing Authority, are.

Second, the housing levy pays for more than just high-quality new rental apartments—although new rental housing is the largest line item in the levy at $104 million, the levy also pays for operations and maintenance at housing funded by previous levies, provides rental assistance to low-income people, pays for loans for first-time homebuyers, and funds short-term loans for buildings or land for low-income housing developers. Buying up old buildings wouldn't accomplish any of that.

Third, buying up old, run-down apartment buildings wouldn't have the same impact as building new affordable housing. Projects funded by the housing levy—like Broadway Crossing, a six-story development at Broadway and Pine that replaced a gas station—improve the neighborhoods around them by adding density, putting eyes on the street, and reducing growth pressure on suburban areas. A lot of the new apartments are LEED-certified, too, making them substantially greener (and cheaper to light and heat) than older, less energy-efficient apartments.

Finally, and perhaps most important, housing levy dollars leverage additional public and private funding; according to the city, each levy dollar produces $3.25 of public or private funding. Buying up old buildings isn't just insufficient as a way of providing low-income housing; it's also short-sighted from a purely economic perspective.

There's a lot more to housing, in other words, than just housing.

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