One Question

One Question for Mike O'Brien on Incentive Zoning

Mike O'Brien says the new data suggest it's time to "reevaluate" incentive zoning, but maintains that the anecdotes he hears tell a different story.

By Josh Feit February 18, 2014

One Question

We talked to City Council member Mike O'Brien, the chair of the land use committee, today to get his reaction to the numbers we reported yesterday that raised red flags about the city's incentive zoning program.

The numbers—62 percent of eligible developments since 2001 did not use the building incentive, creating just 616 units of affordable housing over the past 13 years—indicate that the city's main program to create affordable housing isn't working.

The numbers also showed that the incentive zoning program's target market, those making between 60 and 80 percent of the area median income (about $45,000 for one person), already have access to housing they can afford—83 percent of rentals were available to people making 80 percent of AMI. The real need, the city's own study showed, is for people making below 50 percent of AMI (about $30,000 for one person), who can afford just 37 percent of units on the market.

We asked O'Brien, an advocate of incentive zoning—he fought to raise the fee last year from then- mayor Mike McGinn's $15 to the council's $22—if the new data had changed his mind about the program. 

"It's really important that we dig into the numbers at a deeper level—because it's a little inconsistent. Actually it's really inconsistent with what I hear when I'm out every day in the community, which is, 'my rent's going up. I'm being kicked out. I can't find another place that I can afford.'"

O'Brien said it's "hard for me to characterize it as 'the program's not working.' It's certainly not as robust as one would hope."

He continued: "One thing that gets brought up all the time is 'why are you guys spending so much time  on incentive zoning?' That it should be a broader-based discussion. 'Don't make the development community responsible for all the affordability needs in this city.' And I don't disagree with that."

Of course, the city does have other programs to produce affordable housing—the voter-approved housing levy, for example, and the Multi-Family Tax Exemption credit for developers who build low-income units in mutli-family housing projects—programs that have produced about 4,000 units and 2,500 units, respectively over the same fallow period for incentive zoning. "We do have a housing levy," O'Brien said. "We do have a MFTE. [Incentive zoning] is a piece of that. We're going to need a variety of tools."

O'Brien, reminding me that he has an economics degree (he was the CFO at local law firm Stokes Lawrence) says he agrees that increasing supply in general is part of the answer (another troubling number in the city study is that a potential 4,000 residential units went unbuilt under the struggling incentive zoning program).

But O'Brien isn't placing his full faith in the free market. "The [thing] we hear all the time is: 'This is just increasing the cost of producing market rate units, and supply is really the answer.' I agree that supply is a big part of it, but I don't believe that 100 percent of our effort focused on supply is going to answer the problem."

O'Brien says he's tasked the city's consultants to seek out the developers who declined the incentive to find out exactly why. "Is it because the economics of the incentive program are so burdensome? I do believe that developers, at the end of the day, are going to make a decision that makes the most sense for their bottom line. And so if that's the case, we really need to understand that because then I don't think the program is getting us what we need."

But, and even though the data already seems to indicate the bottom line isn't working for developers,  O'Brien suspects it's not that simple. It could be, he says, "that these projects actually came on line a couple of years ago ... when the market was different and people just didn't want to build larger buildings. .. Or is it a developer that just doesn't do high-rise? I imagine it's a little bit of everything out there."

As for the apparent miscue on affordability—that the incentive zoning program is geared toward building "workforce housing" that's already available on the market—O'Brien also thinks the data is more nuanced than the top-lines indicate.  

First of all, he notes that there's a wide range between 51 percent and 79 percent of median income, and the policies may have to be "more surgical" so there aren't gaps between available housing. He worries, for example, that someone may be living in housing that's affordable at 50 percent when they could actually jump to 60 percent, but only housing at 80 percent is available. "They're taking up resources for lower-income people, and we need to find the right-size unit that they're ready to step into."

O'Brien also says, as a recent Seattle Planning Commission report about making housing more available to lower-income families pointed out, it's not just about income, it's about the type of housing.

O'Brien says: "If you're a single individual making making 80 percent of AMI, about $40,000, there are studios and one-bedroom apartments at market rate that seem to be available. But when you step up to two or three or four bedroom units, there's really hardly anything affordable to people making 80 percent AMI. It's not just about percent of AMI, it's the housing size. And maybe we want to start focusing our resources there."

And another subtlety O'Brien noted: People making, say, 120 percent of AMI may be choosing to live in cheaper apartments, which are then unavailable to people making less.

O'Brien acknowledged that the new data were challenging the conventional wisdom. "I'm definitely seeing stuff that's new to me, and that's great," he says. "And I need to make sure I'm willing to step back and reevaluate how we would design a program that's effective."

Maybe it's because the numbers are so startling, but in the end, O'Brien is reluctant to totally embrace the new findings. "One of things we saw, at least on the top line, was there's a lot of housing in Seattle today that's affordable to people making 80 percent of AMI. That starts to shift some of the thinking. But it's also really important that we dig into those numbers at a deeper level and really understand what's going on—because it's a little inconsistent. Actually it's really inconsistent with what I hear when I'm out every day in the community, which is, 'my rent's going up. I'm being kicked out. I can't find another place that I can afford.'"


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