1. The so-called "share economy" has gotten a mixed reception from Seattle's City Council over the past couple of years with mayor Ed Murray having to step in and override the council's initial restrictions on ride sharing companies such as Lyft and Uber and having to nudge the council to accept SDOT control over increasing car sharing permits, allowing companies like Car2go to expand their fleets.
Another "share economy" icon, Airbnb—the service that allows people to turn their homes into quick rentals for out-of-town visitors—has run into legal problems nationwide, but a new poll finds support for the model among Seattle voters.
The poll, conducted by David Binder research, found that 81 percent wanted Airbnb to operate in Seattle—the company currently operates here—and 78 percent said the business is good for Seattle.
The poll reports: "Most Seattle voters say that they oppose legislation that would restrict middle class families’ right to use Airbnb to rent out their homes on a short-term basis. Only one in 10 (10 percent) strongly support it, while more than one in three (32 percent) voters of Seattle strongly oppose this legislation."
Council member Tim Burgess tells Fizz his office has been reviewing Airbnb and will “propose various actions in the new year." The proposals will reportedly be part of the housing affordability and livability discussion to address the supply of rentals. Burgess says Airbnb similar short-term rentals “should comply with local regulations and laws and contribute to promotion of the hospitality and tourism sector" of Seattle's economy “just like hotels and others in that sector do."
The big footnote is that the online poll of 400 Seattle voters was paid for by Airbnb.
2. Among the items briefly discussed at Monday's lively budget hearing was an amendment from socialist council member Kshama Sawant calling for $47,000 to be used to pay a consultant for a “housing study.” When pressed for specifics by her colleagues, Sawant said the study would again look at the feasibility of using city bonding to finance the construction of publicly owned affordable housing, ideally on city-owned land, a mechanism she, alongside developer lobbyist Roger Valdez and Sharon Lee (director the Low Income Housing Institute), has trumpeted. Council president Burgess said that a study had already been conducted, but Sawant argued it wasn’t thorough enough. Ultimately, the amendment was voted down.
So what past study or model were they referring to? Back in November 2014, during the previous budget negotiations and hearings, the council passed a statement of legislative intent requesting the mayor and his Office of Housing investigate and study the feasibility of financing the development of affordable housing through the sale of public bonds, otherwise known as debt financing, and paying back the debt through below-market rate rents and “progressive taxes.” A response was due to the council by April 1, 2015.
The response came back by its assigned due date, penned by Office of Housing director Steve Walker, City Budget Office director Ben Noble, and director of the mayor's Office of Policy and Innovation, Robert Feldstein. The report was brief (six pages) and didn’t exactly paint picture of the feasibility of debt financing, noting a shortage of usable public land, the detrimental effect debt financing might have on the city’s current sparkly triple-A credit rating, limited types of revenue streams available to the city to subsidize publicly owned housing, and example modeling showing that rents alone would not cover the operating costs and repayment of the city’s debt with incurred interest.
The response notes that the city has around a $1 billion dollar bonding capacity (the amount which can be issued without a vote of the people, as per state law), and that a total of 33 city-owned properties around Seattle could be used for development, after filtering out parcels that are outside of the city limits, under 15,000 square feet, or already utilized for a preexisting municipal purpose. (It also makes a big deal about the city’s current credit rating and how that could be jeopardized by employing debt financing, noting that issuing bonds to the limit of the city’s legal bond capacity could result in a credit rating downgrade and increase the city’s borrowing costs for future projects such as “transportation improvements and public safety facilities.”)
The model project outlined in the report uses a few assumptions:
- A 4.5 percent interest rate on municipal bonds
- Zero dollars in land cost (assuming publicly owned land were used)
- The model project would include 100 units (20 studios, 30 one-bedrooms, 30 two-bedrooms, 20 three-bedrooms), 34 of the units would be restricted at 80 percent adjusted median income (AMI), 33 units at 60 percent AMI, and 33 units at 50 percent AMI, distributed proportionally by size. (This assumes that larger family-sized housing is desired.)
- A per-unit development cost of $231,400 to $330,750, depending on the unit size (this is from cost estimates from other Office of Housing–funded projects, factoring in prevailing wages for construction workers and project industry standards)
- A vacancy rate of 5 percent
- An annual operating expense of $5,000 per unit (this estimate comes from a per-unit average of city-funded affordable housing, reduced slightly with the assumption that the multifamily tax credit would be applied. However, the report also notes that given the salaries and benefits that city employees currently receive, the staffing required for city-managed housing may increase operating costs).
The report figures that, based on the previously listed assumptions, rent revenues from the units would cover operating costs and 34 percent of the debt service (annual payments on debt), leaving a hefty 66 percent unfunded, or $1,809,420. In addition, the report notes that the city would need to maintain some reserves to cover the debt service in the event of “lower than expected” rent revenues, and that the utilization of public land assumption is “critical,” given that land costs amount to roughly 15 percent of new development expenses.
In short, the report states that money needs to be made available to subsidize remaining expenses of below-market public housing not covered by rent revenue.
Miriam Roskin, deputy director of the Office of Housing, agrees that finding funding to fill the gap is the biggest potential roadblock to using debt financing for affordable housing. “The question always circles back to what resources are going to be used to pay back the debt,” she said.
Roskin notes that many nonprofit affordable housing projects in the city already take advantage of tax-exempt bonds issued by the Washington State Housing Finance Commission in combination with the low-income housing tax credit (LIHTC) program, a tool which Roskin says injects “hard cash” into projects by giving investors in affordable housing a substantial federal tax credit. “That [the LIHTC program] is the backbone of affordable housing finance nationwide. However, she adds that theoretical city bonds couldn’t be paired with the LIHTC equity due to restrictions in tax code. (The city’s report on municipal bonding claims the same, saying that “total project cost[s] would be borne wholly by the city.”)
Roskin says that any conversation regarding city debt financing should be focused on the how to pay back project debt. “Does layering a loan on top of a loan pay the bill? At one point are you talking about [new] resources or just a tool of indebtedness?”
“We don’t want the conversation to end up in a place where you’re [just] layering a loan on top of a loan,” she added.
Sharon Lee of the Low Income Housing Institute told The Seattle Times that she thinks the city’s model excludes potential projects that mix subsidized units with market-rate units, which could theoretically decrease the need for subsidy.
PubliCola has a call out to Sawant’s office to get clarity on her criticisms of the city’s review of debt financing to see why she wants them to take another pass at it.
Believe it or not, developer lobbyist Roger Valdez is reportedly in cahoots with Sawant on the do-over and supported her amendment. Valdez met with Sawant's staff earlier this year about the bonding idea. He likes it. Valdez tells us he thought the city's estimate about available land was too conservative.
3. After the latest count in the extremely close District One (West Seattle) city council race, Lisa Herbold (current aide to outgoing veteran lefty council member Nick Licata) maintained her tiny lead over her opponent Shannon Braddock (former aide to King County council member Joe McDermott).
The last few ballot drops have produced see-saw momentum for both candidates. Braddock won the latest batch, picking up a few votes and narrowing the total vote gap from a 35 to 24 vote difference, baby advantage Herbold.
As we’ve mentioned before, the margin will likely trigger a recount by King County Elections.
According to county rules, a recount by county vote tabulation equipment will be conducted if the margin of difference is less than .5 percent of the total ballots cast for both candidates (which is around 138 votes in the District One race). If the margin is even smaller, at 0.25 percent of the total ballots cast (around 70 votes), the recount will be conducted by hand. With the current margin at 24 votes, it seems King County Elections will be doing the counting themselves.