Just how expensive has housing become? King County’s home prices have skyrocketed 15.7 percent compared to the previous year. Seattle’s median home value was nearly $700,000 in September, according to Zillow, while about half of Seattle residents have an annual salary of less than $50,000. And the county recently counted nearly 12,000 people experiencing homelessness.
We’ve heard many: a property tax to subsidize housing; a tax exemption for new multifamily buildings that set aside rent-restricted homes; citywide upzoning, allowing taller buildings in exchange for affordable housing units or fines for developers who don’t meet those quotas. Just to name a few.
What the city hasn’t tried? Nothing. That’s right, nothing. And a University of Washington real estate academic believes that—nothing, nada, zilch—is the solution to the affordable housing shortage.
“It’s not a very popular position,” admits James Young, research director at the Runstad Center for real estate studies at the UW. “I understand the political need to go and do something policywise. But I also understand that that has economic consequences.”
The city’s constant and unpredictable housing policies are accomplishing the opposite of their intentions, Young says, creating risk and uncertainty for developers; and risk in business means driving up prices to make up for it. Even proposed regulations can trigger panic among buyers who want to purchase a home before they go into effect—again, driving up purchase prices and rents. What’s worse, developers may delay building to see how those new laws will translate into dollars.
“That’s the last thing you want, to further delay development when you have high demand,” Young says.
He’s not alone in his belief that the city’s rulemaking is only making things worse.
Density gadfly Roger Valdez argues that the anticorporate, antideveloper sentiment common around Seattle is part of the problem. Another problem: calling, as many city leaders do, the housing shortage “a crisis.”
Valdez, director of developer advocacy group Smart Growth Seattle, says the housing crisis narrative is a false one. He calls talk of a calamity “fearmongering” that’s only detrimental to the conversation. There’s a shortage, yes, and prices have gone up. But the city is not struggling with meeting the marketwide demand. And housing shortage strategies, he says, should include developers and landlords rather than exclude them.
Steep fines for developers can lead them to cut down on spending—lowering the number of units or putting the brakes on work—and that can lead to less supply in the market. With fewer vacant properties and more people competing for them, prices rise.
Say you and your partner both make $41,000 a year (the Census Bureau’s 2015 median household income in King County). For an average one-bedroom apartment in Seattle (over $1,900 a month as of September), you’d be paying just about the recommended percentage of your income toward rent. But that could change quickly. Slowing development could pose a risk to price out such couples, the middle-income families who don’t currently qualify for rent subsidies.
Valdez would rather the city subsidize rent than give into the crisis narrative, which he describes sarcastically: “If we don’t regulate, tax, and fee the production of new housing to meet demand, developers will laugh all the way to the bank, Chinese people will buy up all the new housing and leave it vacant, and the only people living here will be 22-year-old millionaires in itty bitty apartments eating avocado toast,” he wrote by email. “Seriously, that’s about the size of it.”
James Young’s advice—his “do nothing” advice—is not the kind of counsel elected officials want to hear. It’s not even an option politically. And it’s justifiably maddening for social justice advocates who want immediate solutions for people priced out of their homes. Do nothing? How long do we wait?
Seattle City Council member Rob Johnson, who’s leading the city’s upzoning efforts to increase density, says he believes the government has a social responsibility to address affordability for struggling households.
“And so do our voters,” he says, pointing out that last year 70 percent of them voted to double a levy to build more affordable housing. In 2015 a city analysis concluded that with high development, there’s also more displacement.
“The city is of two minds about this,” council member Lisa Herbold says. “I think the more we acknowledge that there is displacement, the more we have to do something about it.”
The debate often comes down to two philosophies. One is to make developers pay their fair share to contribute to low-income housing. The other maintains that the government should seek other ways to make living in Seattle more affordable (through new tax dollars that would go toward subsidized housing) without hampering production or creating barriers to contribute to density.
Dan Bertolet, senior researcher on housing at the Sightline Institute, wants the latter. “[Seattle is] trying to solve a very deep systemic problem about income inequality that’s basically a problem of income,” says Bertolet, “and solve that through housing policy.”
Young argues that, in Seattle, where there’s financial incentive to do so, developers are building as quickly as they can. Rent control stands as one example of a public policy that economists generally agree doesn’t work and slows down production of affordable housing. That hasn’t stopped candidates for political office throughout the years from demanding it.
“It may not be moving fast enough, but trust me, developers have no reason to delay projects if they know what the rules are,” Young says. “I don’t know a developer around that is not flat-out full capacity.”
But here’s the thing: As fast as they can is still not fast enough. And advocacy groups like the Tenants Union say allowing the free market simply to fix itself ignores the low-income population that’s being left behind.
Herbold, who has championed renters’ rights policy, says there are real concerns with fewer affordable housing units available because landlords no longer want to deal with the hassle of city regulations and decide instead to sell their extra properties for a profit rather than continue renting them. The city is assessing whether its legislation has those kinds of impacts.
“Generally I think the city has tried to strike a good balance,” council member Johnson says, between building more affordable housing and encouraging market-rate development. While the city’s rezoning includes fines for developers who don’t create enough affordable units, other changes opened the door for the kind of solutions the city wants to see—like taller buildings or more backyard cottages.
“We can’t do it on our own. We need the private sector,” Johnson adds. “And they can’t do it on their own; they need us.”
James Young acknowledges that he is pessimistic when it comes to public housing policies. He’s often asked about his political affiliation. (He has none.)
A former associate professor at the University of Auckland, in New Zealand, Young has studied property markets around the world for 25 years. He says he looks at past results from other cities, and “my experience has kind of taught me that most policy solutions tend to create more problems than they solve.” And they can come back to bite the housing market in the long run.
But he knows there’s not much chance Seattle lawmakers will take the hands-off approach. He thinks that’s only going to drive housing prices up. For the sake of the tens of thousands paying more than half their income on rent, let’s hope he’s wrong.