INCENTIVE ZONING: A REALITY CHECK

February 2014DSA Workforce Housing Subcommittee

Seattle’s affordable housing strategy is

failing.

Seattle is focusing on the wrong

problem,

which leads to the wrong solution

and limited outcomes.

Income disparity results in housing disparity

80% AMI 50% AMI

Annual income for 2-person household in Seattle $56,480 $35,300

Hourly wage equivalent$27.06 $16.91

% of Seattle rental units affordable by income level

83.1% 37.3%

Seattle’s most significant affordability gap is at 50% AMI and below,

not at 80% AMI.

Assumption 1: Seattle Doesn’t Have Enough Workforce Housing

The Facts: According to the most recent data available from King County:

• 83% of Seattle’s rentals were affordable to incomes at 80% area median (AMI)

• In contrast, only 37% of Seattle’s rentals were affordable to incomes at 50% AMI

Conclusion:  There is no shortage of workforce housing, and Incentive Zoning’s focus on it neglects Seattle’s much greater affordability need for households at 50% AMI and below.

Assumption 2: Incentive Zoning fees are too low

The Facts:  • At current fees, 62% of eligible development in Seattle did NOT to use the incentive since 2001• In South Lake Union alone, 14 of 20 projects did not use the incentive• Significant public benefit was left on the table as a result of projects in downtown and South

Lake Union building below zoned capacity:

Conclusion: Increased Incentive Zoning fees will lead to even less participation in the program, resulting in less housing supply, less revenue for affordable housing, and loss of many other significant public benefits.

Assumption 3: Incentive Zoning fees are an effective way to create affordable housing

The Facts:Over the past 12 years:• Incentive Zoning has resulted in funding for the equivalent of only 616 units of

affordable housing, compared to 46,000 total units developed in Seattle. • The Housing Levy produced over 3,700 units and the MFTE Program produced 2,563

units, with another 4,312 units in the pipeline.

Conclusion: Incentive Zoning accounted for less than 2% of Seattle’s new housing supply in the last 12 years. Under any approach, Incentive Zoning will supply only a fraction of Seattle’s affordable housing needs; other tools are needed.

Assumption 4: Requiring affordable housing in on-site performance in high-rise buildings makes sense

The Facts:  • High-rise construction costs 1/3rd more per

unit than mid-rise “5-over-2”

• For the same amount of money, 1/3rd more affordable units could be produced in mid-rise construction

Conclusion: Requiring affordable housing in high-rise buildings results in fewer homes for workers, as 1/3rd more affordable housing units could be produced for the same resources in mid-rise construction.

Assumption 5: Incentive Zoning supports the city’s comprehensive plan goals

The Facts: • Incentive Zoning charges an extra fee for zoned capacity that increases the cost and risk

to produce the housing supply goals established by the Comp Plan.

• Incentive Zoning taxes housing supply, ironically, in an effort to produce housing supply.

Conclusion: By increasing the cost to produce additional housing, Incentive Zoning is a deterrent to building the housing supply envisioned by city policy.

Incentive Zoning is not working – so what should we do?

Fix the incentives: • Establish true incentives to encourage developers to build to maximum capacity

and increase housing supply. • Re-examine fee rate and the base height to increase participation in the program

– leading to more housing supply and contributions to the program.

Focus on more productive tools:• Incentive Zoning accounts for less than 2% of the housing supply while other

tools (Housing Levy, MFTE) have been 10X more productive• Use of City-owned property• Up-zones around transit areas• Expansion of the MFTE program• Purchase/conversion of multi-family properties• Encouragement of market innovations such as Micro-housing, ADU’s, etc.

Using the right tools to tackle the right job, we can meet the policy objectives driving zoning increases in

designated urban centers.

Citations

Slide 3• City of Seattle Office of Housing – Income and Rent Limits – MFTE• 2009 King County Benchmarks: Affordable Housing

Slide 5• 2009 King County Benchmarks: Affordable Housing

Slide 6• Data accumulated from City of Seattle Department of Planning and Development

and Office of Housing

Slide 7• Data accumulated from City of Seattle Department of Planning and Development

and Office of Housing