A quick fix for affordable housing in Seattle

Seattle’s Mayor Murray is still hot on his quest to create 20,000 more affordable housing units in his city by 2025. Part of this quota, he hopes, will come from rent-stabilized apartments financed through a Multi-family Tax Exemption (MFTE). This sort of exemption provides 12-year tax breaks for new or rehabilitated buildings if the developer restricts the rents for 20 percent of units to rates affordable to low-income people earning approximately 75 percent of AMI for one bedroom units. The tax break applies only to the physical structure, not to the land. According to the City of Seattle’s website, eligible residents earn approximately $47,000 for a one-person household and approximately $67,000 for a four-person household.

Murray wants to increase the percentage of set-aside units to 25 percent, with exceptions for larger-bedroom units geared toward families. He also wants to expand the zones where the MFTE is applicable. Currently, the qualifying neighborhoods are clustered around downtown; Murray wants to make the incentive a city-wide ordinance, so developers can utilize the exemption (and create affordable housing) wherever multi-family buildings are allowed.

This exemption is a wonderful way to create affordable housing in the short-term. The cost of providing rent-controlled apartments is outweighed by the savings created by the tax exemption. Developers still make a profit, and the city has way to continuously generate more affordable units. Even for-profit companies find the program lucrative.

Unfortunately, after 12 years the affordable units can be converted, without penalty, to market-rate. Existing residents have no recourse and have no safety net when their rent-restriction expires. At the end of their contract period, developers have no responsibility toward low-income tenants and are free to raise the rents at will. There is no provision in the law protecting residents at the conclusion of the rent-controlled period.

This presents a tenuous situation, and is not ideal for a city looking to increase its total share of affordable units. Sure, Murray might achieve his lofty 20,000-unit goal, but the numbers will fall shortly thereafter.

More sustainable options include linkage fees or inclusionary zoning laws, both of which generate long-term housing options (although, as a recent story in Chicago indicates, even a guarantee of permanently affordable housing is not trustworthy).

If Murray truly has the interests of his low-income constituents at heart, he will include protections for permanent affordable housing.

 

 

 

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