Council Pushes Back on “Growth Fund” Housing Preservation Proposal

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Freshman city council member Lisa Herbold has proposed resurrecting a pre-Eyman-era housing “growth fund” to pay for the preservation of naturally-occurring affordable housing–privately owned housing that, because of its age or state of repair, is more affordable than market-rate housing.   The original growth fund was created in 1985 to fund affordable housing construction; it consisted of a percentage of property tax revenues from new construction downtown, and brought in about $15 million in its 17-year existence. Herbold’s proposal would begin with a single demonstration project.

“I think it’s an important commitment to make in light of our current housing crisis,” Herbold says. “Between 1960 and 1985, nearly 16,000 housing units were lost downtown. … I think we are in a similar time now and if [Mayor Ed Murray’s] goal of 20,000 more net affordable housing units is going to be met, we have to do something about the fact that it is unlikely the units lost will be replaced or preserved without an explicit preservation strategy.”

Last Wednesday, Herbold invited affordable-housing advocates from groups like Puget Sound Sage and the Low-Income Housing Institute to pitch the council’s affordable housing committee on the fund proposal. 

“I think the public understands the linkage between all this new construction in a booming economy and the loss of affordable housing,” LIHI director Sharon Lee told council members. “We’ve got 1 Percent for the Arts. If housing is on the front page of the paper every day and people are being forced to leave Seattle [because of high housing prices], why aren’t we using 1 percent of the general fund for housing?”

Lee told the committee that former mayor Greg Nickels eliminated the growth fund when he first took office in 2002; “He said, ‘We have a housing levy; let’s just cut [the growth fund],’ and that was a disappointment to us,” Lee said.

But committee chair Tim Burgess and city budget office director Ben Noble strongly disputed Lee’s claim that Nickels had cut the fund for purely political reasons, noting that 2002 was the year that a Tim Eyman-backed measure capping annual property tax growth at 1 percent was adopted by the state legislature (the original initiative was ruled unconstitutional, but the legislature passed a copycat version). That meant that property tax revenues, which had been growing at about 6 percent a year, took a sudden, dramatic hit, forcing the city to scramble for funds to pay for basics and leading to the city’s current reliance on property tax levies to pay for everything from early-childhood education to libraries to housing.

“I think we should be real clear about why the city got rid of the growth fund in 2002,” Burgess said sternly. “It was not just the whim of Mayor Nickels.” After the 1 percent cap on property tax increases took effect, city leaders “determined that we should increase the size of the housing levy … and eliminate the growth fund because our property tax revenue options had been suppressed so much. That’s a much fairer explanation of that.”

Moreover, Noble and council member (and former private-sector CFO) Mike O’Brien pointed out that neither of Herbold’s proposals would create any new revenue; rather, the dedicated growth fund would take money from other city programs funded by the budget and spend it on housing preservation. Similarly, the bond proposal wouldn’t create any new money (Herbold protested: “It’s new in that it’s dedicated to this purpose”); instead, it would create new debt that would have to paid back, with interest, out of the general fund every year.

“Let’s not pretend that we get this [housing preservation fund] for free when we’re paying for that debt over 20 years, and there’s no new source of that money because it’s coming out of the general fund,” O’Brien said. “I expect and hope our experts will give us the best solution, so if using our bonding capacity is the best way to fund affordable housing, that intrigues me … and on the flip side, if it’s not a very good idea and there’s more efficient financing tools, I would not want to use a bad tool just because it sounds good.”

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“The bottom line,” Noble told me this week, “is that to do what council member Herbold is suggesting would require taking existing general fund resources and dedicating it to housing—which is a perfectly fine thing to do, but the general fund is already being relied upon on to pay for cops and fire and everything else.”  Noble says the city is still optimistic about passing a tax exemption for landlords who agree to keep their housing affordable, which narrowly failed in the state house this year thanks to opposition from house speaker Frank Chopp.

Both O’Brien and Burgess seem to agree that the source of additional funding for housing preservation is less important than providing the money, which led both to the idea of funding preservation through the housing levy.

“We’re getting ready to vote in two or three weeks on dedicating a huge amount of taxpayer money to housing, including preservation,” Burgess says. “This is really a discussion about how are we going to allocate all of the taxpayer money that we have at our disposal, and focusing on a specific method like a growth fund is less important to me than how we decide to use all our resources.” However, Herbold counters that the 2009 housing levy could have funded affordable housing preservation, but didn’t, in part because housing levy funds are less flexible than the growth fund was, and because the Office of Housing traditionally works on new construction, not preservation.

At last week’s meeting, Office of Housing director Steve Walker seemed to agree, noting that buying up existing for-profit affordable housing is challenging, because of income requirements (if an existing resident makes too much to qualify for a unit in a newly city-owned building, would the city kick her out?) and because the city doesn’t have much experience in the housing-preservation business.

Herbold says she worries that “if we separate the conversation, the result will be that we are driven down the path of traditional OH programs. …  Separating the conversation about financing from the conversation about preservation from makes the need for preservation more and more abstract from the harm of displacement.”

The council will need a lot of convincing on that front (right now, Herbold’s proposal seems to have little traction), and that will likely have to wait until after voters consider the $290 million housing levy proposal in August.

Committees Ask: What Will Affordable Housing Look Like, and Are We Willing to Sacrifice for It?

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Why won’t the city add more density in single-family areas?

Why is the city violating the sanctity of single-family areas?

Those were the two contradictory questions in play at the first meeting of the five focus groups that will help determine the shape of the Housing Affordability and Livability Agenda, a plan to build 50,000 new housing units, including 20,000 affordable units, over the next 10 years through a combination of incentives, zoning changes, and additional affordable housing dollars.

The HALA meeting, held in the Bertha Knight Landes room at City Hall while a separate meeting on the housing levy was wrapping up in council chambers upstairs, brought all the focus group members together for an initial overview of their work plan for the coming year. The focus groups, made up largely of people who aren’t well-represented on the vocal, historically influential neighborhood community councils and citizen interest groups, are divided not by geographic region but by neighborhood type–hub urban villages with hub urban villages, urban village expansion areas with urban village expansion areas, and so on. (Downtown and South Lake Union are part of a separate rezoning process, as is the University District.)

Most of the meeting was procedural–a lineup of city staffers extolled HALA’s virtues using catchphrases like “placing without displacing” and explained the history of HALA and the “Grand Bargain,” a deal struck between developers and affordable-housing advocates like Puget Sound Sage to build more affordable housing while providing upzones that benefit builders’ bottom lines.

But the main focus of the city’s reassurances, and the audience’s questions, was how HALA–which would expand the boundaries of some urban villages, making up a total of about 1 percent of city land, into what are now single-family areas–will impact Seattle’s single-family neighborhoods. Although HALA staffer Michelle Chen told the crowd preemptively, “The mayor is not proposing any changes to single-family zones that are outside the urban villages,” the very first (and majority of) questions were about how the proposals will impact single-family areas; specifically: Does HALA go too far in allowing more development in historically single-family areas, or does it fail to do enough?

The very first question–“Why don’t single-family zones have to contribute to housing?”–got to the heart of this debate. “The mayor has taken a position that outside of the urban village areas we are not changing single-family zones,” Chen said. “That is the direction from the mayor, taken after a big outcry from the neighborhoods, from the communities that are changing.” Diane Sugimura, interim director of the new Office of Planning and Community Development, jumped in, adding that the city’s comprehensive plan (which guides all macro-level development in Seattle) “has directed the majority of growth to urban villages.”

But will growth in urban villages be enough? In addition to the 120,000 people expected to move here in the next 20 years, Seattle has a growing affordability crisis that impacts the people already here, and no one is more impacted than the very lowest-income residents, those who are homeless or in transitional or marginal housing. Upstairs in council chambers, council members heard testimony from dozens of folks who supported the housing levy, and none who didn’t–a unanimity rarely present at public meetings about tax increases. (The $290 million levy would double homeowners’ annual contribution to low-income housing, to $122 a year for a median-value home.)

Organizations that provide or support low-income housing–Solid Ground, the Housing Development Consortium, the Downtown Emergency Service Center, the Low-Income Housing Alliance–showed up armed with damning statistics. “If Seattle wanted to hold a public meeting and invite everyone who is homeless or severely rent-burdened, we would not be able to fit everybody into CenturyLink stadium,” Keri Williams of Enterprise Community Partners said. But it was the recently homeless speakers, who made the case as plainly and indisputably as possible that without housing levy-funded programs, they would still be on the streets, who made the greatest impact.

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Linda Pritz*, a formerly homeless woman who lived at the YWCA’s Opportunity Place in downtown Seattle, told the council that “as a resident of affordable housing for the past 12 years, I know firsthand how important it is to have sustainable housing.” After years of spending 80 percent of her income on rent an utilities, eating ramen and neglecting her diabetes, she said that “when I moved into the building in 2004, I was so relieved that I had found a place that I could afford that I sat down on the bed and cried. Pritz now spends just 30 percent of her income on housing.

Another speaker, Hope Green, said she had been homeless for years, dealing with a failed relationship and “an addiction that was spiraling out of control” and moving all over the state before she found affordable housing in Seattle. “I counted 112 places that I slept until I landed in the [Catholic Community Services’] Referral Center … where I received a hot meal, a shower, and referral to a safe and comfortable nightly shelter at the Noel House,” a shelter for single women.” Since then, Green said she has been able to work on her recovery, start paying off her debts, and recovered some of the self-esteem she lost living on the streets.

The housing levy and HALA are inextricably connected, because the city won’t meet its goal of 20,000 new affordable units without levy funding. The levy election is in August, and the HALA focus groups will meet for the rest of this year and into 2017.

* My apologies if I mispelled Linda’s name, which I wrote down as she spoke.