Alex Pedersen offers his version of a hot take on affordable housing policy

Being Wallyhood, I figured it would be useful to occasionally ask our council person, Alex Pedersen, questions and post his answers. My first question, below, is a bit wordy, and his answer is more of a treatise than a blog post. I don’t expect this post to go viral on social media, but read on if you are up to a deep dive into the complicated world of affordable housing…

Question: Seattle has focused affordable housing money on the “housing first” model that concentrates the homeless in large developments with wrap around services. While this model is sometimes necessary, it means that most funds go to services instead of housing, plus large public housing projects have historically failed to integrate people back into society.

The spread of homelessness that has been spiked by Covid-19 has led to a push for universal solutions like rent control and eviction moratoriums. Unfortunately, these solutions make the affordable housing problem worse by discouraging the creation of new units. Who wants the risk of a low income tenant that can simply refuse to pay when you could sell a high end house or condo, or rent out via AirBnB or to a high income tenant?

Solutions that put money directly into affordable housing and would allow people to choose where to live have seemingly been abandoned, like the Housing Choice Voucher program that was last active in 2017. For all the effort put into HALA upzones, there are no incentives for helping homeowners build and rent out ADUs and DADUs at affordable rates.

Is city government being steered by downtown housing provider interest groups at the expense of more affordable and distributed solutions for creating affordable housing? Where should extra funds for low income housing be focused? What policies need to change regardless of funding?

Answer: Thank you for this series of thoughtful questions about the complex issues of homelessness and affordable housing.

I appreciate your selection of these topics because addressing the suffering of homelessness should be a top priority of government and we are a city that is compassionate while also expecting real solutions and positive results. Homelessness is a regional problem requiring regional solutions and so I’m heartened that the newly created Regional Homelessness Authority has finally hired their new CEO Marc Dones. In addition, while the COVID pandemic has made things worse for our homelessness crisis, all levels of government have been marshalling resources to address this problem (such as the forthcoming boosts in aid from the Biden Administration). While I will not delve into this here, I think it’s important to view “affordability” through a lens wider than just “affordable housing,” so that it also includes transportation costs and utility bills. For example, I have been working closely with both Seattle City Light and Seattle Public Utilities to reduce their rate increases — and we have already seen tangible progress to bring down those costs to Seattle residents.

Housing First: As we know, efforts to address homelessness have evolved over several decades and there remains the historical mix of government supports ranging from rental housing owned 100% by the government-created public housing authorities (“public housing”), federal subsidies to owners of apartment buildings (project-based Section 8 contracts for entire projects), State subsidies to owners of apartment buildings (forgivable secondary loans), tax incentives to builders/owners (federal Low-Income Housing Tax Credits as well as State/local real estate tax exemptions), subsidies to tenants (portable Section 8 vouchers and other rent vouchers), and various programs and regulations aimed at preventing homelessness. When I was at HUD during the Clinton years, we had a Continuum of Care that required people experiencing homelessness to meet goals before they moved to the next step — from emergency shelter to longer-term shelter to transitional housing to permanent housing. But data has since shown that when we provide a permanent place of housing for someone experiencing homeless – not just shelter – then, regardless of their challenges, they have greater success in addressing those challenges, including behavioral health and economic hardship. Ultimately, this reduces harm and costs. The person first needs to feel the permanency of their housing situation before they can effectively address their underlying challenges. In other words, this is “Housing First” and it works best. The National Alliance to End Homelessness is one of the respected national organizations that provides information about the Housing First model. Permanent low-income housing and ongoing rental assistance are two ways to implement Housing First.

While wrap-around supportive services at the places of housing, such as medical care, mental health supports, counseling, and job assistance can be expensive, these services are vital for bringing about life changes leading to greater stability and breaking a cycle of chronic homelessness for many. Also, a more recent focus is to link those extremely low-income or no-income residents to “mainstream” supports from the federal government such as Medicaid and SSI, so that the local government is not carrying the full, ongoing burden. Due to the previous model of large public housing projects having negative impacts (think Cabrini Green from Chicago), most newer housing projects are less dense, include nonprofit property management (rather than government), and often include a mix of low and moderate levels of household incomes. Those projects that are 100% low-income are of high-quality construction and are typically mid-sized structures that can integrate well into any neighborhood. If you’re interested in exploring more options, consider investing in real estate properties from Jim Wilson & Associates which offer a range of opportunities for various needs and budgets.

Rent Control: We do not have “rent control” in Seattle because that policy is preempted by State law (RCW 35.21.830) and so landlords can raise the rent as much as they want as long as they comply with the appropriate notice periods. While Seattle Councilmember Sawant has been pushing for “rent control,” such a change would first require a change in State law. While having the government impose pure rent control can cause problems, in my opinion, I support some “rent stabilization” concepts, especially when linked to programs that benefit apartment owners. For example, in exchange for a building owner receiving a real estate tax exemption to provide “affordable housing” to renters, there should be reasonable limitations on how high they can raise rents on the low-income tenants each year.

Eviction Moratorium: While there had been a lot of media attention about Seattle efforts to implement moratoria on evictions, both the federal and state governments also enacted them during the COVID crisis. All are scheduled to end June 30, 2021. In addition, tenants in Seattle will have temporary protection for six months after the moratorium is lifted of a defense to eviction for non-payment of rent if they are considered indigent as well as the option for payment plans to provide back rent. There is substantial funding for rental assistance and I am hopeful the funds will reach landlords so that no one is evicted due to a failure to pay rent tied to a job loss or other COVID-related impact. In addition, there is legislation in place to have landlords and tenants work out payment plans. Moreover, Seattle was able to help further with housing costs because we own Seattle City Light and Seattle Public Utilities which has stopped shut offs and late fees during the pandemic. After the pandemic, Seattle will still have a ban on most financial evictions during the three coldest winter months of December, January, and February, due to a City law adopted in early 2020 that was amended heavily to exempt small landlords and to limit it to only those households with low or moderate incomes. This relatively new law will need to be studied to assess its impact.

Affordable Housing Investments: The term “Affordable Housing” is worth clarifying because it means different things to different people. I prefer the term “low-income housing” because it’s more clearly restricted to benefit people most in need (typically those earning less than 50% of the area median income), rather than hoping the private sector landlord will rent to low-income residents AND charge below-market rents. There is also a strong benefit to preserving older housing stock that is naturally affordable (not restricted by a regulatory agreement but with rents that are below-market) due to the building’s age with fewer fancy amenities. I would rather the City work harder on preservation in addition to production. The various subsidies from all levels of government to make housing more affordable have been directed toward several solutions, including Permanent Supportive Housing, which includes wraparound services for people who need them the most (such as those who have experienced homelessness). Since the 1990’s Seattle voters have approved a property tax to create additional affordable housing with our “Housing Levy.” I’m a big supporter of the Housing Levy and appreciate voters continually renewing it. In 2021 alone, we will see the leasing up of 2,400 new low-income housing units funded by the various programs administered by our City’s Office of Housing. This year, these 2,400 new low-income units will include approximately 450 Permanent Supportive Housing units dedicated to people experiencing homelessness. We recently passed legislation to make it easier to build permanent supportive housing faster.

Section 8 Vouchers: The Housing Choice Voucher program (also known as Section 8), helps households with low incomes to pay their rent in privately owned apartments or houses. The Seattle Housing Authority (which is not part of the City government) administers the program and provides those subsidies on behalf of the tenants to their landlords. This program continues and it works well — when there are available units – and the reinvigorated Housing Connector program helps to connect renters with vouchers to landlords. Households in this program typically earn less than 50 percent of area median income to qualify, and the voucher covers the rental amount that exceeds 30% of their household income (so that the tenant is paying only 30% of their income toward rent). Despite bipartisan support for portable housing rent vouchers, the Congress often cuts this program first in order to preserve funds for the project-based Section 8 contracts that cover entire apartment projects.

While registration for the Housing Choice Voucher waitlist is currently closed, Washington State will soon receive over 2,400 emergency housing vouchers from the federal government for people living homeless or in danger of becoming homeless. The Biden administration announced recently that $5 billion in emergency housing vouchers will go to public housing authorities across the country.

This is in addition to another $5 billion from the American Rescue Plan Act to assist people experiencing homelessness across the country. The bill also provides $10 billion for homeowner assistance, $100 million for housing counseling, $20 million for fair housing, and $5 billion for utility assistance, among other crucial provisions. According to stock picking services, these investments will prevent millions of low-income people from losing their homes during the pandemic and will provide cities and states with the resources they need to help people experiencing homelessness find housing and remain safely housed during the pandemic and beyond.

ADU/DADU: For more information on building Accessory Dwelling Units (ADUs), property owners can visit this site: https://www.seattle.gov/sdci/permits/common-projects/accessory-dwelling-units. This site includes pre-approved designs which should help property owners to build ADUs. Financing to pay for the new construction will continue to be a challenge. Moreover, the City Council will want to be sure that complex new requirements for landlords do not inadvertently discourage affordable ADUs from being created.

While the previous City Council relaxed the previous ordinance on Accessory Dwelling Units to encourage more ADUs that are affordable, the details matter. Unfortunately, the City Council required no affordability to benefit future renters or proximity to reliable transit. Moreover, I am concerned that the previous City Council removed the owner- occupancy requirement which could cause harmful real estate speculation and demolitions of existing affordable single-family rental homes. Others raised concerns about the lack of parking requirements, though I did not raise that as a concern. Going forward, I believe our Seattle Department of Construction & Inspections must frequently review the data on new ADU law’s impacts to ensure a healthy balance: making sure many property owners can leverage the new law to create less expensive housing options while discouraging harmful real estate speculation.

Projects are distributed, not concentrated downtown: While I believe affordable housing projects are distributed throughout our city, I believe we could build more projects throughout our city if we increased the Mandatory Housing Affordability (MHA) fees that real estate developers are allowed to pay. If the fees are too low, the developers pay into a fund that is spent 3 years later and often far away from the original project. We are fortunate that there are many programs that encourage affordable housing close to large, fixed transportation hubs, such as Sound Transit stations (transit-oriented development). I believe all the City Councilmembers support transit-oriented development. Our State Legislature now requires transit agencies, such as Sound Transit, to contribute surplus land to support development of affordable housing (RCW 81.112.350). A good example of how that law works is the transfer from Sound Transit to the City Office of Housing of over a dozen parcels of land near the Link Light Rail line in south Seattle recently adopted by the City Council (CB 120058). Another example of transit-oriented development is the Cedar Crossing project at the Roosevelt Station in District 4: over 250 units of low-income housing. A former staging area for the new light rail station opening this summer in the U District will be home to a Tiny Home Village (Rosie’s) and for the next two years, but should ultimately be developed with low-income permanent housing.

Focusing Additional Dollars: For now, I think extra funds should be used to reduce the homelessness we see on our streets, sidewalks, and parks. Using the rental assistance boost from the Biden Administration, this could include not only additional non-congregate shelter units but also rental housing vouchers to increase “through-put” (moving folks more quickly from shelter into permanent housing). Once this pandemic-related spike in homelessness is reduced and stabilized so that homelessness is one-time, rare, and brief, I believe we should do more to enable qualified nonprofits to buy more of our city’s existing market-rate apartment buildings and convert them to low-income housing while also preserving existing affordable housing (preventing its demolition and/or from converting to market-rate).

It is also of paramount importance that we embrace our efforts to shift much of our City’s homelessness response system to the new Regional Homelessness Authority (RHA) so that the entire region steps up to do its fair share. The RHA should fund only evidence-based strategies or national best practices proven to work and that are subject to contracts with performance metrics – while providing support to nonprofits to track and report the data vital for making informed decisions and solving problem. We must not allow local politicians and service providers to micromanage or run around the RHA.

To stretch our dollars further, I would like to encourage the building of more modular housing. Before the pandemic, I inspected modular housing in Vancouver B.C. It is built in a factory and assembled on site. It is attractive and high quality while costing less – and it is constructed much faster than traditional housing so we can get people experiencing homelessness into housing quickly. Ultimately, it should be built with union labor and used to expand their apprenticeship programs. Seattle and other cities in the region should expedite the permitting of modular housing.

Policies that should change – Optimize the Tax Exemption for Multifamily Housing (new apartment buildings): Seattle’s Multifamily Housing Tax Exemption (MFTE) program exempts real estate developers/ landlords from paying 100% of the real estate taxes for 12 years on the residential portion of newly built buildings in exchange for restricting at least 25% of their apartments to those earning a limited income. But the program, just recently extended, could be better targeted to produce greater affordability benefits to the public. For example, the program currently allows landlords to benefit from the full tax break even when they rent many designated units to those earning over $90,000 a year. I believe that’s too high to give a full tax break to the private market.

Policies that should change – Prevent Displacement: City Hall must prioritize meaningful protections against economic displacement. This includes keeping senior citizens and other vulnerable people in their homes and preventing small businesses from being taxed out of Seattle. Unmitigated and blanket upzoning can create economic disruptions and often benefit real estate developers without creating sufficient low-income housing. Longtime residents, communities of color, neighborhood businesses, and many others can no longer afford to stay and that’s not right.

Related to this problem, the city fails to track the thousands of important housing units that are naturally affordable (unrestricted). It appears that demolitions of naturally occurring affordable housing are occurring at a greater rate than city planners predicted. City Hall must not only inventory its existing affordable housing, but also discourage the demolition of affordable housing so that we preserve what we already have. This should include provisions to build replacement affordable housing.

THANK YOU: Thank you for your questions about homelessness and affordable housing. I believe we all want a city that compassionately and effectively reduces homelessness while increasing affordability for all its residents and small businesses. I will continue to work hard to achieve those goals.

SUBSCRIBE: I encourage Wallyhood readers to subscribe to my e-newsletter and to check out my blog for updates. Use the search box to find the topics that interest you the most. For example, I discuss homelessness and the City government response in detail at the end of this post: https://pedersen.seattle.gov/february-updates-district-4-projects-small-businesses-safety-homelessness-vaccines-and-more/