Seattle's Housing Crisis and The City's Future

by John Stafford

"Capitalism is doing what capitalism does." Thus lamented a Cambridge, Massachusetts reporter as he witnessed the town's transformation from a distinctive neighborhood with idiosyncratic shops and affordable housing to a more prosaic district with chain outlets and upscale housing. His point (and mine) is not that capitalism is an undesirable economic system. Rather, the point is that capitalism is a powerful and often amoral engine that, left to its own devices, can alter the character of a locality in a manner that most residents find undesirable.

Seattle is currently facing this threat. Seattle is the fastest growing big city in the country — we are expected to grow by 120,000 residents in the next two decades. This growth is being driven largely by the post-recession economic recovery, a thriving technology sector (e.g., software, e-commerce, biotechnology, aerospace) and desirable living conditions. Responding to the high demand for housing, developers are building new units, converting older units to more profitable uses and raising rents in existing units. Indeed, recent rental price increases in Seattle have been the highest in the nation.

The problem of escalating housing prices is being compounded by the problem of prolonged income stagnation for middle and lower class families. This problem does not exist for high-income individuals, whose compensation continues to increase in the aftermath of the Great Recession (leading to all-time highs in income inequalities). These three forces — the rapidly rising cost of housing; flat incomes for the middle and lower class; and rising incomes for the affluent — have established the foundation for the forces of capitalism to make Seattle a city that is increasingly for those who are white and those who are wealthy. In short, Seattle is facing two linked crises — housing affordability and demographic transformation, with the former driving the latter.

To address these threats, a number of proposals have been made by numerous groups, including the HALA (Housing Affordability and Livability Agenda) Committee, whose report contains 65 recommendations to the mayor. These recommendations can be divided into several categories: increasing the public and non-profit role in creating new affordable housing (via increases in the City of Seattle Housing Levy and the State Housing Trust Fund, as well as other measures); zoning changes (e.g., enlarging multi-family zoning, allowing additional construction on single family lots and expanding micro-housing); requiring commercial developers to financially support affordable housing (e.g., by requiring residential developers to build affordable housing in new developments — "inclusionary zoning," and by requiring commercial developers to pay "linkage fees" to fund affordable housing in other areas); regulations to maintain affordable housing (e.g., developer-government partnerships that incent the preservation of affordable housing); changing building code requirements to decrease housing costs and thus increase affordability (e.g., decreasing off-street parking requirements, allowing more use of wood construction, streamlining the permitting process); expanding tenant rights (e.g., limiting upfront deposits and late fees); providing assistance to keep individuals in their current housing (via foreclosure counseling, rental assistance, etc.); and rent control (this is currently illegal under the State Constitution and was not recommended by the HALA Committee, but has been recommended by other groups).

It is far beyond the scope of this article to attempt to evaluate these proposals. Suffice it to say that some mix of these policies will be mandatory to effectively manage Seattle's rapid growth phase, and there have been heated debates amongst City Council candidates, government officials, housing advocates, developers and other groups regarding their relative merits. Naturally, in most instances, the policies favored by affordable housing advocates and those favored by developers are at odds with one another. When considering specific policy responses, it is imperative to keep in mind four considerations (the first two of which were alluded to earlier).

First, there are already signs that Seattle is undergoing a reversal of established demographic trends. From 1970 until 2010, consistent with national patterns, the percentage of Seattle's population that was white declined in a steady manner. Recently, however, this trend has begun to change. The Seattle Times' Gene Balk writes: "In 2013, 67 percent of the city's population was non-Hispanic white — that's up from 65.2 percent in the previous year. The uptick means Seattle is now whiter than it was back in 2010." He continues: "This represents an unexpected reversal. The city, like the nation as a whole, had actually been getting less white in recent years…until now, that is." (Seattle Times, 10/27/14) Dick Morrill, UW professor of geography, writing for Crosscut, echoes this sentiment: "The main story from the census findings is the continued gentrification of Seattle, with displacement of minorities and the less affluent out of the center of the city, especially to South King County and Pierce County. The city core is becoming whiter, while the edges and suburbs, north and east as well as south, are becoming far more diverse." (Crosscut, 4/29/11)

Second, because of these trends, Seattle's affordable housing crisis is about far more than the cost of housing. It is about the future of Seattle — its demographic profile; the character of its neighborhoods; its high level of homelessness; and its aesthetics. All of these will be impacted by the policy response currently being formulated.

Third, the appropriate policy response will involve more than just housing. In 1994, Seattle embarked on a growth strategy that attempts to concentrate population density in "urban villages." Concentrated density tends to reduce carbon emissions on a per capita basis, as residents can meet a higher percentage of their basic needs by walking or via transit, rather than driving. To realize these benefits of density, transit must be designed to serve the urban villages (and it has been). Thus, effective growth management strategies, housing strategies and transit strategies are inextricably linked. Moreover, policies that affect income and the cost of raising families also impact affordability. Seattle has enacted the $15/hour minimum wage ordinance and is embarking on a subsidized preschool program — policies that will make housing more affordable. On the other hand, the state's regressive tax system and Seattle's large ethnic educational achievement gaps are factors that continue to diminish economic prospects for lower income, minority groups — making their housing less affordable. Thus, as always, different policy areas interact with one another in powerful and often conflicting ways.

Fourth, some areas of policy have many variations, and cannot therefore be meaningfully discussed in monolithic terms. Rent control, an oft-maligned policy option, is a prime example. There are many varieties of rent control. In one form, rents are controlled citywide by tying allowable increases in rents to the inflation rate. A vast majority of economists oppose such schemes, as they disincentivize new construction (exacerbating the problem of inadequate housing supply), require a large bureaucracy to implement and create a rash of other problems. A more limited approach is to require rental increases in lower-income neighborhoods to be capped at a specified level in order to prevent property owners from instituting rapid, large rent increases which serve as de facto eviction notices to low-income tenants. Such a targeted policy would have minimal impact on housing supply, require little bureaucracy and retard gentrification. The simple point here is that a meaningful discussion on rent control requires specificity (which is usually lacking) on which variant is being considered.

There is a very real risk the duel crises of housing affordability and demographic transformation Seattle faces will lead to major changes in the character of the city that the majority of residents will find objectionable. The extent to which this risk is minimized will be contingent on the mix of policy proposals enacted within the city.

Obviously, residents should be highly engaged in this debate. Housing affordability has rightfully become the centerpiece of this year's City Council races. Unfortunately, however, voter turnout was not encouraging — as of August 6th, only 30% of Seattle Voters had returned their ballots. Equally concerning, outside spending on the election from independent-expenditure committees (representing interest groups with financial stakes in policy outcomes) is at an all-time high. This juxtaposition may suggest that residents do not fully appreciate the connection between Seattle's current housing affordability crisis and the future profile of the city; while developers certainly do.

John Stafford is a substitute teacher for Seattle Public Schools and a former management consultant in corporate strategy. He recently completed a run for State Senate in the 37th District. He is writing a monthly article on public policy for the South Seattle Emerald.

Sources: The Seattle Times (10/27/14, 5/16/15, 5/27/15, 7/4/15, 8/3/15); The Stranger (7/29/15); The HALA Committee Report (7/13/15); "Solutions to Seattle's Housing Emergency" by the Community Housing Caucus (3/16/15); Crosscut (4/29/11); Real Change (7/8-14/15); the City of Seattle website (www.seattle.gov).