Seattle's Housing Affordability and Livability Agenda

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Game-Changing Government Policies & Drivers

By William Hillis

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William Hillis

Broker & Research Editor, Realogics Sotheby's International Realty

"Prices are rising so quickly that the MHA payment option schedules may be insufficient to divert developers to the performance option." 

 

In August 2017, the City of Seattle extended its Mandatory Housing Affordability (MHA) ordinances to two more areas: Central Seattle, at three key intersections along 23rd Avenue; and in the Chinatown-International District. MHA is integral to the City’s Housing Affordability and Livability Agenda, billed as a “multi-pronged strategy for addressing housing affordability.”

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Strategizing affordable housing is nothing new, but in past decades, the focus was on targets and voluntary incentives. These early strategies were subordinated to the design review process, which usually added costs through delays and was occasionally coopted to thwart affordable housing efforts. The MHA is a more aggressive approach designed to coax developers into providing affordable housing units. They must either design such units into their plans, or pay a fixed fee per square foot into a fund held by the City Office of Housing. The MHA is aimed to “provide at least 6,300 … new rent-restricted homes for households with incomes no higher than 60 percent of the area median income,” an ambitious goal in a city with escalating rents and home prices rising by more than one percent per month, according to Case-Shiller’s home price index.

Affordable housing is a worthy goal, and some developers will prefer to expedite their projects by meeting the MHA’s performance thresholds. However, prices are rising so quickly that the MHA payment option schedules may be insufficient to divert developers to the performance option. For example, within two blocks east and west of 23rd Avenue, one of the targeted areas, the median selling price year-to-date has been $440 per square foot. Yet the highest payment option charge scheduled by the MHA is $32.75 per square foot—less than 7.5 percent of the median selling price in that area, and less than seven months of price inflation at current rates.  

Impact: Developers in Seattle will generally prefer to maximize profits by opting for the payment option rather than the performance option.