Seattle voters to decide on $970M levy to fund affordable housing

Seattle voters will soon weigh in on the city’s largest-ever property tax measure for affordable housing.

The latest iteration of the Seattle Housing Levy would raise $970 million over seven years, more than triple the existing levy that expires at the end of this year. Supporters say the levy marks a “critical investment” in the city’s housing stock, while the levy’s only prominent skeptic argues for other strategies to address the housing shortage.

“We are in a deepening housing crisis that demands more tools at scale and this levy rises to meet the moment,” said Patience Malaba, a leader of the Yes for Homes campaign and executive director of the Housing Development Consortium.

Even so, Seattle’s need for new affordable housing still far outstrips what the levy is expected to build, underscoring how far Seattle remains from solving its housing and homelessness crises. 

Over the next 20 years, Seattle is expected to need 3,500 new homes every year for people with low and moderate incomes. The levy is expected to fund 3,200 new homes in that income range over seven years.

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If approved, property owners in the city would pay 45 cents per $1,000 of their property’s assessed value. That amounts to about $385 a year for the owner of a median $855,000 home, an increase of about $260 a year from the present levy rate. 

The levy is one of the city’s primary funding sources for affordable housing, along with a business tax known as JumpStart and developer fees collected under the Mandatory Housing Affordability program.

Nonprofit developers typically pair levy funds with other government moneys to build rental apartments, subsidize the rents and, in some cases, provide supportive services on-site. Levy funds also pay for rent assistance and homeownership programs and, in the proposed levy, would raise wages for workers providing services in supportive housing.

Levy spending over the next seven years would include: 

• About $707 million to help fund construction of about 2,900 new rental homes and renovations to about 600 existing homes. These funds would support housing for people making 60% of area median income, about $57,000 for a single person, or less. At least 60% of this funding would be earmarked for housing that is affordable to people making less than 30% of area median income, or about $29,000 a year for a single person. Affordable is defined as requiring tenants to spend no more than 30% of their income on housing.

• About $51 million to help fund construction of nearly 300 new affordable homes for sale for people making moderate incomes, home repair grants, foreclosure help and mortgage assistance. These funds would benefit programs for people making 80% of area median income, about $71,000 for a single person, or less.

• About $122 million to fund operations of affordable buildings, services for residents and wage increases for social services workers. Some operations funding could also temporarily be loaned to nonprofits buying existing apartment buildings, then repaid to the city and used for operations later in the seven-year life of the levy, according to the Office of Housing.

• An additional $30 million for rent assistance to help tenants avoid eviction.

About 6% of the funds, $60 million, would pay for administration of the levy, including city staff and the costs of maintaining and preparing city-owned properties set to be used for housing development. 

Supporters and opponents

On the ballot roughly every seven years, the housing levy has long been popular with voters. The existing levy — double the cost of its predecessor — passed in 2016 with 71% of the vote.

This year, a campaign in favor of the measure has raised nearly $463,000 as of Wednesday, and there has been no organized opposition campaign. A Seattle Times/Suffolk University poll in June found a majority of respondents supported the levy.

The largest donors in support include the Housing Development Consortium, which has donated $40,000. Developer Matt Griffin, philanthropist Connie Ballmer and Amazon each donated $25,000. Habitat for Humanity Seattle-King and Kittitas Counties donated $10,000 and spent $22,500 on production of a video supporting the measure. 

Other big donors include nonprofit and for-profit developers and unions. The political action committee of the Washington Multifamily Housing Association, a landlord lobbying group, donated $10,000.

The levy’s most vocal skeptic is Roger Valdez, director of the pro-development organization Seattle for Growth, who wrote the statement opposing the levy in the county voter guide. 

Valdez criticizes Seattle’s existing spending on affordable housing. He argues the city does not have a “coherent, sensible strategy for addressing the underlying issue. And in fact, the city council does things that are exactly the opposite to make things worse, like imposing fees on the construction of new housing.”

Valdez argues the city instead should improve the affordable housing development system, repeal or loosen fees and regulations on private-market developers to encourage more building and focus more on direct payments to people with low incomes, such as universal basic income or rent assistance.

“If this system was more streamlined and more efficient, the money would get to people [who] need it a lot faster,” Valdez said.

Supporters see the levy as a critical source of funding for deeply subsidized rentals private developers are not building.

“For every unit that’s been built, a household has been housed that wouldn’t have been housed in the [private] market,” said Susan Boyd, CEO of the nonprofit developer Bellwether Housing. “If the market were able to produce things cheaply enough for people to live in with limited income, then it would be doing that and it can’t.”

Affordable housing developments can face higher costs than private projects for an array of reasons, including because of more complex financing that adds time and overhead costs. 

Government-funded projects can require higher worker wages, banks may have tighter lending standards for affordable housing, government funding often takes longer and requires regular reporting, and some neighborhood groups may oppose affordable housing, drawing out timelines, according to a 2014 report from the nonprofit Urban Land Institute. 

Seattle developer Ben Maritz planned a 114-unit private-market apartment building in the Central District with rents targeted at people making 80% of area median income, or about $71,000 for a single person. But as interest rates climbed in the last year, the project no longer worked financially, he said. 

Instead, Maritz’s firm now plans to pursue city funding and, in order to qualify for those funds, make the apartments affordable for people with lower incomes, those making about $48,000 to $58,000 a year. The project’s budget will rise from about $47 million to $58 million, he said.

“Sometimes there’s this sense that, ‘Oh, affordable housing developers are wasteful’ … That’s not really the case. These projects are structurally expensive,” Maritz said. 

Rising costs

Beyond bureaucratic hurdles, developers of all kinds of housing are facing rising land prices, construction costs and interest rates. 

Due in part to those costs, the levy is not expected to dramatically increase the number of new apartments built per year even as it brings in more tax dollars.

The 2016 measure dedicated $201 million, about 69% of that levy’s total, to building, buying or renovating a promised 2,500 rental homes. The city says it has exceeded those estimates and funded nearly 3,300 units.

This year’s levy would direct about $707 million, 73% of the total, to building, buying and renovating an expected 3,516 total rental homes.

Levy supporters blame higher land and construction costs, limited sources of other government funding and plans to build more larger homes for families.

Construction costs, including labor and materials, have climbed nearly 60% in Seattle since the last levy passed in 2016, according to the Mortenson Construction Cost Index.

One limitation on building more units is a lack of federal money. 

The federal government only provides a limited number of tax credits, a common source of funding for affordable apartments, each year. If nonprofits want to build more homes than those credits will support, they rely more heavily on state and local funds. 

Washington Rep. Suzan DelBene and Sen. Maria Cantwell, both Democrats, have proposed increasing Low Income Housing Tax Credits, but Congress has not passed that legislation.

King County ballots are due by 8 p.m. Nov. 7.