Uncategorized September 14, 2015

Have you Heard: Seattle Unveils ‘Grand Bargain’

Faced with a growing housing problem, Seattle leaders have unveiled an ambitious plan to create 6,000 affordable housing units in the next 10 years.

In September, Mayor Ed Murray and Councilmember Mike O’Brien introduced what is being dubbed the “Grand Bargain,” a plan that tries to find common ground for both housing advocates and real estate developers while increasing the production of affordable homes.

It’s a groundbreaking proposal at a time when many cities are looking for new ways to expand affordable housing production.

There are two major components to the Grand Bargain. The first establishes the Affordable Housing Impact Mitigation Program (AHIMP), also known as a commercial linkage fee, that will help fund the construction of new affordable housing by requiring developers to pay a fee on every square foot of new commercial development. The fee will range from $5 to $17 per square foot, based on the size and the location of the development.

The second part calls for Mandatory Inclusionary Housing (MIH) for new multifamily developments, requiring 5% to 8% of units to be affordable for residents earning up to 60% of the area median income (AMI) for 50 years. In 2015, 60% of the AMI is $37,680 for an individual and $53,760 for a family of four. As an alternative to on-site units, developers can pay a fee to construct new affordable housing off site.

The proposals alone would be a tough sell, but there’s another important piece to the plan.

“The Grand Bargain says what if we implement a mandatory inclusionary housing program but we do it in conjunction with a modest ‘up zone’ citywide,” says O’Brien.

In other words, the city will look at increasing development capacity by allowing developers extra space or height in their buildings. This would give landowners some additional value in exchange for providing affordable housing.

“Instead of the affordable housing advocates or the nonprofit housing providers on one side and the private development community on the other side ready to sue each other over the linkage fee, this agreement we believe will give us more affordable housing with the up zone, and the development community is supportive of it,” O’Brien says.

A new model

The sweeping proposal stems from the work laid out by the Housing Affordability and Livability Agenda (HALA) Advisory Committee. Made up of 28 housing experts, activists, and community leaders, the committee recently met for 10 months to hash out specific recommendations.

The HALA plan, which features a total of 65 recommendations, comes at a time when low- and middle-income families are struggling to find affordable housing in Seattle. More than 45,000 households in the city—one in six households—are spending more than half of their incomes on housing.

In the very best of times, Seattle and its development partners have created about 800 affordable housing units in a year, says Faith Li Pettis, co-chair of HALA. A partner at the Pacifica Law Group, Pettis is a bond counsel familiar with affordable housing transactions.

HALA needed to find a way to more than double the prior high-water mark to meet Murray’s call for 20,000 affordable housing units in the next 10 years.

“There was no way we were going to get that out of the nonprofit community using their traditional type of financing,” Pettis says. “The capacity isn’t there.”

The Grand Bargain components—the commercial linkage fee and the mandatory inclusionary zoning— are estimated to add 6,000 affordable housing throughout the city over 10 years. Many jurisdictions that have mandatory inclusionary zoning have been able to produce units at 80% of the AMI, but the committee wanted to go deeper. As a result, the units that HALA expects to come out of the plan will be targeted at 60% of the AMI.

Seattle has a strong track record of supporting affordable housing, including a housing levy that has been repeatedly passed by voters. Even with that, the area needed a new model to capture the number of units needed by residents, Pettis says.

“This has the possibility of being a real game-changer,” Pettis says. “It’s a new way of doing business.”

Despite the strides made by the HALA committee and city leaders, there’s still a long road ahead, admits O’Brien.

In early September, he was hoping to pass a commercial linkage fee bill this fall. Officials will also work on the inclusionary zoning legislation, which is expected to take approximately six months. However, key zoning changes have to happen as part of the Grand Bargain, and to do that citywide would likely take about two years, estimates O’Brien.

All eyes will be on Seattle during this time.