MHA Holiday 2.0: Starring Seattle Councilmember Dionne Foster

[00:00:10] Hello and welcome to the latest edition of Seattle Nice, the only podcast that tells you what's really happening in Seattle politics. I'm David Hyde with Erica C. Barnett of Publicola, fresh from a vacation to an undisclosed location, Ohio gozaimasu. Erica C. Barnett. Very disclosed, actually. And thank you. I even posted a rare photo of myself. I was in Japan.

[00:00:34] I saw that. That's why I was disclosing secretly here. Also with us, Sandeep Kaushik. Hello, Sandeep. Hey, David. Hey, Erica. And today we have a very special guest to talk about Seattle's Mandatory Housing Affordability or MHA program. Seattle City Councilmember Dionne Foster who's got a plan for fixing it. She represents the at-large Position 9, a seat that she won last year after defeating Sarah Nelson. Dionne Foster, thanks so much for joining us. Thank you for having me.

[00:01:04] So just to set this up quickly, Mandatory Housing Affordability, for those who don't know, is a program that was established a few years ago that gives developers of market rate housing slight increases in height and density. And in exchange, they have to add affordable housing on site or pay a fee, what's known as a fee in lieu to build affordable housing elsewhere. The amount of money the fees bring in has gone down in recent years as housing development has declined.

[00:01:33] And developers have asked, and Councilmember Foster, you have proposed an 80% reduction in the fees they pay for two years while the city works out a new approach to MHA in the future. So that's kind of where we are. You've proposed this measure. Mayor Katie Wilson was working on a similar proposal but dropped it so that she could convene a task force. So is that a pretty good summary? Am I missing anything in your proposal? Yeah, I think that's a fair start.

[00:02:03] I can give a little bit more detail there. So, you know, thanks for having me again. The proposal that I've put forward for MHA is time-bound, so that's right. But it's kind of got like a two-tiered approach, right? So basically the first part of this is that if you've got a project where you're vested, and the way we're using vested is you've got a complete building permit application into the city.

[00:02:26] You know, once this, you know, if and when this accelerator passes, those projects would have an 80% reduction, and they've got two years to get to their foundation inspection. So I think that's where the two years comes from. But we are looking at like a concrete set of projects that would need to be vested by the time this ordinance passes. And then if you are not a vested project, we are saying then you could have a 60% reduction in your MHA fee.

[00:02:52] And for those projects, there's a couple of different requirements that developments would need to hit. So that includes making sure that they've got 25% or more of the units are two-bedroom or more. And that's because I think we need a lot, a lot more family-sized housing here in Seattle. And there's also a couple of carve-outs in terms of locations for those projects because we wanted to be sensitive to concerns that I was hearing from some community members around anti-displacement.

[00:03:20] So there's a couple just, you know, nuance to it, but more or less, you had it right, Erica. I want to ask about the second thing that you mentioned, the areas that are going to be sort of exempted from this second track of fee reductions. A lot of these areas are places where we need housing. There's been a long debate over whether to sort of prevent housing in places like the Central District, like Beacon Hill, like the CID, the areas that you have excluded in your legislation.

[00:03:50] Why exclude so many parts of the city where we need housing from the reduction? Yeah. So I would come back to this is a temporary accelerator, right? So this isn't a permanent mechanism. And we could talk more about the long term and where that sort of fits in. So if your project is already vested, if that is, you know, if your project's in the works and you've got your building permit application, you're still able to access that 80 percent and those carve-outs don't apply.

[00:04:17] So I just want to first focus in on we're talking about sort of a narrow subset here. It's not an exclusion of housing in those areas. But it was really to take into account the fact that we want to make sure we're not sort of accelerating necessarily the pace of housing in certain geographic areas that have maybe seen a lot of development or where there's a high risk of displacement concern. And so that's the basis for this is using some of the city's data around high risk of displacement

[00:04:44] so that we're not sort of over-incentivizing production in those areas during this short period of time. So let me jump in here and kind of pull the conversation back to maybe the 500-foot level for a minute. We've talked about this MHA holiday idea a lot on Seattle Nice. We obviously have opinions about it. I'm a supporter of the idea. But I wanted to ask you, Dionne, to kind of weigh in. Why take this on?

[00:05:08] Like what's the rationale here and what's the kind of urgency in doing this? Obviously, the mayor had been pursuing this idea for a while. She ran into some, you know, building opposition from what I would say are kind of elements of her base, you know, in the anti-displacement left or maybe the anti-capitalist left or whatever you want to call them. And she ended up backing away, right, and saying, I'm going to do this longer term task force conversation process.

[00:05:37] But then you have now kind of come in, swooped in and said, no, let's move forward on this now and, you know, negotiated an agreement that will, you know, go before the council. So what was the driving force there for you and what do you see as the rationale and the urgency for doing this? Yeah, great question. So, you know, I had a lot of really good conversations with the mayor and her staff and other folks about the accelerator proposal, I guess, this spring.

[00:06:07] So we'll just first off sort of say I'm really grateful for all the work that especially the staff did, the department staff, so on. I was a, as you all know, I was a staffer 10 years ago. And so I think it's really important to say that. And so it was, I think the mayor and I had a lot of alignment earlier this year. And I will also say, I think I really appreciate we're getting ready to take up the mayor's budget.

[00:06:29] I appreciate that they've got this position for this housing ombudsman in their budget in terms of making sure that it's easier for our affordable housing partners to navigate the permitting process and other things that they have to go through the city on. So just huge, huge appreciation for those things. You know, for me, I think your question is maybe around like urgency or why now? And, you know, if I look at the data, like our building permits are down, right? They're down significantly.

[00:06:56] And if we think about where that's going to lead us to in the next few years, that's going to mean less housing getting built, more constrained supply, fewer options for people. And ultimately, that's not going to be good for the cost of housing across the city, right? So for me, that's one of the things I'm looking at as housing chair is we have a lot of work to do to make sure that we're supporting production, right, here in Seattle. The other thing, obviously, that comes with that is work and jobs for folks.

[00:07:26] And I think that's also really helpful. You know, when we had this introduced in chambers last Friday, 10 days ago, something like that, you know, I think we had maybe like 150, you know, folks in chambers. Many of them were people in the construction trades. And we heard about people who've been out of work or they're worried that the project they're on right now is going to be their last project. So I think the ability to get that production back up is good for us in the long term. It's good for us in the short term.

[00:07:52] It's going to help us get some needed sales tax revenue in from projects, which helps our city budget and other budgets. So I see a lot of opportunity. Correct me if I'm wrong about this, but as I remember when the MHA first passed, there was a sense that, hey, look, if this is distorting the housing market, we're going to make some tweaks right away to solve those problems. And that didn't really happen. And so I'm curious whether I'm right about that or not, just why it's taken so long to start to address this problem.

[00:08:21] My sense is it's because we've spent too much time kind of fixating on the concept of greedy developers. And in some ways, we've started to sort of move past that and say, let's just roll up our sleeves and try to make it a better city and try to solve the housing crisis. But why do you think it took so long? And how do we make sure we're able to make tweaks in the future if we need to more quickly? Yeah, great question. So let me let me say this. Let me first also say, I think MHA has been a very helpful program as well.

[00:08:48] So just before I talk about the tweaks and those pieces, you know, when it passed and you're talking about that, you know, we anticipated or the council and the mayor at the time, you anticipated it would help produce about 6,000 units of affordable housing over a decade. I think we're pretty close, right? Like 5,300 and some change there. Right.

[00:09:08] So I think it's important as we're talking about the accelerator and this temporary adjustment to also be clear that we're talking about what I would say is the success of the program as well in terms of producing subsidized units. I think your question, David, maybe is why do we wait so long or how do we tweak it in the future? For me. Yeah. Why did it take so long? And how do we make sure that it doesn't take so long in the future? Yeah. Yeah.

[00:09:35] I mean, I think there's a lot of opportunity with what I'm putting forward as this short-term approach, right? Which is why I talked about sort of the time-bound nature of the accelerator program. And then there is opportunity, I think, and obviously I don't want to speak for the mayor's task force, but I think there's opportunity there to talk about the sort of long-term future of the program.

[00:09:55] And you're right, as it was written originally, I think part of it was to ensure that we're taking into account other factors, economic factors, interest rates, and that we have the ability to adjust it over time. I also tend to think that once we've adjusted something, you build a little bit of muscle memory and you have the ability to, you know, come back and say, hey, the original intent was to look at the market and to make changes as needed. So I think that will help.

[00:10:22] What's really important to me also is that we're really clear that this is a lasting program for the city of Seattle, right? So, you know, my perspective, I've been very clear about this, is that we're doing a short-term accelerator to boost housing, but not to get rid of MHA, right? Because we have seen it contribute so much to the city's well-being. Your legislation also includes a resolution that deals with a number of subjects.

[00:10:45] But the one I want to ask about is it says that this should be MHA should be imposed in the former single-family areas, which are now called neighborhood residential, and more density is allowed there. The state basically forced the previous council to accept that by passing legislation. So why, you know, as I understand it, and correct me if I'm wrong, but part of the rationale here is that the low-rise areas, which is a different zoning type, have about the same amount of density now.

[00:11:14] So it's not really fair to impose MHA in those areas and not the former single-family areas. But my question is, you know, is that correct? Is that the rationale? And Kathy Moore proposed doing this, a very similar thing in legislation before she resigned from the council.

[00:11:32] And, you know, pro-housing folks really opposed it because you're imposing fees on very small projects, and it makes them, you know, much more disproportionately expensive than these bigger projects. So why propose this now? And I know it's just a resolution, but what is sort of your preferred end state? Like, what do you want to get out of this? Yeah, thank you.

[00:11:57] Okay, so the resolution, it's been interesting to see the responses to the resolution after I put that out. I'll start with the end state. You know, for me, and it gets maybe to David's question, sort of like, I think we should have a long-term approach that feels more sensical to me. And one of the things that feels off to me right now is what you mentioned right now, or just now, Erica, in terms of the difference between low-rise and neighborhood residential.

[00:12:25] The other thing I would say about the resolution that I think is really important is that it is not a proposal to take MHA as is and put it in neighborhood residential. So what it does do is say, I want our central staff, our team here on the second floor at City Hall, to work on a proposal that includes inclusionary zoning in neighborhood residential.

[00:12:46] There's also some things that we put in there around approaches to make sure it's a flat fee or ways to think about it so it's not constantly escalating to make it more predictable for folks who are building in neighborhood residential. So there's more work to do to figure out this concept.

[00:13:02] It is specifically not the proposal that former council member Kathy Moore put forward last year, although I think because it's talking about a form of inclusionary zoning in neighborhood residential, that is sort of the easiest thing for people to reach for. So I understand that response, but it's where I'm actually asking for something different and to work on a process to identify that and get that right. So to me, it's about getting the dials right. Really quick follow up on that.

[00:13:31] I mean, I do want to push back a little bit and just ask why not get rid of this inclusionary zoning or, you know, MHA whatever in both neighborhood residential and low-rise. I mean, these are very low-density areas. And so, like, just so listeners understand, let's say you're building, you know, six units. And I'm going to get these numbers not quite right.

[00:13:56] But, you know, then you have to build one of those units as affordable or pay for an affordable unit, which is, you know, which developers say is a really disproportionate expense when you're building, like, townhomes. Yeah. I mean, I think why not get rid of it overall? Like I said, I think MHA has been a really significant contributor to affordability as we grow, right?

[00:14:18] So coming back to those, you know, 5,300 units that we've built with the resources from MHA, I think it's still an incredibly important tool for us as a city to grow in an equitable and affordable way. Sorry, just to be clear, I just meant in those areas. I think that in those areas, as we've seen, it's still possible to have development alongside an inclusionary program, right? So if we're looking at what's happening in low-rise, we're still seeing townhouses be built.

[00:14:46] We're still seeing those smaller infill developments be built. So I do think it is very possible for us to have a inclusionary zoning program even in those areas that does not function to stop development. I want to dig a little bit more into the politics around this, right? Because Erica's questions gets at that. David, I think, alluded to it as well earlier. There's a contingent of folks, strong supporters of MHA that come from a kind of section of the left.

[00:15:15] I don't know, Council Member, I guess I would call them kind of the Pramila Jayapal left. And that look with some suspicion at private sector development itself as being an engine of gentrification and displacement. And therefore – and also they look at the profit motives. David mentioned greedy developers. People are making bank off building shit in Seattle.

[00:15:41] And that segment of the left really focuses more on kind of public housing, right? And believing that what we really need to invest in is stuff like social housing, more public funding for affordable housing and those kinds of approaches to housing as opposed to the private sector development side. But there's also a kind of abundance left that's risen up in the last couple of years that is much more about kind of harnessing market forces to – we need as much housing as we can. Let's be abundant about it.

[00:16:11] Let's build a shitload of housing, right? And to unleash the regulatory burdens. Get rid of this shit like MHA. Why are we taxing as something that's good housing, right? So how did you negotiate? And there's a real dispute there, right, philosophically and politically. So how did you negotiate that to get everybody or most everybody on the same page on this deal? Okay. So I won't go to the preamble too much there, Sandeep.

[00:16:39] But what I'll say is – you know, what I'll say is this. I'll say that my vantage point, right, like I have a little bit of both of those beliefs in me, right? Yeah, yeah. I know you do. You know, I think that – and I think to me the question is what does our city need right now, right? And as a council member and as somebody whose job is to represent the whole city, when I'm looking at these, you know, vacant lots, right, that have the potential to be housing, right?

[00:17:10] Like I've walked around a few of them and I talked to neighbors where they're like, oh, yeah, this has been empty since 2017, right? Or, you know, oh, we saw this sign go up, you know, three years ago and nothing else has happened. Or, you know, when we're looking at the projections that we have just from the growth management board, right, where it's like we have to grow. We've got to build stuff for 112,000 people.

[00:17:34] Like I'm looking at those things and thinking, okay, we need to continue to get to this benchmark. I'm a big supporter of social housing. We've had them in committee. We made some changes to their charter this year to help them be more successful. I think we need to keep building more subsidized housing. I know that's something that you and I share, Cindy, you know, your build service and other things, right? And I also think that the market has a role to play. And it can't do everything, right?

[00:18:00] Like and I think market rate developers would say the market can't do everything, right? So, again, I think it's about getting the right balance here, which is why I'm taking this approach that's temporary, because I think we need a little bit of a boost right now because we're seeing high interest rates, just high costs for people. It's hard for, you know, from some of the folks that I've talked to, it's hard for them to just get the percentage that they need in order to build and to get the resources that they need to put their buildings up, right?

[00:18:28] So, I think we need to maintain MHA, but we also need to do something right now to help spur this development here. So, that's the perspective that I have, right? And I think the resolution also reflects part of my perspective, because I do want to make sure that this program remains a part of our approach as a city for the long term, and that we have the ability to sort of recalibrate not just the short-term percentage, but answer this long-term question of,

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[00:19:50] I'm curious about how the details kind of reflect the horse trading that goes on in these kinds of negotiations, like reading Eric's story, some of these details, like how do we come up with a number of an 80% reduction for some of these projects? Does that reflect sort of the optimal number for yielding the best possible results for the city? Or is part of that just kind of reflect a negotiation and it's our best guess.

[00:20:20] 80% is probably pretty good. And we've got some attention from both sides. Like where do you come up with these numbers? So, you know, earlier in this process, we got a chance to sit down with some of the folks whose projects had been stalled and look at their pro formas and sort of try to figure out like, hey, what would help a lot of these projects move forward while still ensuring that the city hits our baseline assumptions on income coming in from MHA. So if you look at what we typically project for MHA,

[00:20:49] it's about $20 million a year, 19 and a half million, I think. And so it was that kind of math based on the projects that we could, we had the best information available for was this project could move forward. We would still get this much revenue. This would help us. We get the sales tax revenue. We would also get some amount of MHA revenue. And that it's based on what I believe and what looking at that information shows us

[00:21:13] would get us both the project and the projected budget revenue from MHA. In other words, it keeps the kind of MHA ostensibly whole at the level of money it's producing currently, right? You know, while spurring these 35 plus projects to move forward. Yeah, and obviously MHA revenue fluctuates, right? So, you know, it can go up and go down depending on what projects are getting built.

[00:21:40] Last year we had, I think two years ago, it was like $22 million. Last year it was $46 million. To date this year, it's $11 million. So it obviously fluctuates with the market. That's part of the way that it goes. But one of the things, again, that we were seeing on the horizon was if projects stall out and projects don't get built, we obviously don't have the benefit of the revenue coming from the project. But then we also don't have the benefit of the housing coming from the project. So I wanted to ask just a politics question.

[00:22:10] So this, you know, you proposed this. Publicola gave you quite a bit of credit. And Josh Feit, our co-founder and columnist, gave you quite a bit of credit for breaking the logjam here. But I want to know, you know, developers want this passed by the end of the year. And I believe, you know, early next year at the latest. I want to know if you have the votes. And I know you're not allowed to do like a vote count. But, you know, have we really broken a logjam here?

[00:22:40] You know, the Housing Development Consortium, which raised most of the objections, the most vocal objections, last time to the mayor's plan, is not one of the folks that you were negotiating with, I believe. So, yeah. Do you have, are you confident that this plan is going to pass? I feel like you're trying to get me to like break OPMA or something here. Erica! You know, I got to say, you know, you guys have gotten a lot stricter about doing vote counts

[00:23:09] in the last 10 years or so, even theoretical vote counts. So, you know. I'll take your word for that. Yeah. You know, I think, I mean, what I can say is I fully stand behind the proposal that I'm putting forward. Right. And I think that if you got a chance to watch committee when we had it in committee, I think you had a chance to hear from some of the committee members their reflections around this approach. And I think what I heard was fairly positive. Right. I think I don't I never want to speak for other council members.

[00:23:37] But I think, you know, from the committee members, I think what I heard was, you know, comments around the excitement for making sure that we're helping support new production. I think some reflection in terms of the approach, in terms of taking into account the gentrification and displacement concerns. So I think that the early comments from other committee members were very positive. So I'm feeling really excited about the proposal. I'm feeling I don't I feel like a knock on wood to say I'm feeling confident, but I think I'm feeling confident about the support for the proposal as well.

[00:24:07] And like I said, I mean, I think that what I'm putting forward takes into account the short term needs, as well as taking into account, you know, making sure that this is that we get back to the program overall. And I think that's important, not just for myself, but I would anticipate for other members who have seen the impact of this program in the city in terms of producing affordable housing. Last question, council member. The mayor just put out her proposed budget. Obviously, you're about to leave us to go into your kind of all day budget

[00:24:35] or meetings or whatever you all do. It's fine. Yeah, yeah, yeah, yeah. I almost had an aneurysm at the last one. So I don't know if I characterize it quite that way. Geeking out about the budget. But one of the things the mayor proposed in her budget is she's taking some money out of money that's sitting in accounts at the Office of Housing. I think it was about 65, 66 million dollars, right?

[00:25:02] To fund her shelter and, you know, related initiatives, right? And with the intent that the money will be paid back in the future as future revenues come in. But I know that was something you were kind of keeping an eye on to see what the mayor was going to propose there. How are you reacting to that? How does it and what nexus does that have with this MHA holiday proposal, if any? Yeah, thanks. So we have OH is coming tomorrow.

[00:25:30] So you're a day ahead. So by the time this comes out, that might have already been done. But here's what I'll say about that. I mean, I think that what we're seeing in terms of homelessness is a priority that the mayor and I share, right? And obviously, you know, earlier this year, I sponsored her legislation in terms of the shelter expansion and the changes in the census count. And, you know, Erica wrote about that. But, you know, the thing to me there is that like we have a crisis

[00:26:00] that deserves to be treated like a crisis, right? And that the investments into shelter capacity are a really important part of how we address the crisis right now. In particular, the shelters that are high acuity shelters or, you know, serving the people who have the highest needs, right? And that's really important. And that's also more costly, right? But that's the way that we actually support people getting their needs met. That's the way that we actually support people who are, you know, have been homeless for a long time or struggling with co-occurring mental health or substance abuse issues.

[00:26:29] So I'm going to be looking for that and that, you know, with this investment. And again, I know that something the mayor and I share is a goal to also make sure that we are supporting Jump Starts health in the long term. So obviously coming into this year with $175 million budget deficit, we're going to face some really hard challenges, some really hard decisions. And I think this is one of them. But I think to me, it seems to be, you know, a really thoughtful approach that the mayor is taking. But we'll dig into it a little bit more

[00:26:59] in committee tomorrow. So I don't want to put the cart in front of the horse until we get a chance to actually dive fully into the budget. And I'll just say, you know, one other thing that I think we're looking at here is, you know, I think the mayor did a good job and spoke about this in her comments when she sent the budget down in terms of minimizing the staff layoffs. Right. And while there are a number of positions that are being removed from the budget, most of those positions are not filled positions.

[00:27:28] However, there are a few positions that are currently filled that'll have layoffs. And so the other thing we're looking at is that several of those positions are in SDCI or the Department of Construction Inspections where we do our permitting. So I think that's another place that we're looking as we're trying to figure out how this accelerator fits in with the budget to make sure that as we're trying to do the housing production, making sure that we have the staff capacity and support to get that done in the way that we all want to see it happen. And so we'll be digging into those things

[00:27:57] over the next few weeks in budget. I'm sure that we'll be hearing more on this podcast about that. And I hope lots of folks engage and show up and come down for public comment because it's a really important moment that we're in. And I'll just take this one other point of privilege and say this before I go run out to the dais. You know, I talked about being a staffer before and something that I thought about a lot this year was Ben Noble, who I think we all know here is a long-term sort of city staffer and was the budget director and then a central staff director.

[00:28:27] You know, I don't know if it was my first months on council, if it was right before I came to council, you know, called the budget deeply unsustainable. And I remember watching that and going like, oh, those are strong words from him. Um, and, um, and I think about that a lot when I'm, when I'm thinking about the hard decisions that are in front of us. Um, we have a lot of work to do to make sure that we have this, you know, the long-term health that the city budget deserves to have. So I'm, I'm really excited to dig in. I know, Erica, you said it was like hell listening,

[00:28:57] but it is, it's gonna, I think we've got a really important job to do to, to make sure that we've got, um, you know, a good long-term position here. All right. Council Member Foster, we know you gotta go. Thank you so much for joining us. Thanks for having me. That's it for another edition of Seattle Nice. She's Erica C. Barnett. Uh, he's Sandeep Kaushik. I'm David Hyde. And thanks everybody so much for joining us.