Seattle's Sizzling Social Housing Debate

[00:00:00] Hello and welcome to the latest edition of Seattle Nice. I'm David Hyde here with Erica C Barnett of Public Cola and Sandeep Kaushik of Kaushik & Company, political consultant. And we're talking about social housing. Last year we had a social housing initiative.

[00:00:27] This year we have a social housing initiative that's going to be about how that social housing gets funded. It's exciting, it's controversial, we're going to dig in starting with Erica Barnett. What is this social housing initiative all about?

[00:00:43] Well, as you said, David, last year voters pretty strongly supported an initiative to set up a social housing developer which is basically just an entity that would in the future get funding to build and would actually construct social housing. And for

[00:01:00] the purposes of Seattle, we'll just define that as permanently affordable housing that is publicly funded whose operating costs are paid for in part by rents because it is not just for very low income people, although it does include that. It's for people

[00:01:14] making all the way up to 120% of the Seattle area median income. So the idea is that those folks would subsidize or help to subsidize the rents of the people making less money and able to pay smaller rents. So the measure initiative 136 would

[00:01:29] be the complement to that measure initiative 135, and it would actually pay for this housing by imposing a payroll tax on the payrolls of folks who make more than a million dollars a year. So basically every dollar above a million dollars in

[00:01:45] total compensation, including stuff like bonuses, deferred stock options, things like that, every penny above that would be taxed at 5%, and it would be paid by the employers, not the employees. And they estimate that'll raise about $50 million a year.

[00:01:57] Saudi Khashoggi, it seems like something that passed as Erica said, with a lot of support last year, likely to pass again this year? Well, right. I mean, last year what was passed was a kind of gauzy, unfunded sort

[00:02:14] of promise that we were going to create this intersectional nirvana of a new kind of housing, right? That would bypass all of the traditional affordable housing. Clunky and complicated mechanisms, right? Traditionally we build affordable housing by cobbling together money from lots of different sources, federal

[00:02:34] grant dollars and state dollars and other kinds of money that comes in. And this is the promise they said of creating this new kind of housing that would be very intersectional and kind of bottom up, it would be kind of run

[00:02:50] and organized by the people who live there. But they didn't have a funding mechanism for it then. So it just sort of created a public development authority, as Erica said. Now they're coming back and saying, OK, now

[00:03:01] we have a plan for or a request for about $50 million a year in funding based on this kind of payroll tax adjunct to kind of sister tax to jumpstart. And I think it's going to be more contentious, right? Because now all of a

[00:03:17] sudden there's a price tag attached to this and it opens up a lot more questions, I think about whether this is a good value and a good proposal and is going to lead to the results that the sponsors of it are promising.

[00:03:31] Well, I think, I mean, just to object a little bit to your language tonight, if I don't know what is frothy and intersectional, I'm not sure what you mean about that. Maybe you mean mixed income. I'm not sure. But I mean, I don't think it was frothy.

[00:03:44] I think it was very self-consciously at the time without a funding source, in part because the supporters, how's our neighbors said that they could not, in fact, legally put a funding source on the ballot along with creating a PDA. But yeah, I mean, I think

[00:04:00] it may be more contentious. It probably will be. But I think the fact that we're talking about people who are compensated at over a million dollars a year, you're really talking about a relatively small slice of the population. And I think an average person

[00:04:15] looking at that would probably say, well, I don't know anybody that makes a million dollars a year. And if they do, I think I'm OK with their employer paying a little bit of money on their marginal earnings above a million dollars. I mean, of course, I personally think

[00:04:30] we should have progressive taxation, that taxing people who make literally over a million dollars every single year seems pretty appealing to me just on a gut level. And I think that that will be the appeal to voters

[00:04:43] if they end up voting for it. Assuming it makes it on the ballot. The way the story is framed in crosscut in the Seattle Times and elsewhere is that this is ultimately a debate between the Seattle Chamber

[00:04:55] of Commerce that doesn't like taxes and folks that like affordable housing. Yeah, that is the way it's kind of been initially framed. And if that's the way it's going to be framed between now and November, then I think Erica is right. You know, we're a progressive city

[00:05:09] and the vast majority of people aren't going to pay this tax. And you know, and very likely are going to be supportive of the idea that people know people are going to pay the tax to be clear.

[00:05:19] It's not businesses, but on on it's a tax on jobs where the total compensation is over a million dollars. Right. And so from a sort of progressive sort of sort of tax fairness view, that seems like a pretty benign way to do it.

[00:05:34] I think to a lot of people. But that so there's one set of questions about the taxing source, right, and what they're going to use here. But I think there's a whole other set of questions about whether this is a fully baked idea or not

[00:05:48] and whether they have a real proposal and one that, you know, actually, you know, merits giving these folks a very sizable amount of money, you know, north of 50 million dollars a year in perpetuity to test this idea and kind of kind of put it into action.

[00:06:05] And I think those are the questions. I think that I'd like to see more attention paid to David. I think to answer your question, I think it's right. Right now there's going to be a tendency to frame this as like sort of big bad

[00:06:17] greedy businesses who don't want to pay taxes and don't care about, you know, the poor and the deprived versus, you know, the sort of compassionate people who have this wonderful idea to build this new kind of housing that we desperately need. And, you know, if that's the debate,

[00:06:37] you know, we know which side is going to win that, right? I think if we dig a little deeper into like what this proposal is and how cooked it is, I think we might have a different debate

[00:06:46] or at least some different questions about whether this is going to work as intended or what the risks are, what the opportunity costs here, or how does this compare to the way we build affordable housing already? And is it a better play or not?

[00:07:00] Right. I think there are a lot of questions that have yet to be answered. Well, I mean, I think I can hear you say I love hearing you talk about policy, but I can also hear you cooking up a campaign in those words that you just said,

[00:07:12] like how how are we going to argue against the people that like just want to help the deprived? And again, I would say in terms like the deprived, I mean, we're talking about again, people making up to 120 percent of the Seattle area

[00:07:23] median income, which is quite a lot more than I make personally. And I'm a pretty average person. So, you know, I mean, we're talking about people who are making or not the deprived or the poor as you're putting it like it's mixed income housing.

[00:07:36] And it's not. I mean, it is a new it is a new type of housing, I suppose here in Seattle, but it's common in Vancouver, for example. And I think that's one of the examples that they are using as a, you know, as a partial model.

[00:07:48] But, you know, I mean, I think a campaign based on, you know, these people don't know what they're doing is that's a hard campaign for you to run. Son, I mean, I just not necessarily, I mean, we will see. Right.

[00:08:00] I mean, I think there are some real questions about whether these people know what the fuck they're doing. Right? Like, like let's let's dig deeper into this. Right. And when I when I said this was gauzy and or frothy is the term

[00:08:11] you used in intersectional, the original proposal was very much a sort of touchy feely thing about how this is going to be this brand new type of housing where people are given sort of power and control

[00:08:23] and the marginalized will have a say in how they live and, you know, yada, da, da, da. About the board having people from the front who are renters on it. Well, I will say that we're on the street already is that the PDA

[00:08:35] that they set up is already internally a mess. And so, you know, the danger here, I think, Erica, is that we get back to like exactly what went wrong with King County RHA which we've talked about in previous episodes where they create a kind of

[00:08:49] you know, what was a good idea? Let's regionalize our homelessness response, but do it in a way that creates a sort of government and structure that's a mess internally. And that leads to controversies and discrediting bad outcomes. Right. And I think that's a big difference there.

[00:09:06] Yeah. The big difference, I think, is you're talking about an organization that has no funding authority, the KCRHA, and an organization that would have funds coming in. I think that there's a fundamental difference between these two organizations.

[00:09:19] And one reason the KCRHA lacks, you know, the ability to get anything done is that they have no way of getting any kind of money. And they're at the whim of Bruce Harrell and Dow Constantine. So I think it's not exactly comparable.

[00:09:31] That was a problem with King County RHA. But I think I would hope that you would agree with me that that was not the problem that we had with the, you know, continuum of care controversy, right? That we both followed and talked about in previous episodes of this,

[00:09:48] where there was this what I would say excessive privileging of sort of cultural progressive notions about, you know, a kind of the woo-woo end of sort of cultural progressivism that is about sort of privileging lived experience over, let's say, technical expertise.

[00:10:07] Right. And I do think that was a big problem with how KCRHA got set up and why a significant part of why it went off the rails. And I see a lot of the same dynamics come into play here.

[00:10:19] Can I just get back to the social housing question here? I mean, just as a matter of principle, it sounds kind of cool to live in like Vienna or Singapore in these government subsidized units. You could imagine, especially being a younger person

[00:10:33] and having access to that stuff and being able to live there. On the other hand, you know, what we're talking about here is an extra governmental body essentially managing that type of housing. And so, Erica, you know, without being the Chamber of Commerce,

[00:10:49] like how do we adjudicate those kinds of questions? Like, is this the best bang for the city's buck? You know, $50 million is a lot. Is that a good question to even ask? And how do you how do you answer that as like a reasonable person

[00:11:01] who might be kind of pro-social housing? I think that's a totally legitimate question. And I think that the question, Sundeep, is, you know, fundamentally raising about like whether this is a workable plan, you know, our legitimate questions.

[00:11:14] But I don't think that we live in a paradise now of really well subsidized and sustainable and super well managed affordable housing in all cases, you know, I mean, right now, as you mentioned at the top,

[00:11:27] David, there is sort of a mishmash of funding sources that come in that are not always completely dependable. And we have a network of various nonprofits that are in charge of providing that housing, which themselves are government funded.

[00:11:41] And you know, and so I think to sort of say, you know, that just in general, a PDA as a governing construct and a government, you know, as the funder, you know, as through attacks is worse than this non-profit.

[00:11:57] I mean, I think, Sundeep, like, you know, if you've sort of dug down on that, you'd probably disagree that, you know, that the current sort of, you know, housing industrial complex is working amazingly well.

[00:12:08] But also, you know, I when you're talking about like sort of young people in Vienna, I mean, one of the things that I do think is good about the sort of framework proposal that has come out and it doesn't have like a ton of specifics.

[00:12:21] And I think that's that's where the issues are going to rise. But one thing that's good about it is it actually includes a lot of, you know, larger units, two and three bedrooms, which is one reason it's only 2,000 units over 10 years that they're projecting rather than 2,500 or more,

[00:12:37] because they are not just doing those studios and one bedrooms because that is what the market is already providing. There's a glut of those units and there's huge demand for these units. The market will not provide and that, you know, our current housing finance system is not providing,

[00:12:51] which are, you know, apartments for families. And I think that's I think that's really commendable. Sundeep, it might not work, but why shouldn't taxpayers decide they want to, well, in this case, voters decide that they want to tax for something that,

[00:13:09] yeah, it's $50 million a year, but it's a $50 million a year experiment that may yield some positive results. It's not as much as the jumpstart tax currently. What's the problem with that? Even even if we go into it with some unknowns about the planning

[00:13:23] or an execution, I do think I do think that's one of the strongest arguments for it. As Erica's pointing out, the argument here is we'll fill a need that the market currently is not filling, which are kind of family-sized apartments rather than studios

[00:13:41] or one bedrooms. We'll actually start to, you know, build a bunch of two and three bedroom apartments that there's a great need for and are at high demand. But for various reasons aren't penciling in the private sector market.

[00:13:54] That's a I do think that's a strong argument in favor of them. But look, I mean, to the extent that they've produced any kind of anything substantive that we can dig into, they were working with a developer, a progressive developer named Ben Moritz.

[00:14:10] I know Ben, good guy, smart guy, I really like him. And he put together a kind of kind of 10 year spreadsheet. Right. And I was looking at it today and I've got a lot of questions about this spreadsheet. For one thing, we're talking about $50 million a year.

[00:14:25] So north of $500 million over 10 years to build about they're estimating about 2100 units or to add about 2100 units of social housing. But when you dig into the spreadsheet, almost pretty much two thirds of those units are going to be existing apartments. They're just going to buy existing buildings

[00:14:50] and then convert them over to quote unquote social housing. But they're already, you know, apartments that exist and presumably are being used in the city of Seattle. Only about on this spreadsheet it says only about 625. Yeah, 625.

[00:15:04] The other thing is weird here is the math seems a little bit off. I came up with a higher number like 800 and some numbers would actually be built. But but if we go with Ben's number of 625 there, that's 625 new units for $500 million.

[00:15:18] That's a lot of, you know, that's the per unit. Well, I mean, I think you're using pretty sketchy math if you're if you're cutting out all the acquisition. You know, I mean, well, let's talk about the acquisition units really quick because, you know, again, as you said earlier,

[00:15:31] this goes up to 120 percent of median, right? So which is well beyond what we ordinarily consider the kind of range of typical publicly funded affordable housing, right? So we're talking about 80 percent and below of AMI is typically

[00:15:46] what what we what we talk about for kind of workforce and affordable housing. And then then, you know, I mean, there's some fraction of those 14 on 1375 units that are getting acquired that are going to people who have higher than median incomes.

[00:16:04] Right. So I think you do discuss it. So that is the whole. Yeah. So if I can say something, I, you know, I think that the the acquisition part is actually, I mean, there has been fortunately, especially during COVID

[00:16:18] when units became more available and people are building on spec and affordable housing developers like Lehigh were able to snap up a lot of units. That is a much better bang for your buck, frankly, than building units that I mean,

[00:16:30] they have them at six hundred thousand dollars a year. I think that that is very, very optimistic over the course of the next 10 years. But let's say it only costs six hundred thousand dollars per unit.

[00:16:42] Why would you not want to build or to purchase units that are currently market rate units and make them affordable? I mean, a unit is a unit. So I guess I don't really understand the sort of the considering that like

[00:16:56] a lot of times the complaint about affordable housing is, oh, my God, I can't believe it costs so much to build. And it's just ridiculous. These nonprofit developers wasting money, they're finding a cheaper way to do it.

[00:17:07] And I'm not just talking about, you know, this social housing initiative. I'm saying nonprofit housing developers and providers, you know, all over the city and region are, you know, trying to get units while they can. And I think that's a good thing.

[00:17:19] I mean, that is saving money for the public. So I don't really understand how you can, you know, people can sort of say, it's too expensive to build. And at the same time, it's bad to acquire because you're not making new units.

[00:17:31] I mean, you were taking units out of the private, you know, market rate market and saying these are going to be affordable in perpetuity. That seems like a good thing to me. Yeah. But there are a lot of private market rate units that are already affordable right now.

[00:17:44] Right? I mean, are you just going to convert already existing affordable units private sector affordable units into public sector and social housing affordable units? Like again, these are questions. I mean, ask Lehigh they're doing this right now. I mean, this seems like a red hair.

[00:18:01] Here's the other question. You know, like I said, I really like Ben, I think he's a smart guy, you know, but he has a vested interest in this succeeding, right? You know, so does Lehigh. So Sharon Lee, you know, who is a who is the head of Lehigh

[00:18:13] and is a big advocate for this, they're the ones who are likely going to, you know, do the work. And I don't think there's any nefarious about that, but they have a vested interest in seeing the succeed.

[00:18:22] They're going to make money or build or get get funding out of this. That you want. Who else are the housing finance experts since you think that everybody who's on the current board is illegitimate and everybody who knows anything about housing finance is compromised.

[00:18:40] So who is supposed to be the expert? I'd say anybody knows about housing finance. I get that they have a vested interest. Well, they're the advocates for you. But yeah, yeah, I feel like raising objections that are not entirely.

[00:18:53] I would love to see some kind of out either the media itself or some kind of, you know, outside non involved, you know, people with some expertise about the construction of affordable housing to kind of vet this before

[00:19:08] we decide we're just going to, you know, run down the pathway of funding this thing because right now I don't know that it's cheap. You say you say to take it as a given that $600,000 a unit, you know, over the course of this thing is.

[00:19:22] I said the opposite. Yeah. Oh, no, I said I said the opposite. I said, I think that is optimistic. So I said the opposite of that. What do you mean by optimistic? I guess I think it's optimistic in the sense that I think

[00:19:33] it could get quite a bit more expensive. And I think the acquisition, yes, is cheaper than building new housing. I think that's going to be consistent over these 10 years. Right. I'm not vouching for the numbers. I'm just saying, you know, that I don't think acquisition, saving money

[00:19:47] through acquisition is a bad thing. I think it's, you know, by and large, a good thing. And that's why people are doing it. Is the debate about that, Sandeep saying we want to, if we're going to spend all this money, we want to add more units

[00:19:57] because supply is the bigger issue. And Erica, you're saying, yeah, whatever, social housing is an end in itself. I'm not saying either. I mean, I think supply is an issue, but I don't think that I mean, I like units are not fungible.

[00:20:12] You know, a $2,000 apartment is worth nothing to somebody who can only pay $1,000. So if you convert that $2,000 apartment into a $1,000 apartment, a person who couldn't otherwise afford housing has housing. So I think that that is what I'm highlighting is that, you know,

[00:20:28] it isn't it isn't just total number of units. It isn't only, you know, the cost, you know, the rent of each unit. It's both. But I don't think we could I don't think that it would be like if the

[00:20:38] alternative would be to create a version of this that was just new housing. I think Sandeep would be objecting to the fact that it's a hundred million dollars because it would be, you know, fantastically more expensive to build 2,000 units as opposed to, you know, acquiring half of that

[00:20:53] or a little more than half. Yeah. But the real question here, the big question, it's one thing if you're if you're acquiring high priced high end units and because of that public acquisition, you know, lowering the rent substantially and making them affordable to people.

[00:21:10] And obviously there's some there's benefit than that. And and if you can make that work cost effectively, OK, great. Right. But there's also a lot of housing stock in the city like multifamily housing stock that are, you know, aging buildings, right, that are market rate.

[00:21:26] But because they're a little down at the heels or a little bit, you know, I have a friend who lives in an apartment on First Hill that's like this, you know, she's paying market rate rent. But it's way below the median because the buildings, you know, old

[00:21:38] and a bit rundown, but perfectly serviceable housing. And if that's the sort of housing we're going to convert over to quote unquote social housing, I'm not sure there's a whole huge benefit that's going to accrue in terms of of the.

[00:21:51] That I mean, this is just to close this point. And then I know, Erica, you want to jump in? But this is the whole thing about these kind of loose rent cap kind of proposals, which I actually think there is some merit for.

[00:22:02] Right. It is because one of the biggest drivers of displacement in the city is those kind of older buildings that are while their market rate, they're way below median that are getting bought up. You know, they have mom and pop owners.

[00:22:15] They're getting bought up by like development companies or whatever who who spruce them up and jack the rents 40 or 50 percent, right. And drive out all the people that currently live there. So I do think there's a there's a big issue with with that sort of housing.

[00:22:28] And maybe, you know, maybe the analysis will show that this will save a lot of that housing, which if it does and it pencils out, OK, you know, there's a case where I just haven't seen it made yet to just

[00:22:39] quote what they said at the press event yesterday. I mean, again, this is just a matter of sort of trusting them at this point. Right. I mean, there's no there's nothing in the legislation that says they have to purchase high quality housing.

[00:22:51] But I mean, they were pretty explicit about saying we're not talking about apartments that are more affordable because they're the oldest housing stock in the most rundown. And, you know, I'm I'm I'm glad that you have a friend who lives in an apartment to talk to.

[00:23:05] But, you know, I've pretty much only lived in those kinds of apartments. And and they are like and yeah, they are more affordable and they are more rundown. And like in the social housing folks yesterday, you know,

[00:23:17] we're at least making a point of saying that that is not what they're talking about. They're not talking about the naturally occurring affordable housing and the mom and pop stuff that, you know, everybody always likes to, you know, go all goo goo over.

[00:23:29] But rather stuff like what Lehigh was buying up during the pandemic, which were a number of very nice apartment buildings like the Dockside Apartments, like a couple on Capitol Hill that are these gorgeous lofts that are now going to be. I mean, there's one right over here

[00:23:43] that was purchased by Chief Seattle Club here in Pioneer Square, where my office is. So, I mean, I guess we could take the worst faith analysis and say, oh, they're just going to buy up all these crappy old buildings

[00:23:54] from the mom and pops who are just struggling to hang on by their fingernails. But that is not what they have indicated. And they've said the opposite. So, you know, I just I don't think we have to to to to assume

[00:24:05] the worst faith analysis of what they're planning to do and what these these acquisition numbers are based on. Yeah. And I guess I'm saying, I don't think we fucking know, right? Because there's no I mean, what the information we have to go on

[00:24:20] right now is pretty thin on the ground, right? There's like this little, you know, Ben's little spreadsheet thing and what they told you at a press conference. Right? Right. Sure. And we also have and we also have the examples of, you know,

[00:24:33] and I'm bringing up Lehigh and Chief Seattle Club. There's two examples that have bought up a number of very nice, very new apartment buildings. And I don't think you have an example, Sundeeb, to counter that where, you know, one of the nonprofits

[00:24:46] has been going around buying up, you know, shitholes and shoving people in them and saying, look at what good we're doing. I just I don't think that there is an example of that. So yeah, they might be planning that.

[00:24:55] But I think it's more likely that they're planning to do what the nonprofits are already doing. Again, there are different strata of housing. You know, as I've said before, like I'm on the DSE board, right, which focuses on a homeless housing, right?

[00:25:07] Which is zero to 30 percent of AMI housing. And there, you know, we've seen a significant investment in buying kind of, you know, older sort of hotel kind of housing and converting it over to homeless housing, right? Permanent supportive housing, zero to 30 AMI kind of housing.

[00:25:23] We've certainly seen a lot of that happening recently. Again, I, as I've said before... This isn't homeless housing. To be clear, if people aren't familiar with the social housing, you know, it is not intended to be homeless housing. It's not shelter. Yes.

[00:25:38] Those DSE hotels are sort of a step above shelter and they're very important, but they are not the kind of housing by-large like anybody is building, you know, except for homeless providers, which is great. But like the idea is not that this is how we're going

[00:25:54] to house, you know, all of Seattle by just buying up the lowest cost housing. And I just, I cannot think of a single example of a housing developer that is going to be charging rents who has done that. And I'm just, you know, thinking of all the examples

[00:26:08] of Lehigh buying up new buildings. Now, I'm not saying that's going to continue forever like the market changes, but that's how it has been. And I just, and basing my analysis on that that I don't think that social housing has some secret, you know, bait and switch plan

[00:26:21] to just buy up crap and say that they're providing new housing. All right. That's it for another edition of Seattle Nice. She's Erica C Barnett. He's Sandeep Koushik. I'm David Hyde. And you, our listeners, our folks who are supporting us and our editor, Quinn Waller on Patreon.

[00:26:38] You just go to patreon.com slash Seattle Nice. And thanks for everybody who's been contributing. It's we're just about meeting our expenses right now. So that's fantastic. If you haven't yet, head on over there. And thanks for everybody who's been giving us

[00:26:50] the five star reviews wherever you get your podcast and to everybody, thank you so much for listening.