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    An opportunity for more workforce housing in South Lake Union

    Seattle needs more workforce housing. Specifically, I am referring to housing that people earning 60%-80% of the area median income (AMI) can reasonably afford to live in. Based on the City’s Office of Housing chart on AMI and affordability, that’s housing that a family of four earning between $52,000 and $64,000 per year can reasonably afford (or, for a single person earning between $36,000 and $45,000). It is important that we create more of this housing so that the people who work in Seattle can afford to live in Seattle. We have a tremendous opportunity to grow our workforce with development happening in South Lake Union.  As we approve changes to spur this development, we must ensure that the development will also produce housing for those workers.  We can so by improving our incentive zoning program.

    SLUMore workforce housing is an aspirational goal, but it is also a specific one. The City’s Comprehensive Plan has set a goal of 37% affordable housing units in South Lake Union by 2031. The problem is that the incentive zoning program that we have in place to encourage this type of affordable housing will produce, at most, 12% of that goal. Further, many of what will be built will be off site, outside the neighborhood.  We haven’t seen a plan for filling the rest of that gap.

    Here is a short primer on incentive zoning. When the City grants an upzone to a particular neighborhood slated for redevelopment, property owners see an increase in the value of their land. The City captures some of that increased land value for the public’s benefit, including affordable housing.  Under the City’s program, residential developers can choose to either build affordable housing for the additional height they gain in the upzoned neighborhood, or they can pay into a fund at the Office of Housing. We refer to the former as “performance” and the latter as “paying in lieu.”  All commercial development, such as office buildings, pays in lieu.

    We’ve learned a few things about this affordable housing program in the past few years:

    1. The price is too low – most developers choose to pay in lieu and that funding only covers a portion of the cost to develop affordable housing off-site.
    2. It doesn’t build workforce housing in the neighborhood – most of the funding is used to build lower income housing in other parts of the city.

    The City Council is being asked to use the existing affordable housing component of the incentive zoning program in the South Lake Union rezone as it stands. But unfortunately, as outlined above, we know this program would not meet our Comprehensive Plan goal of providing 37% affordable housing in South Lake Union.

    At our South Lake Union Committee Meeting on Monday, we heard public testimony from many people.  One of the things we are hearing is that the time for Council to act on this rezone is now and with the current incentive zoning program in place. This urgency comes from a hot local market for commercial and residential development, something almost unheard of elsewhere in the country right now.

    However, we are also hearing people who say that the City needs to comprehensively reevaluate our incentive zoning and affordable housing policies to begin to close the large unmet need for affordable housing citywide. Some say we should do this thorough review before we adopt the rezone so that we include any changes to the affordable housing program in this South Lake Union decision.  If we don’t, we potentially miss out on millions of dollars in public benefit that could help create more of that critical workforce housing that we need.

    As I reflect on what I have heard and learned so far throughout this rezone project, I see the merits on both sides, but do not feel they are mutually exclusive.

    I think we need to act now and move this legislation through Council so we can get to work on this exciting economic development opportunity for Seattle.  However, we must first adjust the affordable housing program as currently written, to ensure that the program produces workforce housing in the neighborhood. We can do this by increasing the pay in lieu price to capture the full amount of public value intended by the incentive zoning policy and to provide the correct incentives for developers to produce that housing in the neighborhood.

    The Council has hired two sets of consultants to help us understand the right “price.” On Monday, they shared differing perspectives on how high the price can or should be, but agreed there is additional value, probably in the range of 2- to 10-times the magnitude currently being captured for affordable housing via the incentive zoning program.  Continuing to engage these consultants, we could find a good price in the next month, and include it in our final decision, without a drastic delay to the rezone.

    With the rezone complete, we should then turn to the city-wide study with a larger stakeholder group engaged.  If at the end of the year, we land on a better price, we can come back to the table to revise and improve any changes we make to the program today.

    We must act now and consider raising the pay in lieu price to ensure the development of affordable workforce housing in South Lake Union. It would be irresponsible for the Council to approve legislation that we know will not put us on a path to meet our policy targets for the neighborhood. Let’s strengthen this program now and begin developing a South Lake Union that helps everyone in Seattle prosper from this opportunity.

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