Councilmember Mike O’Brien (District 6, Northwest Seattle) received findings today from the City Auditor regarding the City’s decades-old Incentive Zoning program. Since 1985, Incentive Zoning in Seattle has allowed developers to gain extra floor area in exchange for providing affordable housing units or paying into a fund for affordable housing production. O’Brien requested that the audit be conducted to ensure the public benefits derived from new construction, including affordable housing, were being properly collected and implemented.

“Two years ago, I stood with UNITE HERE Local 8 who raised concerns over missed opportunities for greater affordable housing contributions from hotel developments like the proposed R.C. Hedreen Co. hotel in the Denny Triangle,” said O’Brien. “The findings shared today by the Auditor demonstrate that the complexities of the Incentive Zoning program have left a lot of room for improvement in administering the policies. Now that we’ve identified the clear problems, it’s time to correct them.”

Selected highlights from the audit point to City departments having inaccurate accountings of projects that made, or were required to make, affordable housing contributions.  Furthermore, developers for at least ten projects failed to pay for or finalize performance agreements to provide affordable housing units at earlier stages of the permitting process. As a result of the audit uncovering unfulfilled payments, the City sought and received a payment totaling $3.7 million for affordable housing (including interest) in November 2016.

Key findings from the Auditor’s report include, but are not limited to:

• Discrepancies, errors, and missing information in documents and systems used as the basis to determine or track extra floor area and affordable housing contributions, as well as other recordkeeping weaknesses, which contributed to a lack of transparency and inaccurate reporting.
• No formal process exists for the City to revise contributions to affordable housing when building plans changed. Therefore, developers may not have provided the City an accurate affordable housing contribution.
• Elements of the Land Use Code related to incentive zoning for affordable housing are complex, unclear and conflicting elements of the Land Use Code and required staff interpretation, making customer service and uniform application of the program’s implementation difficult.

In response to the Auditor’s findings, the Seattle Department of Construction and Inspections (SDCI) and the Office of Housing (OH) will submit work plans and progress reports to Council to ensure proper Incentive Zoning implementation moving forward. The work plans include:

• An update of departmental policies to prevent payment and data errors, and decrease fraud risk;
• Increased reporting requirements that include additional metrics and that are made accessible to the public;
• Sharing a regularly updated list of projects that have contributed to incentive zoning;
• Clear process and review guidelines for applicants; and
• Potential changes to the land use code.

The Planning, Land Use and Zoning Committee, chaired by Councilmember Rob Johnson, will meet to review the audit findings at its next regularly scheduled meeting on Tuesday, April 18 at 9:30 a.m.  Representatives from SDCI and OH will join the Auditor to present how they intend to respond to the Auditor’s findings.