Housing ‘affordable’? Sez who?
What makes housing affordable? Is it merely cheap rents? Or does quality count too? And if the choices are between very low rents and dubious quality, versus good quality and higher rents, which is better? Which should government incentivize?
Out in Seattle, Vulcan, a development company (Motto: “Rethink Urban”) owned by billionaire investor and philanthropist Paul Allen:
Is building 172 apartments at the site at
How many affordable workforce apartments can you spot in this picture?
will seek a property-tax exemption from the City Council because 35 of those apartments are considered affordable to moderate-income residents under a city policy. The cheapest of those apartments are 396-square-foot studios that will rent for $ 738 a month. The 10-year tax exemption is worth $ 309,670 in the first year.
To clear the site, Vulcan acquired and then demolished Lillian Apartments:
If you lived here … well, you can’t anymore
(because the building has been demolished)
Not only were the then residents — artists and musicians, who are both cheap and highly tolerant of funky urban space — displaced, they can’t afford to move back:
Fell, who rented a one-bedroom unit at the Lillian for $ 400, says she couldn’t afford to live in Vulcan’s new affordable units, never mind its more expensive ones, which top out at $ 2,510 a month.
“I don’t make anywhere near median income,” says Fell, 36, who returned to college to get a degree in media studies.
Nor does she think most of the Lillian’s former tenants — who were drawn to the building’s 33 apartments by its proximity to downtown, funky sense of community and monthly rents that ranged from $ 250 to $ 500 — could afford to live in the new project called Alley24.
This is occurring in the context of urban revitalization (and illustrates many of the elements I previously listed as stimulating neighborhood improvement):
The transformation of the old Lillian site to more-upscale housing is an illustration of South Lake Union’s sweeping makeover. The area, which until recently was characterized by low-slung warehouses and pockets of inexpensive housing, is now an emerging biotech hub where city officials hope to see 10,000 new apartments and condos developed in the next two decades.
Revitalization that the City of Seattle is not only encouraging but fueling:
The changes at the apartment site also raise questions about the city’s policy of granting tax breaks in exchange for so-called “work-force” housing, or housing that fills the gap between deeply subsidized low-income housing and more expensive units aimed at affluent people.
Proposed by Mayor Greg Nickels, it applies to 17 neighborhoods where the city wants to stimulate housing construction and provide apartments for people earning $ 32,000 to $ 40,000 a year. That salary range amounts to 60 percent [LIHTC ceiling — Ed.] to 70 percent of median income for single working
The result is more housing than before (Lillian’s 36 turn into 172):
Since the program was adopted, the council has approved three projects and is likely to bless two more today. In all, the five projects would produce 506 housing units, with 271 of those considered affordable.
Total tax exemptions for the five projects are estimated at just over $ 800,000 in the first year, or roughly $ 8 million over 10 years. The city’s share of those exempted taxes is roughly $ 270,000 in the first year.
The Vulcan project would receive the largest tax exemption of the five developments. It seeks a tax break five times bigger than the other project before the council today, a 40-apartment proposal for the Chinatown International District.
In the case of Alley24, the city, in effect, would subsidize the rent on each of the 35 units by about $ 242 a month in the first year.
We can do some simple math: $738 + $242 = $980, which reflects the cost of delivering ‘market quality’ housing. Versus $400 for something that fails every building code known to man.
Indeed, the issue isn’t whether the apartments will get rehabbed …
“The incentive was not available in South Lake Union at the time the Lillian was demolished, so it could not be an incentive. The correlation is not there.”
… but whether any of them will be affordable:
Vulcan executives say that without the tax break they would not have offered the more-affordable apartments.
“I think private developers are not in the business of providing below-market or affordable housing without subsidies or incentives,” said Lyn Tangen, Vulcan’s director of government and community relations.
At the risk of telling a PR director how to speak, let me suggest the right formulation is this:
If residents and communities want market-quality housing, the law of Economic Gravity says that housing must always capture market returns on capital. Affordability that is uneconomic is not sustainable. So if government wants long-term sustainable affordability, then government must subsidize the difference, using a mix of the four kinds of money, or operating supports and resident income subsidies, or both.
Tangen said the tax exemptions are part of a “fabulous program” that will help ensure that people with a mix of incomes will live in the neighborhood.
Of course, there is always something lost:
“It’s very sad. I hate it. But it’s progress, I suppose,” [former tenant Beth Fell] said.
Whether you see it as progress depends on your definition of ‘affordable housing’ and how much housing you think people need.
“Well, it was a hole in the ground covered with a sheet of tarpaulin, but it was a house to us!”
