Adding up the Math for Seattle Social Housing

It’s been six weeks since the political group “House Our Neighbors” announced Seattle Initiative 137, to create a new tax to support “social housing.” If by June they get the signatures, Initiative 137 will be on the ballot in November. Voters need to look before leaping into this ambitious and flawed housing program.

A year ago, the advocates pushed through Initiative 135 without much of a fight, setting up the Seattle Social Housing Developer. That agency hasn’t done anything yet, because it has no money. If Initiative 137 gets on the ballot, it will be asking for a tax that its supporters say will raise about $50 million a year.

The Seattle Metropolitan Chamber of Commerce is likely to oppose it. The Chamber hasn’t gone through the decision process yet, but its president, Rachel Smith, lists four concerns:

First, Initiative 137 would fund a new government agency that would compete for public money with the existing agencies. 

Second, Initiative 137 would give an estimated $50 million a year to an agency that as yet has no management. “They haven’t brought on any housing developers or housing experts of any kind,” Smith says, adding “We’re going to keep asking questions about the capabilities of the board.”

Third, the new Seattle Social Housing Developer has not offered a business plan.

Fourth, Smith says, “They’re opaque.” The agency’s web page is down much of the time, and when it’s up, there is nothing much on it.

In short, if Initiative 137 makes it to the ballot, Seattle voters will be asked to make a serious, dubious, and largely irreversible choice.

A year ago, Seattle voters passed Initiative 135. But did they read it? Many voters probably looked at the label, “Social housing,” and thought it was housing for the poor? But mostly it’s not. The proponents openly aid as much, if anyone was listening. Even the slogan on their yard signs said, “Social Housing for All.” Not all, but more than the poor.

Seattle’s 85-year-old public-housing agency, the Seattle Housing Authority (SHA), has never offered housing for all. Some of its apartments are for families with income as high as 80 percent of area median income. For a family of two (2.05 is the average size of Seattle families) that’s $80,750 a year. But most of SHA’s housing is for families with income below 30 percent of the area median, which means those earning less than $32,900 a year. 

SHA serves 2 percent of the households in the city. Seattle has other affordable-housing programs, but all of them face the reality that to build a new unit of public housing costs around $500,000, which limits how many they can build.

The believers in social housing say they have a way around that. Their idea is to build public housing for tenants of up to 120 percent of median household income. In Seattle, that means a family of two earning up to $121,000 a year. The idea is to use the profits from those who can pay to make up for those who cannot.

It’s a fetching idea, but people who know public housing say the arithmetic doesn’t work. The profits from renting to the middle class would be too small to support the poor, unless you have lots and lots of middle-class people and only a handful of poor. And how many middle-class people want to live in public housing? 

What kind of housing is contemplated? Ask that, and the advocates start talking about Vienna, Austria. That central European city has a huge amount of public housing. Much of it is decades old, and not all of it has indoor heat or baths in each unit, but there are many units. About 80 percent of Vienna’s people are renters of some kind. Of the renters, 31% are in city-owned apartments, 26% in city-subsidized apartments, and 40% in private units, most of them rent-regulated.

The grand vision of social housing in Seattle is to replicate Vienna, and create a rental market dominated by government-owned apartments. As staff reporter Anna Patrick explained it in the Seattle Times a year ago, “Proponents of social housing say the ultimate goal is to remove more housing from the private sector and place it under a government’s or a public authority’s control.” 

But to actually do that would require a much broader and deeper tax than Initiative 137’s proposed 5-percent payroll levy on salaries above $1 million. In Austria, social housing “pencils out” by having a nationwide tax of 1 percent on wages.

The secret sauce of Vienna’s social housing is cheap land. Before World War I, Vienna was the capital of the Hapsburgs’ Austro-Hungarian Empire. Austria-Hungary lost the war, the monarchy was overthrown, and suddenly Vienna was no longer the capital of an empire. During the 1920s, the city shrank in population. Its socialist government — people in those days called the city “Red Vienna” — vacuumed up cheap land.

As you may have noticed, we don’t have a lot of cheap land in Seattle.

Initiative 135 had little to say about the cost of land.  As for the cost of construction, it declared that all new buildings should include daycare, communal kitchens, affordable co-op working spaces or common areas; that new buildings should be built to green standards, that the construction workers should be union labor, and that any buildings the agency buys should be retrofitted to meet green-energy requirements. (“Should” means preferred but not required.)

Initiative 135 also set up a management regime unlike the Seattle Housing Authority’s or anyone else’s. It says there should be no background checks to weed out applicants who have misbehaved at other places. No demands for rental references. No cosigners of the leases. No pesky questions about citizenship or immigration status. 

Any tenant that becomes a problem, the initiative said, must be offered “restorative justice conflict resolution” — and no family shall ever be evicted because its income has risen above $140,000 a year. For each tenant, rent must be no more than 30 percent of income. (How they will verify income the law doesn’t say.) 

For the whole project, the law says rents must be enough to cover operating costs and debt service. What if it’s impossible to do both? The law does not say.

Now, consider the politics. In the first ballot measure, the advocates offered voters a big, popular idea but no money. “Supporters of I-135 say they deliberately did not include a funding source in the initiative in order to avoid violating the State ‘single-subject rule,’ which limits ballot initiatives (and State laws) to a single issue,” wrote Erica Barnett on Publicola.

However, the real reason was that it’s safer to ask voters to approve the vision only, with no money attached. That’s how the Seattle Monorail Project was pushed through, 20 years ago: Buy now, pay later.

Back then, the Monorail Project duplicated a program already in existence — light rail. To the Monorail people, the Sound Transit people were “the establishment.” And so, the Monorail people went directly to the voters. At first, they told voters that the Monorail would pay for itself out of the fare box, which experts rightly said was impossible. Then, after the voters had given the Monorail Project tens of millions of dollars, it wasn’t enough. There was eventually a financial crisis, and the politicians killed the program.

Social housing looks like the same story. Initiative 135 was put on the ballot by youthful believers. “This generation is so disregarding of the work the other generations have done,” says John Fox, 74, who for years was head of the Displacement Coalition. (There is a public housing project on Aurora Avenue named for him.) 

Initiative 135 created jobs for 13 board members of Seattle Social Housing Developer. You can read about the board members here. Under the law, seven of the 13 were appointed by the Seattle Renters’ Commission. The law doesn’t require them to have experience in buying, financing, building, or managing rental housing. It requires them to be low-income renters. The name for this is “lived experience,” a vague concept. One might just as well appoint a majority of people to Boeing’s board of directors based on their “lived experience” of flying economy class.

Initiative 135 — which is the law now — lets the city council appoint two members to the Social Housing board, the mayor one, the Green New Deal Oversight Board one, the King County Labor Council one, and El Centro de La Raza one. But a quorum is seven, so the “lived experience” group controls it.

To buy or build apartment houses, the Seattle Social Housing developer has the legal power to borrow money by selling bonds. Right now, it can’t sell bonds because it has no income. That will change if Seattle voters approve the tax. The tax will be pledged to the bondholders, which will end the voters’ power to repeal the tax for the next 20-30 years.

Under last year’s Initiative 135, voters have no rights over the Seattle Social Housing Developer. Citizens have no right to vote on the bonds. None of the 13 members of the Social Housing board, whoever appointed them, is subject to a public vote.

At in the old Seattle Monorail Project, two board members were elected by the public. It was only two seats, but when the agency had a financial crisis, the holders of the two public seats were beaten in a high-profile election. The politicians got the message and shut the program down.

Chapter 3.110 of the Seattle Municipal Code empowers the mayor and city council to shut down a public corporation (which the Social Housing Developer is) if it defaults on its bonds, fails to file an annual report, or otherwise breaks the law. 

But House Our Neighbors didn’t want any elected officials shutting down the new agency it was creating. In the text of Initiative 135, the lawyers wrote the following words: “Chapter 3.110 does not apply to the Public Developer and this Charter except to the extent stated herein.”

And that is the law. All that’s left is to give these people $50 million a year.