The Case for a Collaborative Approach to Social Housing

Seattle and five other cities, plus a county, have initiated social housing programs to provide affordable, publicly owned, and controlled housing for working, lower-income residents.

Seattle, Atlanta, San Francisco, Los Angeles, Chicago, Toronto, and Montgomery County, MD have passed social housing laws. All five U.S. cities started their programs in the last four years.

Local Progress, a national network of progressive municipal officials, has released a detailed report on the status of social housing programs in these cities and Montgomery County, not including Toronto.

City governments may resist social housing plans because they have limited revenues and little or no ability to fund them.  However, North America’s oldest and most successful social housing entities, Montgomery’s Housing Opportunities Commission (HOC) and the Toronto Community Housing Corporation (TCHC), have survived and expanded affordable housing with supportive local governments. It takes time and cooperation from local governments to make a social housing approach possible.

This February 11, Seattle voters will decide whether to accept or reject a continuous funding plan for social housing. Two competing housing plans are on a ballot mailed out on January 22 and must be returned by election day.

The grassroots organization House Our Neighbors (HON) is presenting Proposition 1A (a.k.a. Initiative 137) to the voters.  Previously, HON put Initiative 135 up for a vote in 2023, which passed with a yes margin of 14 percent.

It established the new public developer, the Seattle Social Housing Developer (SSHD), to create and own social housing in Seattle. The housing would be available to the target population, commonly defined as the working class, those earning from zero to 120% of Seattle’s area median income (AMI).

Proposition 1A introduces a progressive tax derived from levying a 5% payroll tax. Employers pay it on the amount each employee earns over $1 million a year in compensation. It is projected to deliver $50 million a year to SSHD.

With the mayor’s support, the city council rejected implementing Initiative 137’s funding plan and instead placed an alternative plan on the ballot, Proposition 1B. It requires no new taxes; instead, it withdraws $10 million yearly from the JumpStart business tax. Most of that tax already goes to low-income housing, plus some funding for sheltering people experiencing homelessness. The net gain in housing units would be around 10% of what 1A could deliver. The plan would end after seven years unless renewed.

Also, unlike social housing plans, the 1B plan would not include a mix of low-cost and market-rate housing. Such a mix provides an additional revenue stream to continue building affordable housing. Instead, with 1B, every resident must be eligible for publicly funded rent subsidies. As a result, it does not provide a consistent revenue stream to keep its plan operational, produces less housing over a shorter time, and has no plan to continue operating.

If the public wants a path toward a long-term approach to providing more affordable housing in Seattle through social housing, which other cities are pursuing, Proposition 1B is not the way to go. Proposition 1A is the path, but it will also require sufficient funding and diligent accountability to the public.

Two cities demonstrate how Social Housing can successfully work

Toronto’s TCHC started over 20 years ago and has developed over stages. It’s now the second-largest housing provider in North America, with more than 58,000 units across 2,100 buildings serving approximately 105,000 residents.

Most of its funding is from resident rent payments and subsidies directly from the City of Toronto. However, 89 percent of its tenants pay rent geared to income, with a median income at 28 percent of Toronto’s AMI, as of 2016 data. The remaining tenants pay market rent or affordable rent rates. Applicants are placed on a centralized waiting list and selected based on their income and housing needs. 

TCHC is a municipally owned corporation with independent corporate status as a non-profit. It is managed by a 12-member board appointed by the City Council. The board comprises nine public members: two tenants and three City Council members, one of whom can be the mayor. The board supervises the management of TCHC’s business and affairs. 

Montgomery County’s Housing Opportunities Commission (HOC) was formed in 1974. It is a quasi-governmental organization similar to Toronto’s social housing public developer. The HOC is also designated Montgomery County’s Public Housing Authority and Housing Finance Agency, enabling it to finance construction through essential purpose bonds and State and County subsidies.

In the last forty years, it has developed and owns a controlling interest in new mixed-income housing where 20-50 percent of the residents are low- or moderate-income households. Critical government support has augmented HOC’s outreach by passing a landmark law requiring developers to set aside about 15 percent of the units in all new housing projects for households making less than two-thirds of the area’s median income,

The county executive, with the concurrence of the county council, appoints the seven volunteer commissioners and its president/executive director, who conducts daily operations.

These programs are imperfect, but they still produce more affordable housing for low and middle-income households than other cities can match. They partner with for-profit developers for new construction, which allows for a mixture of residents at different income levels.

However, they retain ownership or management over their buildings and keep them off the market to keep them permanently affordable. This practice decommodifies housing units, i.e., not making them an unaffordable commodity.

Could Seattle and other cities eventually have similar success?

The Atlanta and Chicago governments initiated and committed funding to begin their social housing programs. Their funding is directly tied to the city government. San Francisco and Los Angeles went outside the city government by passing initiatives with margins of over 56% to fund social housing. Funding was provided by increasing the real estate tax on high-value transfers, with more than 90% of transfers, like home sales, not subject to the levy.  

The initiative’s voter response shows that residents will support making affordable housing available if an additional tax is levied on those most capable of paying it — high-income people or businesses. This push comes from renters and small homeowners who need affordable housing near their jobs. Often, these are public employees such as schoolteachers and social service providers.  

Renters may comprise most voters demanding social housing, considering the percentages of residents who live in these cities: 65% in San Francisco, 55% in Seattle, and 54% in Los Angeles.

Sixty percent of San Francisco renters live in rent-controlled units, where rent increases are limited. However, 17,565 low-income renter households must earn 3.8 times the City’s minimum wage to pay the city’s average monthly rental rate.

In Seattle, 41 percent of renter households have incomes at or below 50 percent of the annual median income (AMI). However, less than two-thirds of rentals are affordable and available to them.

Los Angeles has 494,446 low-income renters looking for apartments. They must earn 2.9 times the LA minimum wage to afford the average monthly rent.

Private investors dominate housing production.

Although Atlanta, Chicago, San Francisco, Chicago, and Los Angeles have new social housing entities, they have yet to build or acquire a building. It takes time.

Advocates and providers of social housing are playing the long game and preparing the public to understand that producing social housing depends on intermediate steps, not overnight miracles. They face the reality that private investment forces, not government policies or financing, shape the housing market.

Seattle is a perfect example of how private investors dominate housing production. In the first 10 months of 2024, 12,730 new housing units were opened. Over the past decade, the average increase has been over 6,000. In comparison, only 600 units would be expected to be produced yearly by SSHD and the seven-year Seattle Housing Levy.

Here’s how the numbers work out. Using a low-ball estimate of $250,000 to create each new affordable unit, SSHD can produce 200 with its $50 million; another 400 would be provided by the Housing Levy property tax, which provides $100 million a year. Seattle has added approximately 200,000 new residents in the last twenty years.

King County projects that Seattle will need 5,600 new homes annually over the next twenty years. This leaves private investors with the task of creating 5,000 affordable homes annually. However, the market incentives for producing that number are not there.

Consequently, future years present challenges for working families looking to live in Seattle. By 2044, 44,000 people will need housing, making less than 30% of the area’s median income (AMI). If the percentage increased to 100%, that number would double. 

This exercise shows that the demand for affordable housing is enormous. It drains the resources of any government entity, and investors will not provide it because they can make more money from higher-end homes.

Until a national party is willing to stop the concentration of wealth that rules the marketplace, the best we can do locally is support programs like SSHD. Its annual production of 200 affordable units addresses this demand. If the local government supports it and the public believes it is financially accountable, it could also offer an opportunity to produce more such units.

Accountability is critical to maintaining popular and institutional support.

San Francisco and Los Angeles have a dedicated but limited funding stream for social housing. However, if they can tap general obligation or dedicated housing-fund bonds for low-cost construction, they can use that revenue to operate and maintain their housing while paying interest on the bonds.  Meanwhile, Chicago and Atlanta have funds from public bonds to provide low-cost construction loans but have no independent tax dedicated to social housing.

Toronto and Montgomery demonstrate how working with local governments can expand secure funding for operations and new production. Seattle and other cities should collaborate with them and each other to form a network of mutual support. There must be a shared strategy for accessing public resources to provide permanent, affordable housing for working families.

The key to obtaining broader public support for a social housing developer is involving the existing government bodies, such as the city council or housing authority, in helping to manage their projects. Working with those institutions establishes a level of accountability that engenders public support for future funding of those developers to avoid their new housing units being treated as a commodity on the market.

All these cities’ social housing developers have those links except Seattle. All have some resident participation on their boards or oversight committees. However, Seattle is the only one with most board members selected by social housing residents and no institutional representation on its board.

This could work, although the public will consider it unaccountable. Involving representatives of public institutions would immensely help SSHD obtain bond funding and other forms of assistance.

Should Seattle’s Proposition 1A pass this February, its board and new executive director need a long-range plan to secure and maintain public support through the existing institutions. They will need their support to survive in a market dominated by private investors.

In turn, the city council and mayor need to recognize the public’s demand for creating SSHD to generate social housing. The city government must commit to working with SSHD without shifting money away from emergency shelters for people without housing.

Framing social housing as competing with emergency shelters for limited funds is a zero-sum game. That approach will weaken both efforts when each needs to be addressed.  Portland has aggressively provided effective emergency shelters, and Seattle can learn from their approach. However, it does not eliminate the need for more affordable housing.

Passing Proposition 1A is not the only solution but opens the door to a much needed one. SSHD must open its board to institutional representatives to secure future funding and succeed. At the same time, city government leaders must be leaders. They must work with social housing advocates to make Seattle more affordable. Other cities have done that; we can, too.