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.
Interesting article, but it fails to acknowledge the supremely polarized politics of activists who have pushed Seattle-style social housing forward: the same folks who pushed through so many municipal “renters’ rights” laws that are wreaking havoc on our rental housing system — negatively impacting safety, affordability, and viability, and contributing to the loss of thousands of units of naturally affordable, locally owned small-scale / missing middle rentals (with no recovery in sight). Will they be exempting themselves from the irrationally written laws they passed, once they are in position to try to manage buildings and maintain operations in a stable way? They won’t even talk about operational challenges with people and orgs currently operating Seattle rental housing, only pie-in-sky dreams of a perfect world they will build.
House Our Neighbors and the many urbanist/housing justice groups who have worked toward social housing are highly unlikely to succeed because it’s their way or nothing. Good luck to our public dollars if this passes. I wish it could play out in a more rational world, but that’s not Seattle’s political sphere.
Thanks, Nick. I wish I still resided in Seattle so I could vote for 1A. I appreciated your great explanation.
Could you please explain this?
“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.”‘
If these numbers are correct, the 41% of renters below 50% of median household income have up to 66 % of rentals available that they can afford. How much below, the article doesn’t say. However, it makes me think the availability of rentals isn’t quite so bad as the social housing advocates say, as 66% of rentals is much more than 41% of renters. If these figures are correct, the shortage might not be so pressing as advocates of this project claim. Much of their appeal is to tax the rich, a pretty appealing idea, but less about how to insure the tax money is used to actually provide benefits.
I agree our city needs social housing, that is, lots of publicly owned housing to serve both low and moderate income households. But as Nick points out, there are some flaws in how this new social housing authority is set up, with very strong tenant control and with most board members having no experience with building or maintaining housing. As he says, a board member and the executive director have some experience building housing, but the big majority of the board has no such qualifications or experience. Building, managing and maintaining a significant amount of social housing isn’t going to be easy. Handing these sums of money to an organization set up this way seems really problematic to me.
I’m still sort of on the fence, because I do like the social housing model, but I don’t like how governance of this proposal is set up. Maybe it would be best to vote against the whole thing hoping that housing advocates will go back to the drawing board and give us a more feasible plan for how to actually manage the project and spend the money.
Very interesting. Thx.
I’m trying to sort out your comment on the percentages (41% and 66%) and I’m hoping that Nick will be able to respond.
Your reasoning would be correct IF the baseline for the 41 percent of renter households and the 66% maximum number of affordable units available were the same. For instance, if the number of renter households were much greater than the maximum number of affordable units available, there would be a gap. And it could be huge since 41% of a more significant number would be larger than 66% of a smaller number.
Nick,
I have another question about your statement:
“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.”
I’m wondering how many people work in Seattle make enough money to produce $50 million a year to this SSHD.
Just to make a simple model. If X makes (through their wages) $2 million a year than X employer will pay $50,000.
So….
$50 million divided by $50,000 equals 1000… That means (as one crude example) there are 1000 people in Seattle whose compensation is $2 million a year… Really? I’m not talking about rich people with inherited wealth, who, if they were taxed on such a basis, would obviously simply move their office to Bellevue. Likewise with, say, Amazon…. Amazon could simply require the employee to office in Bellevue.
Obviously there’s all sorts of models but that’s a simple one.
Are there really 1000 employees in Seattle who are (based on their wage compensation) making $2 million a year? I know there’s lots of lawyers making a lot of money… but even a lawyer billing out at $500 an hour (not uncommon) is grossing $1 million max.
So putting aside whether it’s a good idea, is it even a realistic proposal to generate so much money?
I’m skeptical.
Where can I find the economic models supporting the legislation to explain the source of the $50 million?
In the words of our dear departed friend, Peter Sherwin, “Do the math”
David,
If anything, the estimate is low. Our data derives from the fiscal note for SB 6017. Because SB 6017 would have levied a 5% tax on compensation above $1 million, 7.5% tax on compensation above $5 million, and a 10% tax on compensation above $10 million, it gives us a good starting point.
• The revenue estimate for SB 6017 for the 2023-2025 biennium: $657,124,171.00
• We trim the estimate, because Proposition 1A has only a 5% tax on compensation in excess of $1 million, with no further laddered steps, reducing statewide revenue estimate by 10%: $591,411,753.90
• We divide by half, because the fiscal estimate is for 2 years: $295,705,876.95
• We take the IRS data on incomes in excess of $500,000 as a proxy for proportional wealth in the 7th Congressional District compared to statewide: 25.8%
The 7th Congressional District is almost exactly the same population as Seattle (7th CD: 787,902; Seattle: 733,919) and overlaps Seattle, while leaving out some of the wealthier areas (the areas from just north of the I-90 bridge, through Leshi and all the way down to the city limits along Lake Washington). If anything, with these deletions from some of Seattle’s wealthiest areas, using the 7th CD estimates results in a conservative estimate.
• The adjusted gross income floor for the top 1% in Washington state increased by 11% (from $625,720 in 2018 to $692,287 in 2020). We assume proportional increases from 2020 to 2024: 23.2%
• We add 5% to account for wealthier neighborhoods in Seattle excluded from the 7th Congressional District.
• We subtract $25 million for leakage and non-compliance.
Estimate for 2025: $73,880,000
Thanks, John.
I appreciate the notes though with such a compressed format, I have no idea if your reasoning & flow of facts makes sense. Someone who knows more than I do will have to review your argument. In the meantime, I’ll try to dig up your proposed legislation to understand the basic definitions, who is covered etc etc tho it probably doesn’t matter to me since I already voted.
But bottom line, in lay and understandable terms:
Is it inaccurate for me to state that (by order of magnitude), approximately one thousand individuals who (either live in Seattle or work here) receive $2 million/year compensation? And whose work location aren’t easily transferred to Bellevue?
If so many make so much, that’s great and happy to see you tax them, not me!
But one of the reasons I voted against either 1A orv1B is that, among other reasons, I am skeptical of the longevity of your funding source and that you’ll eventually move your tax scheme down market.
John,
Maybe if it’s simpler, I assume that there is a long-form explanation somewhere for how HON derives the $50 million. Maybe in a City Council staff report? (The staff often do very good work.) So maybe you can you please point me to it? Thanks..
Btw, to be clear, fwiw, I’m not in the least criticizing your explanation (above) but because it’s just a comment on a blog post and built on a series of assumptions & facts, it’s not easy for me to follow. 🙂 For example, I have no what SB 6017 is.
John,
Maybe if it’s simpler, I assume that there is a long-form explanation somewhere for how HON derives the $50 million. Maybe in a City Council staff report? (The staff often do very good work.) So maybe you can you please point me to it? Thanks..
Btw, to be clear, fwiw, I’m not in the least criticizing your explanation (above) but because it’s just a comment on a blog post and built on a series of assumptions & facts, it’s not easy for me to follow. 🙂 For example, I have no what SB 6017 is.
Yes. Shocking.
Many of the board members seem to lack a family name so really hard to find out more about a lot of them.
My big takeaway from learning more about this SSHD and how it’s even gotten this far? That’s how we got Trump as president: low information voters can be a majority.
My piece did not analyze the “math” of Prop 1 A because I focused on how other cities have begun social housing programs, and Seattle is not out of line in that effort. All these cities face a shortage of affordable housing, such as Seattle.
In each of them, the local city government has played a positive role in making these programs successful, and Seattle’s government should do so as well.
But your question is legitimate and should be addressed. I’ve referred it to HON, House Our Neighbors, and have asked them to analyze it.
And as our dear parted friend Peter said, do the math; the second half is always about who’s doing it.
When I was an early strong supporter of Build the Monorail in Seattle, as you and Peter were. We all believed that the math worked out for the monorail. Alas, in the end, the voters and I reluctantly rejected it in the last of five public votes because the math did not work out.
That left many monorail supporters disappointed and angry. Some even asked for me to return their campaign contributions. Perhaps we should have built it despite the math.
Thanks, Nick.
I’m curious to see how HON responds.
As to the Monorail, it was so long ago that I simply don’t remember the details of its denouement. Whether I’d stand with my then (likely) intemperate response in light of a few decades and how I see things now, I have no idea. At some point, some enterprising journalist will write THE book on the Monorail before all the major actors are gone. Alas. I’d love to hear Peter’s hindsight view. It was unfortunate and perhaps dispositive that Peter was never invited to be on the Monorail Board.
My supposition is that the professional sports teams (Seahawks, Mariners, Kraken, et al) will end up paying a large proportion of the payroll tax. Each team has multiple players who make in excess of $1 million. However, I have not been able to confirm is this is the case or not. I don’t know why this hasn’t been pointed out by anyone.
A quick read-over of the Board makeup of SSHD tells you all you need know. (https://www.socialhousingseattle.org/board). There’s no way this organization can succeed. Too bad, because a social housing program is sorely needed – just not this one. SSHD will fail as it is mainly populated by political activists with an axe to grind, and zero real estate development experience. Better that it fail now and a more solid program, designed and led by actual experts, rise from the ashes before too much money is wasted.
Wow – the inexperience of this board really is shocking. Only one person has any relevant experience, while most of them stress their identities instead of qualifications. I thought we learned about unqualified leaders with the previous CEO of the King County Homelessness Authority. How can this keep happening? We should be as worried about those responsible for selecting this board as with the board itself.
The problem with board selection is that the SSHD bylaws stipulate that the majority of the members be appointed by various advocacy groups including the Renters Commission and the Labor Council. City Council/Mayor have a few positions to fill but most of the spots are filled by activists. This is not a winning formula and I wish there were more coverage of this.
I’m sorry to sound cynical, but this sounds like another “give me the money now, we don’t know how to spend it, but we’ll figure it out later”. Seattle voters have fallen for this trick too many times.
1 B sounds like the proper choice, tell us how you will make this work, and show us that it will work before we give you a blank check.
I know Seattle can find a way to house its lower income and less fortunate citizens. I’ve lived in Seattle for more than 50 years, and spent my entire working career in the affordable housing industry. We did it before, and we can do it again. But please don’t ask us to throw our money at ill conceived, or unworkable plans.