Incentive Zoning for Affordable Housing

Apropos the discussions of affordable housing here and here, on Tuesday October 7 at 5:30 p.m, the Seattle City Council will hold a public hearing on proposed incentive zoning legislation that would tie increases in allowed building heights to the provision of affordable housing. This PI piece provides a good overview.

The two main points of contention are income eligibility and set-aside percentage. John Fox of the Seattle Displacement Coalition contends that the proposed 80% of area median income cutoff is set too high to benefit most “workers.” Meanwhile most affordable housing advocates, as well as some local developers, agree that the set aside should be higher than the 11% dictated by existing code for the downtown zones (note: that’s 11% of the “bonused” floor area only).

More broadly, resistance to the idea of incentive zoning is tangled up in misconceptions about density and growth. When housing prices and density rise in concert as they have in Seattle in recent years, there are those who speciously assume a causal relationship. But the true reason for rising housing prices — housing bubble aside — is that Seattle has become a successful and desirable city.  In other words, it’s supply and demand. There are countless examples across history of affordable high density, and there’s a word that often applies: slum.

If, as John Fox espouses, we were to curtail densification in order to preserve existing affordable housing, the end result would be a net loss of affordability city-wide due to supply and demand. Furthermore, such a curtailment would drive growth further afield and exacerbate sprawl.  And that means more people throwing time and money away on long, single-occupancy vehicle commutes, for which we all will end up paying the social and environmental costs.

Density and affordable housing can coexist in a thriving city, and indeed, it is imperative that we figure out how to facilitate that outcome in Seattle.  If we get the details right, incentive zoning could be a productive strategy.  But we should also recognize that, because someone has to pay for it, other, more direct government subsidies will also need to be part of the solution. 

10 Responses to “Incentive Zoning for Affordable Housing”

  1. dan cortland

    Dan B wrote:
    “If, as John Fox espouses, we were to curtail densification in order to preserve existing affordable housing, the end result would be a net loss of affordability city-wide due to supply and demand. Furthermore, such a curtailment would drive growth further afield and exacerbate sprawl. And that means more people throwing time and money away on long, single-occupancy vehicle commutes, for which we all will end up paying the social and environmental costs.”

    But that’s what the current policy is doing. A house rented for $2000 is replaced not by a house renting for $2500, but by townhouses selling for $600,000. It seems to me you’re warning of incremental decreases in affordability under Fox’s preferred policy, when the current policy drives incomparably greater losses in affordability.

  2. Matt the Engineer

    //A house rented for $2000 is replaced not by a house renting for $2500, but by townhouses selling for $600,000.//

    As we’ve discussed before, this is the effect that makes people think that density causes rising prices. The fact is that if someone had really torn that house down and built a new house in it’s place (with the same SF as the townhouse) it would have sold for $600,000 (or a little more, since there would be one more buyer in the market). Building two units in the place of one unit reduces the price of all houses by a little bit since there’s one less buyer out there.

  3. joshuadf

    The problem with densification is a gap not in affordability but in expectations. We still have the American Dream with a proverbial car in every garage—the garage of a house we own, of course.

    John Fox’s Defining Workforce Housing website lists required average worker housing starting at 713 for a studio. A quick look at craigslist showed several studios in that range (Ballard, Capitol Hill, Beacon Hill). Should workers have to live in a small apartment and walk or take the bus to work?

    In my opinion, the 80% of median income figure is a joke for workforce housing, but it might provide an option for some middle class professionals with high concentration in urban areas such as nurses. In the short term at least, nearly all the for-purchase dense housing will be expensive because it is all new.

  4. Spencer

    Matt and Dan,
    Dan is correct, unless, Matt’s new house built is constructed for less than $100,000 including overhead and profit and design costs.

    But,of course we are talking about a low-rise zone parcels in Fremont or Ballard where lots go for $500-600,000. So, if you are talking about a new $600,000 house it would actually sell for $1-1.2 million ($500,000+$600,000).
    In the standard case, in Fremont or Ballard, to build a “four-pack” costs around $1-1.5 million depending on quality. Add to that the land value the total project comes to $1.5-2.1 million. This does not include soft cost other than land nor overhead and profit. This means the parcel that once had a house valued at $500-600,000 now has four residential units with the lowest, zero profit (not paying your employees), price of about $400-600,000. If you want the for profit version add another 25% of the total project costs.

    So in my mind, in this case of density, it is not reducing the cost of housing but actually increases it. Add in competition and the cost goes up even more.

    Personally low-rise zoning and poor design practice are the root causes for what has happened to our city. The L Zones should go away altogether. In my travels I have not seen any development like what is happening in Seattle happen in other top tier cities in the US. Our designers, in general, should pick up the ball and play the design game not the money making game. It’s time to reward the public not bulge back pockets.

  5. Matt the Engineer

    [Spencer] I think you’re losing the forest for the trees. For instance, you just described four townhouses that are each far more affordable than the house you would have built ($500k vs. $1.1M). Dan C’s point (I think) was that each townhouse would be more than the house.

  6. joshuadf

    I think you’re talking past each other. Dan B and Matt are talking about when development happens, it should be denser rather than not. Dan C and Spencer are describing how brain-dead Lx zoning is, and I think we can agree on that. Leaving the old properties would be more affordable, but that’s not the fact of life in Seattle right now.

    By the way, 4414 NE 77th St is a non-townhome example that I’ve recently witnessed near a friend’s house. It was a 970 sq ft Wedgwood Boeing box, and according to Zillow the new monstrosity sold for $1.125m (estimated monthly payments only $6203).

  7. Spencer

    Matt,

    For the record, what I described was how new townhomes would have to be sold for no profit and overhead to equal the price of the $500-600,000 home demolished. Thus, in this example, the cost of densifying has not decreased the cost of housing. this is one of the biggest reasons I did not stay in my low-rise development job.

    I personally agree with John Fox that 80% is not realistic. Like it or not our wages will not continue to rise significantly enough to keep up with inflation and the wealth disparity. Many renters, I feel, will be in trouble when 80% of today’s income is more like 60% of tomorrow’s income. We need to consider a lower bar or even graduated incentives beginning at 80% down through building shelters. In short, we will soon be short on lower income housing with the only light in the tunnel being the current developers going bankrupt and selling their current projects for less money who in turn lower the price of rents.

  8. Steve

    Spencer,

    Can you elaborate on what should happen when the L zones go away? Do you mean that the L zones would become single family zones? Or mid-rise zones? Or something else entirely? I’m trying to get a sense of what you think would happen.

    On another note: allowing duplex conversion in SF zones may be a piece of the solution here. A converted building should be much cheaper than new construction, and we’ve got a number of houses that could easily be divided.

  9. Spencer

    Steve,

    First, the disclaimer, I am not a planner and I am not also entirely against L-zones. They have their place and are the growing pains cities go through. But, in my experience with developing L-zones they do not promote urban density and affordability but create a small scale sense of suburbia (driveway, lawn, nuclear family characteristics, picket fence, etc.) and actually increase land and housing values. In my experience it seems developers took little notice in what the city’s actual demographics needed but seemed to more willing to listened to what generalizations were made by real estate agents: compact suburban values.

    Second, I think there are a lot of good answers. Most recently I was involved in a design study focused on this very problem. Cottage style housing was, of course, an easy answer and still a good answer, if a developer can get two contiguous parcels. But, it is still based on the suburban model. But, another intriguing model that came out was row housing in the style of what is found in the outlying neighborhoods of London. They essentially are narrow row houses on a deep lot. They share sidewalls with neighbors front the street closely but have a deep back yard. Of course in London there were few garages and a more established public transit system and these buildings were not constructed under the IBC or probably any building code. The ones I have been in had incredibly small staircases and were usually nearly a spiral.

    So, the simple and somewhat evasive answer is, yes, some of the L-zones should revert back to single family zones, some should be up-zoned to mid-rise, while other could be come something entirely different. It would have to be a case by case analysis.

    At times I feel we (USA residents) are too quick to demand and jump on a solution (Tim Eyman comes to mind) with out more thoughtful consideration to what we are creating. Currently I have been thinking about the southside’s accessory dwelling unit zoning. If most people on the southend added a second unit to their parcel the population could increase by say 1/3 to 1/2. Potentially that’s a lot of people. But, there are no incentives for this kind of development. We are a “fast and now” society and the perception is bigger buildings first. Which makes me wonder if anyone has ever done density histories of major cities? Is our path to density a tried and true method or one full of rash decisions?

    by the way, are you up late or an early riser?

  10. Steve

    Spencer,

    Thanks for the response. This is a tricky issue, and while I’m not a planner either, I think it’s pretty interesting to hear ideas. Personally, I love the rowhouse model too, but I’m not sure how feasible it is in a world where everybody drives.

    On accessory dwelling units: the DADU proposal makes me think of the Silicon Valley area, where backyard houses are legal and relatively common (my sister and her husband lived in one for years) and apartment buildings taller than 3 stories or with underground parking are very uncommon. Housing prices are far crazier than Seattle there, but of course, it’s hard to isolate cause and effect. I like the idea that the south end could add people without requiring a lot of tear-down work, but it doesn’t seem like many people have taken the city up on the possibility, and I wonder why not. Parking requirements? Lack of awareness? Lack of interest? It’s interesting.

    On being up late: neither, actually, I’m temporarily in Sweden (tagging along while my wife’s on an academic junket), which is 9 hours ahead of Seattle.

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