Coalition's Response to Councilmember Tom Rasmussen's Position on the Proposed Multi-Family Tax Abatement Program:

March 11, 2004

Hi Tom,

        I saw the piece that you are forwarding now to those who have raised concerns about your stance on the multi-family tax abatement program up for a vote in full Council this coming Monday. I felt the need to respond directly to your response. (Below is my response with a copy of your recent letter). I'm also cc'ing this to folks who are our supporters.
        The first thing I want to say is that I appreciate very much the way you have been forthcoming about your opinions on this. I also appreciate your willingness to seek further opinions and engage in dialogue on this matter with all sides before the final vote. That's what I'm doing here. I also know that will continue throughout your tenure to do this and again we greatly appreciate it.
        Having said that I need to say respectfully, that I believe strongly that you are wrong on this issue - your first stance on a housing issue out of the gate as a new councilmember.

Your set-asides at 60-70 percent are not "affordable":
It's worth noting that the set aside units between 60-70% of median that you describe as "affordable" "moderate" or "workforce" are in reality priced at rent levels well above any truly affordable thresholds. Working people - including folks who testified last week at your hearing - said they needed units in the $550-$750 range. These are units in the range of 'workforce' housing (affordable to those in the 45%-60% range) and what workers and most tenants truly can afford. Please don't kid yourself or us - set-asides priced at 60-70 percent are not affordable.

Use of housing levy's low income focus should not be used to justify this program's emphasis on higher incomes:                                                                                                                                                                  I also don't believe it's appropriate to reference the housing levy as you have done below to justify emphasis under this tax abatement program at the 60-70% level rather than at lower income thresholds. Levy dollars barely scratch the surface and can't begin helping us serve all those households below 50% in need in this town, and especially not those between 0-30 percent of median. We need far more emphasis with all our city programs reaching down and serving these groups most in need. (We just went through a bit of a battle last year around the levy with some groups and the Mayor seeking to grab an increasing share of levy funds for higher income groups - the assumption that we are meeting the need of those at the bottom gives fuel to those seeking to shift emphasis to higher income groups across a range of city and SHA programs).

By doing this, you imply, perhaps unintentionally, that somehow we are making progress in meeting the needs of those at or below 0-50% when we clearly are not. For every one unit we build with levy funds serving these very low income groups, we lose 3-4 times that amount to demolition, abandonment, speculative sale, conversion, increased rents. All too often these trends - types of gentrification - are a direct consequence of city actions and policies. In fact, this tax abatement proposal - if not done right - could itself induce more demolition and displacement.

The measure absolutely needs 1 for 1 requirements but still would cause indirect displacement and fuel gentrification and loss of existing low income units:
The measure absolutely must include a 1 for 1 replacement requirement at comparable price. No developer should obtain these tax benefits if they tear down existing low cost units - unless they are 100% replaced at comparable price. But there also is such a thing as indirect displacement and Belltown is a case study of this. When you stimulate more market rate construction in an urban area (as this mechanism clearly is intended to accomplish), you get more housing demolitions and Belltown certainly has seen its share of that. But the majority of the displacement we have seen in Belltown in recent years has been due to increased rents on the existing older apartments in that area. As Belltown has seen more residential growth, it has also pushed up rents on the older affordable units in that area above what longtime lower income residents can afford. In fact, since 1999, we've lost over 1000 of these older units to increased rents. What happens is that when you flood an area with new development, it creates significant upward pressure on the rents charged on "existing" older longtime affordable rental units. The area becomes more attractive to higher income groups, property values generally go up, older apartments then are bought, marginally renovated, given fancy new names with "jacked-up" rents. It turns the conventional economic "trickle-down" notion on its ear. New development generates new demand which drives up rents even on existing units. One noted economist, John Gilderbloom, has studied this impact extensively (See his book "Re-Thinking Rental Housing". He call's it "price leadership").  My point is - even with a 1 for 1 housing replacement requirement - this tax abatement plan may induce more gentrification and displacement especially in places like the U-District, South Lake Union, Northgate, and Capitol Hill. All the more reason to limit use of this to a few select areas and require truly low or at least lower income set-asides. Until we better address displacement effects of new growth (indeed there are legally defensible tools we can use if we had the political will) - an outcome of growth in Seattle always will be more displacement and more homelessness and this mechanism as written likely makes it worse.

There is no shortage of 'existing" rentals out there serving that 5% of our city's tenants with incomes between 60-70 percent of median.
In addition, while we know there is a growing need for housing among those between 0-50% of median and that need far outstrips our ability to address that need - by contrast, no one and I mean no one - has demonstrated or proven there is any shortage at all of existing housing units affordable to those in the 60-70% of median category - certainly not in the U-District where I live or Capitol Hill or Northgate or even South Lake Union. By the way, this income group between 60-70 percent represents only about 5 percent of the city's tenant base and they are drawn from the upper third overall of our city's tenant community to boot. Come on, how much do these folks really need? Area vacancy rates gives these guys access to an array of choices when income groups below them have little or no choice - vacancy rates for the lower priced older rentals are much lower than units for higher income groups.

We're even getting newly constructed units serving those at 60-70 percent or close to it. Why are we gonna give 'em tax breaks to do what they're already doing and when a supply of these units outnumbers tenants in this income category? Furthermore, no one has proven that with respect to new construction, the market isn't producing additional or new units priced within this 60-70 percent category or close to it. Given that the set asides under your proposal are set so high ($850-$1100) these set-aside levels on new units come very close to the rents a developer will charge anyway for the rest of the units in these new apartment buildings. In otherwords, the market already is dictating that developers set rents on at least some of their units in this 60-70% price range or very close to it.

Also, in those areas where you would extend the  tax breaks - - the U-District, S. Lake Union, Capitol Hill - I would add, they also have been meeting or exceeding their residential growth targets. Those who are telling you we're not building units in South Lake Union are incorrect...we're exactly meeting our growth target down there and there is a range of prices on those units. (We just aren't building at the excessive levels Vulcan wants to see but we're at the city's and neighborhoods designated targets).

In sum, there is an existing supply of units in the 60-70% category - no problem there. And a percentage of the new units we are building - especially in areas where growth targets are being met or exceeded and where vacancy rates are higher - we are building new units in this category or very close to it. The market is dictating it. These developers don't need the tax breaks to do what they are already doing. It just ensures they make more money when they do it and at our expense.

From our perspective, there is no planning justification for the current proposal - we see it being driven first and foremost by political considerations.

Lastly, I disagree with the point you are making below - that the amount of tax shifted to other taxpayers is somehow trivial. Passing on an estimated 20-30 million dollars in cost (over a ten year period) to other taxpayers is not trivial. Yesterday I sat through the discussion of whether or not we should relieve Nucor of some 2-3 million in electrical energy charges. A major issue raised by Conlin and Licata was the precedent it set and the fact that it is an amount that will have to be made up by other ratepayers. Spread out among all the could say I suppose it aint much...but it was enough for these two to take a stand. Increasingly what taxpayers and ratepayers are being asked to pay - it has become ever more regressive as city's, county's and state's desperate for cash look to what limited sources of funding they can find to meet basic needs. We are layering charges, surcharges, increased fines, special levy assessments upon special levy assessments, increasing user fees, increasing electrical energy rates - layer after layer of regressive mechanisms falling heaviest on the poorest among us. In this context any additional charge passed on to those already bearing these added burdens is not trivial. Meanwhile we are relieving Boeing and Microsoft and Vulcan and other biotech and hitech businesses of millions in tax responsibility down in Olympia and pushing other forms of tax breaks for the wealthy at unprecedented levels. Tax Increment Financing is another example pushed by our Mayor that would relieve the big guys of helping foot the bill. Don't underestimate how significant this aspect of the issue is to the average voter and to our neighborhoods. They're already viewing as just one more giveway while they foot an increasing share of the bill.

Nuff said..far too much said probably....I hope you will reconsider. Don't extend this program to South Lake Union, the U-District, Capitol Hill, other high growth areas. It's likely to only accelerate the loss of existing low income units in these areas. And bring the price of the set-asides down to at least 50 percent or at least no more than average rents in any given area. Or implement other measures that limit its use and ensure that it truly serves as a tool to ensure more affordability in our city. And then let's get on with the business of stopping displacement and guaranteeing preservation of what's left of our existing low income housing stock which should be our first priority.

Thank you again for your consideration.

- John

>Date: Wed, 10 Mar 2004 16:35:30 -0800
>Thank you for sharing with me your concerns with the proposed
>re-authorization of the Multi-family Tax Exemption program. Over the
>course of the last several weeks, I have given the issues you have
>mentioned, careful and deliberate consideration. I would like to take a
>few moments to share with you my thoughts on the proposed program.
>The two areas where there seems to be the most debate are related to
>the affordability requirements imposed upon private and non-profit
>developers and the neighborhoods where the program should be eligible.
>Below are my thoughts on each of these components of the tax-exemption
>Affordability Requirement:
>While we do need more resources for low-income housing, Seattle’s
>Housing Levy and the Low-income Housing Tax Credit program administered
>by the Washington State Housing Finance Commission largely targets the
>development of housing in the 30-50% of median income range. These
>successful programs have been responsible for thousands of low-income
>housing units in Seattle.
>Everyone can agree that market rate housing (currently 75-80% of median
>income dependent upon the neighborhood) will be developed without any
>public subsidy or support. But, there are currently no programs
>available to stimulate the development of housing in the 60-70% of
>median income range. The Multi-family Tax Exemption program is one tool
>available to for-profit private developers that can be geared towards
>stimulating new development of housing affordable to individuals earning
>$30-35,000 a year or affordable to a family of two earning roughly
>$40,000 annually.
>I’m concerned that new or remodeled housing may not be built for
>moderate income people in Seattle. This program creates a modest
>incentive to create needed, moderate-income housing at a projected cost
>of roughly $0.25/year, per project for the average Seattle property
>The current rental market is soft and vacancy rates are higher than
>usual creating downward pressure on rent levels. However, as
>Seattle’s economy improves, rental rates will begin to rise and
>create a need for rents affordable to people earning 60-70% of median
>I agree that we need to focus on low-income housing. However, one of
>the primary goals of this proposed program is to create an incentive for
>private developers to help increase Seattle’s affordable housing
>stock. Once the affordability requirement becomes too stringent, no
>developer – private or non-profit – will utilize the program. We
>learned that from our experience with the previous program from
>1998-2002. Based on independent analysis, I feel that the current
>proposal strikes an appropriate balance. The question then becomes
>whether the program is worth having to stimulate work-force housing
>where it would not otherwise be built. I believe that it is.
>Eligible Neighborhoods:
>I had initial reservations about expanding the program to neighborhoods
>that were not exhibiting signs of economic distress or lagging behind in
>meeting their 20-year growth targets. However, after hours of public
>testimony and hearing from residents, low-income non-profit developers,
>housing, labor and environmental advocates, I feel that there is value
>in including the University District and South Lake Union in this
>The Mayor and City Council have targeted both communities for economic
>development, jobs and affordable housing. Given that objective, these
>neighborhoods need to offer housing options across a broad range of
>incomes. Encouraging mixed income and multi-family development is
>important to our long-term growth management strategy. The Multi-Family
>Tax Exemption program will help create units affordable to people in the
>60-70% of median income range. Thousands of jobs in that income range
>are expected to emerge in South Lake Union. Creating housing affordable
>at that income level will be critical to creating more density and
> a healthy, urban environment in South Lake Union.
>The Full Council is expected to consider the Multi-Family Tax Exemption
>program on Monday, March 15th at 2:00 p.m. This issue has fostered
>healthy discussion and I appreciate hearing about your thoughts and
>If you have any additional information to share, please contact my
>Tom Rasmussen
>Seattle City Councilmember

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