In an attempt to encourage developers to build more affordable housing for middle-income workers, Mayor Greg Nickels has released a revamped version of Seattle’s tax exemption program, which builders say has never “penciled out.”
The current program wasn’t scheduled to sunset until 2009, but the rental market has changed drastically enough to render it practically useless, said Rick Hooper, policy director for the city’s Office of Housing. It’s had very limited success; only 11 projects have been developed under it since 2004 and very few developers use it now.
The goal of the new program is to meet a relatively new housing challenge in Seattle; the expulsion of middle-income wage earners through rising housing costs.
The revised tax exemption program targets those making about 80 percent of median, or individuals earning up to $49,000 and families earning no more than $62,300. It would provide a 12-year tax exemption on the residential portion of any new apartment building in which 20 percent to 25 percent of the units are set aside for those income levels.
The monthly rent for an individual under the plan would be no more than about $1,170, between $50 and $250 below market rate, according to the city.
Condo developers can be eligible by offering units affordable to those earning up to $74,760 a year for a two-person household; the income limits vary according to household size. Median income in Seattle is about $54,000 for a single person household.
The program would also expand from 17 areas to all 39 urban villages, including Ballard and the West Seattle Junction.
Taxes not paid by developers shift to Seattle homeowners. Currently, that amounts to an annual impact of about $2.85 on a home worth $440,000. It could be up to $5 a year under the new plan, a “moderate impact” in terms of the benefits it would provide, said Hooper.
The housing department has helped create 762 affordable units in the city since 2004, but the demand is growing.
Rents are up 14 percent since 2005 and that trend is expected to continue. The rental supply is shrinking, largely due to apartment-to-condominium conversions. The vacancy rate is down to 2.7 percent citywide and condo prices have increased by 15 to 17 percent just since the beginning of the year.
The median price of new condos is more than $350,000, requiring an income of at least $74,000. Median-priced single-family homes now require an income of more than $100,000.
The city projects that the cost of renting a new construction studio in 2008-2009 will be about $1,000 to $1,250 a month. One-bedroom rentals will probably be around $1,600 to $1,800 and two bedrooms up to $2,000 a month.
Paul Guppy, vice president for research at the Washington Policy Center headquartered in West Seattle, said city policies and programs, such as rising property taxes and tax levies, have “artificially” increased the cost of housing.
Seattle has increased it’s property taxes by the maximum allowed by state law, 6 percent, for the last several years, and the city collects about $800 million a year in property taxes, Guppy said. He said it’s ironic that public officials support programs like the mayor’s but are “blind to their own policies” that drive housing costs.