Seattle’s Non-Profit Housing Sector In Trouble

The warning signs about non-profit housing in Seattle have been up for years.

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The problems being faced by Seattle’s affordable, subsidized housing sector described in a recent Seattle Times article (“Why thousands of Seattle’s affordable-housing apartments became vacant,” Seattle Times, August 31^st), are entirely self-inflicted and the product of a decade of ineffective policies and profligate spending. Developers and operators of affordable housing are now faced with rising vacancies, falling rent collections, and insolvency. How did this happen?

A decade ago, when the City Council was considering Mandatory Housing Affordability (MHA), it zeroed in on “workforce” housing, units that could be affordable to the wages of policemen and firefighters, people who were actually quite well paid. These units are now just as expensive, if not more so than comparable market-rate units. When our organization criticized the MHA proposal in 2015, part of that criticism was that the greatest need for housing help was at lower levels of income. This should be obvious; people with less income struggle with housing costs and everything else. Now, after MHA has been in place for more than 5 years, there is a glut of workforce units on the market, and they are sitting vacant.

Aside from the lack of sustainability, these apartments are incredibly expensive to build. One of these projects built by one of the non-profits now in trouble, 12^th Avenue Arts, rang in at $47 million for just 88 units, a total development cost per unit of $534,090 per unit. At that price, a household could buy a modest townhome in some Seattle neighborhoods. The costs for these projects – usually built using complicated and expensive federal Low Income Housing Tax Credits (LIHTC) – just keep rising in Seattle and across the country, reaching as much as $1 million per unit in some larger cities like Los Angeles and Washington DC. Paying for these pricey units means having to collect higher rents.

Another issue is with the wild eviction bans that the City imposed during Covid and before, including a winter-time eviction ban when tenants could stop paying the rent without fear of eviction simply because the calendar changed. Making it harder to evict people when they don’t pay rent encourages non-payment, and there is no rent fairy in housing; if the rents don’t get paid, even non-profits can face bankruptcy. In late 2019 we were among the few organizations to oppose eviction bans, urging more cash assistance instead. We expressed the concern then that most of the evictions that were being filed were by the Seattle Housing Authority and non-profit housing organizations. Now, with some buildings mentioned in another Seattle Times story only collecting 50 percent of the rent, non-profits are asking for a bailout from the City.

What was needed then and is still needed now, is thoughtful policies that prioritize construction subsidies for people truly in need, who survive on fixed incomes and need services. The City should expand incentive programs like the Multifamily Tax Exemption (MFTE) program which, according to the latest City-sponsored report, created more than 7,000 affordable units at a cost of just $35 million in forgone tax revenue.

The basic rules of economics don’t stop at the Seattle City Limits. Fewer rules mean more, lower-cost, market-rate housing for working households. That means subsidies can focus on harder-to-serve households. Banning eviction just encourages households with less income to hang on to their cash rather than paying rent. Maybe Seattle still has a chance to get its house in order, but the solution isn’t more money; rather, it is the more efficient use of existing resources and eliminating policies that add problems rather than solve them.