JLARC: “Why is Housing So Expensive?”

Life is full of surprises. I was on a last minute trip to New Orleans when I found out that Governor Inslee had vetoed a budget proviso we had requested in the state budget. Senator Braun was our champion on this request. The proviso would have allocated $500,000 to study housing costs and compare non-profit costs with market rate costs. I was not happy. I sent a pretty stern message to Inslee’s staff personĀ and wrote an angry post at Forbes, comparing Inslee to Nixon. The point of the proviso was to shine a light on the big cost of subsidized non-profit housing. The reason why Mandatory Inclusionary Zoning (MIZ) was proposed, was to shift money from the market into the coffers of non-profit housing producers. Why? Because their business model is wasteful; when market rate producer costs go up, they raise prices and when the same costs go up for non-profits, they ask for more money. The good news is that in spite of the veto, the Joint Legislative Audit and Review Committee (JLARC) are doing the study anyway. Here’s the proviso we wrote:

NEW SECTION. Sec. 103 Joint Legislative and Audit Review Committee

$500,000 of the general fund state appropriation for fiscal year 2018 is provided solely for an evaluation and comparison of the cost efficiency of market rate housing in Washington versus publicly subsidized housing projects intended to assist low-income households.

(a) The comparison will include, but not be limited to, a comparison of the costs of:

  1. Land acquisition;
  2. Preconstruction activities including development an design, environmental review, permitting, and other state and local review processes;
  3. Construction and rehabilitation,
  4. Capital and financing,
  5. Labor costs,
  6. Construction administrative costs include legal, contract and finance activities
  7. On-going maintenance and operating of the housing constructed, and

(b) The comparison will include a review of the department of commerce housing root cause analysis due to the governor on June 1, 2018 Included in the review will be a consideration of geographic and regional factors affecting costs. The report will include a recommendation for a publically available and easy to read sources and label for each publicly subsidized housing project. For purposes of the evaluation and comparison, publicly subsidized housing project means housing that is funded, in whole or in part, by state, local or federal funds or financing programs to assist low-income households.

(c) The evaluation must solicit input from interested housing stakeholder, including representatives from the Washington state affordable housing advisory board, the department of commerce, the Washington state housing finance commission, representatives from the private rental housing industry, housing authorities, community action agencies, local governments, and nonprofit and for-profit housing developers.

(d) The evaluation and comparison is due to the legislature by December 31, 2018.

I met with the team from JLARC. I went the same day they asked. I am sure they must think I am crazy. But they at least looked interested as I described the whole story about how our efforts to support cities as sustainable solutions to climate change and a myriad of other resource issues got waylaid on the “affordability” issue. They even took notes. And these people are way, way smarter than me. I don’t want to raise expectations, but the folks at JLARC seem truly committed to finding answers. I feel relieved. There are some smart people to help answer the question, “Is non-profit affordable housing more expensive than market rate? Why?”

I think this is a big win for the whole discourse, and I told the JLARC team this. If we had solid data and numbers we could have a argument on the politics. Right now, we’re arguing over terrible measures of affordability (i.e. 30 percent of monthly income spent on housing means it is affordable), and trying to solve a “crisis” with no quantitative measure of when it started and when we know it has ended. I told the JLARC team that the solutions are going to be decided by a political process, but that process would be much better informed by their work.

 

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