The City Council is beginning the process of passing its version of Mandatory Inclusionary Zoning (MIZ), Mandatory Housing Affordability. This will charge fees on every square foot of new housing in the City beginning later this year. It’s called a fee, but it really works more like a tax, taking money from the market’s production of housing and giving the money to non-profits to build rent restricted housing units. We’ve said a million times that this tax, like all others, will be paid by the people buying housing. This is exactly what’s happening with the sweetened drinks tax passed by the City according to a study featured in the Seattle Times. And why tax sugary drinks?

When the City Council approved the tax in 2017, many proponents said the goal was to decrease consumption of unhealthful beverages by driving up prices, while others supported the policy because they said it would raise money for healthful-eating and education programs.

All you have to do to find out what will happen if MHA is imposed by the Council is substitute some different language like this:

When the City Council approved the tax in 2019, many proponents said the goal was to decrease consumption of housing by driving up prices, while others supported the policy because they said it would raise money for non-profit housing.

But the big difference is there is no substitute for housing like there is for sweetened drink. So the option for consumers of housing won’t be choosing something else, and they will see more of their income consumed by housing costs, exactly the “crisis” that MHA is intended to address. But it doesn’t address the problem of price, it makes price worse to fill the coffers of non-profit developers. This is what some people call a “compromise.”

Remember what taxes do.

• Change behavior by raising or lowering costs on products or behaviors;
• Buy things the market can’t or won’t produce;
• Redistribute wealth

What MHA does is discourage the production of housing, the opposite of a program like the Multifamily Tax Exemption (MFTE) program that creates an incentive to build housing and create rent restricted units. And it outproduces MHA by a lot. But the market can produce lots of housing if it is allowed. We have way too many rules, creating higher costs and creating what some would call a market failure: expensive housing. But that’s a self-created problem. And yes, wealth is being redistributed by MHA, from the pockets of renters who’ll pay higher rents and into the pockets of other renters who will get access to a few rent restricted units someday.

And the other winner from MHA is homeowners who have equity in their homes. With the scarcity and higher pricing created my MHA when production lags or gets more costly, the lack of supply means their home increases in value. We simply need more housing of all kinds in all neighborhoods in the city for people of all levels of income. We’ve created a mess that necessitates clean up, but the Council insists on making the mess work by adding even more costs to production. And like the tax on sweetened drinks that means higher prices. Maybe that’s good for people who benefit from averting health risks of too much sugar, but when it comes to housing higher prices and scarcity just hurts people with less money.