Recently I spotted an article about California State Senator Scott Wiener’s proposed legislation that would both relax regulation and impose penalties on local cities that were not allowing more housing to be built. It’s time to consider similar legislation here, especially taking away Housing Trust Fund (HTF) dollars until Seattle backs down from it’s disastrous policy of Mandatory Inclusionary Zoning (MIZ). From the California story:

Details of Wiener’s proposal are still being crafted, but in general it has two prongs: The first is based on legislation he successfully pushed in San Francisco, and would exempt 100 percent affordable housing developments around the state from some local development requirements. The second part would punish cities that don’t meet their building goals, which are set through a state process. The bill calls for the streamlining of developments in cities that don’t meet those goals — essentially, builders would be able to skip some local requirements if they are constructing homes in places that haven’t built aggressively enough.

I’m not going to delve too deeply into California’s legal structure, but I will say that I’ve been hearing more and more frustration among advocates for more housing supply about Seattle’s inability to both pare back rules and regulations that stifle more housing while at the same time imposing even more rules that will just drive up the costs of housing.

In the first case is the all too familiar but bizarre recent Hearing Examiner decision that unplugged a modest City proposal to make it easier to build Detached Accessory Dwelling Units (DADUs). The failure of the City to deliver on DADUs is familiar because it’s a discussion that is more than a decade old. Way back in the early part of the last decade it was decided to experiment with allowing DADUs in Seattle, but it was a rather timid effort that limited the relaxation of rules to just one sixth of the city. Later the Council expanded the DADU program citywide but at a limit of 50 units. Now, DADUs are allowed but difficult to finance, and so not many are happening. The Council didn’t pass legislation that changed subdivision rules and residency requirements that would have fixed this even though they were advised by successful cities like Portland, that this is what is needed.

Second, I’ve been over it a million times: MIZ is infeasible, and when it is feasible it is inflationary, causing all housing prices to rise to fund a small number of expensive subsidized units. This scheme is also plainly illegal. Yet the City grinds forward with it’s effort, using measures that both show plainly the infeasibility of their proposal while also adding higher fees in so called, “low opportunity” areas of the city, essentially redlining the areas of the city that would benefit most from new housing and jobs.

I’ve already suggested legislation that would require

• A thorough costs study by the State Auditor’s office with help from an independent accounting firm that would compare the costs of producing subsidized housing in our state with market rate housing;
• A sources and uses funding label for each project in the state built using state funds or tax credits authorized by the WSHFC. This label should be easily accessed and include total project budgets, the sources of funding and a detailed breakdown of categories of spending (eg, hard and soft costs, legal, consultants etc).
• The Commerce Department should be required to produce a plan and recommendations to reduce costs for all housing production based on the completion of the cost study in the legislation (see 1 above)

Now I’d add a fourth and a fifth bullet for legislation similar to what Wiener has proposed in California.

• Any jurisdiction that receives State funding or tax credits for the construction of subsidized affordable housing must reduce and relax regulation on the production of ALL new housing, including allowing the subdivision of single-family lots for the production of accessory dwelling units, elimination of design review requirements for housing in Urban Villages, and other costs saving measures. Failure to produce a cost reduction plan and report actual savings for builders would result in the reduction of HTF dollars to the jurisdiction.
• Any local jurisdiction imposing fees associated with Mandatory Inclusionary Zoning would be ineligible for any dollars from the Housing Trust Fund and would receive lower priority for the allocation of tax credits.

I feel a little like Alec Baldwin. Put that cocoa down! Have I got your attention now?

The bottom line here is that non-profit housing developers have taken the process hostage, demanding more and more money for a manifestly inefficient system. Unless and until they help make the production of ALL housing more efficient and support real on the ground changes to land use code and other costly regulation, this proposal would shut down or limit the flow of cash for their projects. The last measure would basically codify the idea that if you’re going to impose unauthorized taxes on your new housing development, then you can use that money to pay for subsidies rather than scarce State resources.

I doubt this legislation would pass. But it would change the conversation. Will Seattle step up to growth? Or will it face the consequences?