Anita Adams’ ambition sounds simple enough: the Seattle homeowner wants to build a second, four-unit structure on her property so she can give her adult children, father-in-law, and potentially other family members a place to live in the city’s historically Black Central District, where she has resided her entire life.
The 49-year-old government worker and her husband can afford the project with financing, which she expects would total around 2,200 square feet, though she may have to rent out one of the units for a few years to help cover construction costs.
What she can’t afford, though, is the extra $77,000 she would need to fork over to Seattle upfront just to break ground. That cost was created by a local rule to create and fund affordable housing — but Adams argues it is instead blocking her kids from being able to afford to stay in a city where her family has lived for generations.
So, for two years, the project has been on hold while her children live outside of Seattle. In the meantime, the expected cost of the project has ballooned from about $600,000 to at least $750,000 and as much as $900,000 due to inflation and rising interest rates, she said.
“I should have the right to be able to leverage my property the same way the upper echelon enjoys leveraging theirs,” Adams told MarketWatch. “I’m not a huge developer, I can’t afford all of that. I never, ever thought I would have to go through this to be able to add housing stock in Seattle.”
In Seattle, new developments in certain areas have to include affordable housing units or the developer has to pay the city an amount of money based on the floor area of their project — to fund low-income housing preservation and production elsewhere — as a condition of receiving a building permit.
Adams has two options: Add two extra affordable units to her project and rent them at below-market rates to income-restricted tenants for 75 years, or pay a fee.
“‘I should have the right to be able to leverage my property the same way the upper echelon enjoys leveraging theirs.’”
That’s thanks to a so-called “mandatory affordable housing” program, a version of the inclusionary zoning initiatives that cities across the U.S. have either implemented or are debating right now to cope with a deepening shortage of places for low- to moderate-income people to rent.
Seattle’s program allows developers to build bigger and denser housing —called “upzoning,” something that’s long been restricted in cities— in exchange for meeting the city’s requirements, according to the Seattle Times. It’s ostensibly meant to add housing supply to a city where the average rent for a one-bedroom apartment is now $2,002, up 12% compared to a year ago.
But critics, including Adams’ attorneys at the Institute for Justice, a libertarian public-interest law firm, say the program discourages, rather than encourages, affordable housing development.
Seattle has admitted that the fees are based on the value of upzoning, rather than the structures’ impacts on housing costs, according to Suranjan Sen, an attorney at the Institute for Justice. As a result, Sen said, the fees have effectively charged people for trying to build on their own property, rather than for any perceived harm caused by that construction to the surrounding community.
That’s not constitutional and violates the due process clause of the Fourteenth Amendment, which incorporated the Fifth Amendment’s ban on the government taking property without just compensation, Adams and the Institute for Justice argued in a civil-rights lawsuit filed against Seattle in a federal court in Washington State on Dec. 14.
The lawsuit states that “because the MHA permit conditions create untenable risks to her financial circumstances, Ms. Adams has been and is unable to move forward with constructing a house for her family.”
The city’s making land use permits conditional on “commandeering property,” Sen said, rather than the real impact of the proposed development on the city.
“It’s basically like Seattle saying, ‘Oh wow, we have a housing shortage, and so, therefore, we’re going to charge people money to create new housing,’” Sen said. “They’re giving with one hand with the upzoning, and taking with the other hand with the inclusionary housing requirements to where it’s not as much of a boost to housing as it could be — the only new housing it is boosting is high-end, high-market housing.”
To even have the city consider waiving the fee she’s facing, Adams would have to submit a formal request with a full “master-use permit application” that would require her to pay at least $50,000 to an architect, her lawsuit says. The family only has just enough funds to pay for the project itself by “pooling together their resources and refinancing their house,” according to the lawsuit, and paying to submit the application only to be denied is too financially risky.
“Why shouldn’t my kids — who qualify for low-income housing — be able to rent directly from me without having to tie up my property for 75 years?” Adams said. “You can’t overreach like that.”
The city of Seattle did not immediately respond to MarketWatch’s request for comment.
The aim of inclusionary zoning
Inclusionary zoning is an effort by city officials and affordable housing advocates to fill the dearth of affordable housing left after local regulations stymied construction for decades, leaving low- and middle-income workers with few places to live.
While the programs look different from city to city, the overall goal requires developers to include a certain number of lower-income units in their projects, said Matthew Lewis, the director of communications at California YIMBY, who spoke to MarketWatch generally about inclusionary zoning laws and not the merits of the Seattle lawsuit.
Inclusionary zoning can be promising for cities struggling to “maintain economic integration,” Rick Jacobus, a national expert in inclusionary housing and affordable homeownership and principal of Street Level Urban Impact Advisors, wrote in a 2019 policy brief.
“Well-designed programs can generate significant affordable-housing resources without overburdening landowners or limiting development,” he wrote. And, he added, “U.S. courts have generally upheld the basic right of local governments to promote the welfare of their residents by requiring housing that is affordable to lower-income households.”
Still, inclusionary zoning is “functionally a Band-Aid for the loss of public housing and social housing that we used to have up until the ‘60s and ‘70s,” Lewis said. Without public builders, private for-profit and nonprofit developers are left with the mandate to create housing that locals can afford, but new residents of those projects wind up subsidizing that effort by paying higher rents to make up for money lost on the cheaper units.
“The reason this is problematic is that the housing shortages in most cities were caused by people who already live in those cities who just object to housing across the board — the NIMBYs,” Lewis said. “You’re essentially forcing housing to get more expensive for newcomers who make a wage that allows them to afford housing and exempting all the existing residents from having to pay that.”
The kind of fees Seattle charges developers who don’t add affordable housing to their projects, meanwhile, can be a good thing — cities can often make those dollars stretch further and get more units out of them than what a developer might be able to accomplish on their own, Lewis said.
Indeed, nearly 300 projects with issued building permits made affordable housing contributions through Seattle’s mandatory housing affordability program last year, with a resulting $75.5 million in payments and 95 affordable units, the city’s office of housing said in an April report. In 2021, the city also funded low-income housing projects with nearly $57 million in mandatory housing affordability payment proceeds to support 990 affordable rental apartments and 17 condominiums for low-income, first-time homebuyers.
But the fees can’t compensate for NIMBYism, or people pushing back against any and all development, and housing projects still have to be able to “pencil,” Lewis said, meaning developers need to be able to afford whatever it is they want to build. If the fees are too high, some projects just won’t make financial sense.
This is a point some builders have already made in Seattle. The Master Builders Association of King and Snohomish Counties, which represents homebuilders, said in a December 2021 report that the mandatory housing affordability program was limiting the construction of new townhomes, which typically have three to four units in the city, because it’s not feasible to devote a large fraction of a small project to income-restricted units or pay a fee that “roughly doubles townhome predevelopment costs.”
“Mandatory housing affordability was meant to be a ‘grand bargain’ with bigger developers by offering them upzoning, but it did not distinguish between those investors and regular homeowners.”
— Suranjan Sen, an attorney at the Institute for Justice
“Townhome projects went from representing 35% of Seattle residential construction permit intake in 2018, the last full year before MHA went into effect, to a mere 21% in 2020, the first full year after MHA,” the report said.
Mandatory housing affordability was meant to be a “grand bargain” with bigger developers by offering them upzoning, Sen said. But it did not distinguish between those investors and regular homeowners who may want to build on their own properties, even though other cities have ensured their affordable housing requirements don’t apply to smaller developments.
“It is actually, in fact, making it more expensive for people to live here,” Adams told MarketWatch. “It’s driving up rents.”
Adams’ home is deeply important to her — it’s right by the house where she grew up, in a neighborhood she loves. As a girl, she used to walk by the property she now owns, making note of the big maple tree in its front yard as she made her way to the Black-owned corner store nearby.
“It was among the nicer facades of houses in this neighborhood, and so I always loved this house,” Adams said. “When I bought this house, about 25 years ago, I loved the room that became my son’s room. The reason I loved it so much was because I had a view of the entire valley, and I would just sit there and rock him to sleep.”
But her neighborhood is changing. Adams credits her and her husband’s living-wage jobs as the reason why she and other government workers can still afford to live in the Central District, while others have been priced out. Adams is now the only homeowner left on both sides of her family.
She’s been hounded by investors looking to snap up her property, and her neighbors have also been pressured to sell. It’s frustrating to feel like the neighborhood’s Black residents have been ignored or left behind, while their homes have been seen as desirable for others who can afford to have them comply with certain rules, she said.
Even so, Adams has tried to make room for her loved ones who have been pushed out of the city. Today, Adams, her husband, and her father-in-law call the property home, and in the past, she’s housed anywhere from six to eight people at the property.
Her 23-year-old son and 21-year-old daughter even lived in the basement after they lost their housing during the pandemic because they had to leave their college dorms, but they were pushed outside city limits when Adams’ home got too crowded for them to stay any longer.
Building a new four-unit structure could give her kids a future in the neighborhood they know so well, Adams said. The idea of her children being displaced for much longer is painful, and she says it’s impacted her health, her culture, and her way of living.
She hopes the conditions restricting her from building are struck down as a result of the lawsuit so her children and others can move back in with her.
“We were already relegated to this area due to redlining,” Adams said. “And now we’re penalized for living here. Are you saying you don’t want me here? Is local government saying they don’t want me here? Because that’s what it feels like.”
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