Two years ago, voters approved Initiative 135, which created the Seattle Social Housing Developer. Supporters of Initiative 135 argued the Seattle Social Housing Developer would be “a new, powerful tool to counter” the city’s housing crisis by empowering a governmental entity to develop and acquire properties for housing.
Explained the House our Neighbors! campaign at the time, “Social Housing is publicly owned forever, permanently affordable, and creates cross-class communities and resident leadership. In countries around the world, such as Singapore, Austria, France, Uruguay and Canada, housing is a public good.”
Such lofty rhetoric to date has collided with a rather unimpressive start for the social housing body.
In April 2024, the Seattle Times reported that, more than a year after voters approved the creation of the Seattle Social Housing Developer, “Seattle’s social housing developer still hasn’t hired a CEO. It doesn’t have a chief financial officer, either, nor an office. Its website is sparse and its board members haven’t been paid, as was required by the initiative. One staff member is paying for Google Workspace out of his own pocket.”
The Seattle Social Housing Developer hasn’t done much even on such fundamentals and there remain serious concerns about its ability to function.
“A quasi-governmental organization, it has failed basic competency, transparency and accountability standards, frustrating residents wanting to learn more about its operations,” explained the Seattle Times editorial board.
Worse, the editorial board continued, a lack of expertise is built into the social housing developer itself. “By its charter, the majority of Seattle Social Housing Developer board members must be residents of the social housing projects they oversee,” they note. “Knowledge about construction, financing or operations is not a requirement.”
It turns out the aspiring central planners couldn’t even plan out their own organization.
But none of this stopped Seattle voters from overwhelmingly approving a funding stream for the social housing developer on February 11 this year via a ballot measure. More than 63% of voters, in fact, went along with it.
Proposition 1A will impose a 5% payroll tax on compensation paid by employers to any employee above $1 million. Proponents expect this to generate approximately $50 million per year for the social housing developer when it gets going, but the city will need about a year to create the systems to facilitate the tax collection.
When funded, the social housing projects will require the use of union labor and “the highest environmental standards to meet our city’s climate change goals,” which will probably drive up the cost of housing units more than necessary.
Assuming opponents don’t file a legal challenge to the tax, supporters of Prop. 1A and the Seattle social housing scheme hope to be able to bring about 2,000 housing units online over the next decade. Whether that pans out remains to be seen, given the political underpinnings of the social housing developer and the lack of a track record of actually being able to do the job.
Separately, critics have pointed out that income eligibility for these properties is actually quite high, with people making up to $126,000 eligible to live in these government-facilitated housing units.
This is what prompted some local affordable-housing supporters to complain, “Over 12,000 people are homeless in Seattle every night. Another 30,000 risk losing homes to increased rents and demolition. Any new tax revenues should go toward assisting these truly poor folks. Over the first 10 years of social housing, advocates want exclusive use of $520 million to build 1,940 higher income apartments but only 60 for homeless and poor people.”
Since this is all propped up by a payroll tax, it has to be pointed out that city-imposed payroll taxes have an obvious flaw: businesses can move or shift their operations to other cities. That development, incidentally, has been seen in Seattle, which imposed a payroll tax on the biggest companies in the city in 2020 to fund affordable housing.
The result is what you’d expect. “City officials recently reported that the tax brought in $47 million less than expected last year, which coincided with large employers shifting more employees outside city limits,” noted the Tax Foundation in March.
So to recap: Seattle has empowered and will soon fund a politically-captured social housing developer with no track record of actually getting anything done with the goal of maybe bringing a couple thousand units over the next decade for people making up to $126,000 per year. It will do that by imposing a new payroll tax on top of payroll taxes it already levies and which has already been shown to push companies (and therefore jobs and revenues) out of the city.
Instead of fiddling with these sorts of schemes, Seattle needs to put less emphasis on making government a homebuilder and more emphasis on getting government out of the way of homebuilder if wants to actually solve its housing crisis.
The city needs to allow much greater density in many more parts of the city than it currently does or plans to allow. It needs to allow much more by-right development. And it definitely needs to get rid of unnecessary hurdles like its completely unnecessary design review committee which subjects housing projects to arbitrary scrutiny.
In other words, the city just needs to legalize housing.
Sal Rodriguez is opinion editor for the Southern California News Group and a senior fellow with the Pacific Research Institute. He is the author of Dynamism or Decay? Getting City Hall Out of the Way, published by the Pacific Research Institute.
