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June 25, 2022

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Seattle’s Mandatory Housing Affordability program ramped up in 2021, new data shows

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SEATTLE — A much debated Seattle program requiring real estate developers to contribute to affordable housing was more productive in 2021 than in 2020, raising more than $75 million as more projects got underway, newly released data shows.

The data also shows that the city has been collecting fees and investing the proceeds in some neighborhoods more than others.

Under the Mandatory Housing Affordability program, implemented between 2015 and 2019, the city made zoning changes to allow larger buildings and more density in more than two dozen “urban villages.” In return, private developers in those areas, from Northgate to South Park, must pay fees that the city distributes to affordable housing projects elsewhere or, alternatively, reserve some space in their own projects for affordable units.

In either case, the resulting units are rent capped and reserved for households with no greater than 60% of the area’s income, or sometimes lower; 60% of the area’s median is about $70,000 per year for a four-person household.

Before the program known as MHA began, proponents said it would harness growth to create affordable housing. Some opponents warned it would stall development, while others said the density allowances would accelerate redevelopment and the displacement of existing residents, including lower-income homeowners. Many wealthy neighborhoods were untouched by the zoning changes.

Last year, MHA raised nearly $76 million in fees and developers agreed to include 95 rent-capped units in their own projects, according to data released this month by Seattle’s Office of Housing. Both metrics increased from 2020, when COVID-19 disrupted the market and when the totals were $68 million in fees and 21 on-site units. Under MHA, developers must pay or agree to include units before they break ground.

The 2021 haul could help the city fund more than 900 affordable units, given that Seattle assumes each unit needs about $80,000 from the city. Affordable housing projects usually combine city dollars with financing from other sources, including the federal and state governments.

For context, funding from Seattle’s property-tax levy for housing helped construct or preserve 385 affordable rentals last year. The seven-year levy was approved in 2016 and was the city’s No. 1 funding source for such housing before MHA.

Among 282 market-rate projects that were subject to MHA’s requirements in 2021, 269 chose to pay fees while 13 chose to include units on-site. The top payer was a high-rise residential project in the University District aimed at college students, which paid almost $12 million.

MHA requires developers to dedicate 2% to 11% of their projects to affordable units when they choose the on-site option, depending on the location and zoning. The fees range from $5 to $39 per square foot. The program is supposed to yield a mix of fees and on-site units, but developers warned the on-site option wouldn’t work for small-scale projects like town houses; most projects subject to MHA are under 10 units (238 last year).

Since MHA was established, projects in Northeast Seattle (Ravenna, Roosevelt and the U District) have contributed the most money by far, paying about $51 million in fees.

The city has yet to invest any MHA money in those neighborhoods in the form of affordable housing. Conversely, projects have paid $6.5 million in South Seattle (Columbia City, Mount Baker, North Beacon Hill, Othello and Rainier Beach), and the city has directed about $51 million from MHA to affordable housing projects here.

Northeast Seattle has generated a lot of money partly because there have been massive development projects in the U District, said Stephanie Velasco, spokesperson for the Office of Housing. Where the city invests is dictated by where the affordable housing organizations that apply for funding obtain land, she said.

The city awarded funding to affordable projects in Northeast Seattle before MHA took effect (including 133 units in the U District that opened in 2018 and 254 in Roosevelt opening soon) and plans to fund more in the future, she said.

“We’re really beholden to the applications [for funding] that come in the door,” Velasco said. “Since the MHA payments started rolling in, we have not had the opportunity to fund projects [in Northeast Seattle].”

Projects in downtown Seattle have paid about $30 million in MHA fees, with the city investing about $16 million from the program downtown. Projects in Capitol Hill, Eastlake and First Hill have contributed about $4 million, with the city investing about $38 million in those neighborhoods.

There are 15,600 city-funded rental units currently in operation across Seattle and 5,400 under development, according to the Office of Housing.

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