How to Resolve Tacoma, Pierce County, Affordable Housing Difficulty

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Tacoma and Pierce Counties will raise millions in affordable housing finance over the next 20 years after state lawmakers pass a law that allows local communities to collect a portion of the state's sales tax.  This sunset view shows a neighborhood in north Tacoma looking southeast towards Mount Rainier.

Tacoma and Pierce Counties will raise millions in affordable housing finance over the next 20 years after state lawmakers pass a law that allows local communities to collect a portion of the state’s sales tax. This sunset view shows a neighborhood in north Tacoma looking southeast towards Mount Rainier.

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Compassion doesn’t make a pencil, and it won’t build enough affordable housing in Pierce County. In Tacoma alone, nearly 15,000 units are missing from the 2018 Affordable Housing Action Strategy; at $ 200,000, a unit worth $ 3 billion. The rest of the county is likely to have similar needs.

A new intergovernmental initiative called South Sound Housing Affordability Partners hopes to make progress. Here are four ideas that can help: monetize benefits; Removing restrictions on local government; Rethink zoning; and invite builders to profit.

Monetization of social benefits

Investors want a return. If we expect governments and private donors to make significant investments in affordable housing, we need a clear and credible return on investment. Head Start has been talking about ROI for years: every dollar spent on Head Start gives back seven to nine dollars in specific social benefits. Affordable housing should have a similar calculation and use ROI to lay a foundation for support.

Local governments unleashed

For decades, local governments have been prevented from giving public land or renting it cheaply. The legal landscape is more lenient now; Governments should take advantage of the changes.

For example, a new Washington law from 2018 allows local governments to give land to nonprofit and for-profit property developers for affordable housing. This move did not result in much new housing on site, however. We see two reasons for this.

First, for profit property developers are the preferred recipients of such land because they serve the lowest incomes. But nonprofits take more time to arrange funding, so they essentially have excess bank assets. For-profit developers could build faster, but they’re at the end of the line. Allocating more land to for-profit builders could translate into more affordable units faster.

Second, when the acquisition or improvement of surplus land relies on federal dollars (often it does), developers are cautious about triggering Davis-Bacon requests. Davis-Bacon is federal law requiring contractors to pay “prevailing wages” when federal funds are used; these wages and the associated bookkeeping can add significantly to costs. Nonprofits (which generally need public funding anyway) aren’t put off by Davis-Bacon; but for-profit developers stay away.

The underlying assumption can be wrong. A 2016 federal appeals court ruling states that Davis-Bacon will not transfer if a local government leases land to a for-profit corporation. This ruling can open up more excess public land to all types of builders.

Rethink zoning

Four plexes will not solve our problem with affordable housing. The need is too great and developers cannot make money from small projects. That means we need more space for big projects. There are places where zoning allows such projects, but if we continue to group them in a few places we run the risk of separating low-income people from the rest of the community.

The solution is obviously some form of inclusive zoning that enables larger projects in mainstream neighborhoods. As Home in Tacoma demonstrated, this is not an easy step. But it can be an essential one.

Open for business

When local government asks home builders why they aren’t creating more affordable housing, the answer is simple: they make more money doing other things. That’s rational. But what if we ask the wrong builders?

Housing Finance publishes a list of the 50 best home builders in the country annually. These builders are primarily for profit and many are publicly traded. You make money from a repetitive, streamlined construction process and managing the property after construction. They rent to people with low incomes above the 65th percentile AMI.

By accommodating the upper third of the low-wage earners, we could relieve the overall system and reduce competition for existing units. It’s good.

However, these builders don’t seem to like it here. The top ten had together produced over 20,000 units in the past year but built no new projects in Washington. Maybe South Sound Partners can figure out why these big construction companies aren’t building here and then lower the barriers. It could result in thousands of new units quickly without significant public investment.

Is that enough?

I have outlined four steps: demonstration of the ROI; Flexibility in land disposition; including zoning; and the recruitment of for-profit builders. Will these do the trick? I do not know. The need is great and growing; public and private resources are thinly scattered. But it’s almost certain that more of it won’t solve the problem. Whether these or many other ideas, we need new approaches. Let’s hope South Sound Partners take them over. Soon.

Ken Miller was formerly chairman of the board of directors for the Tacoma Housing Agency; he owns DADU Homes.

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