Seattle Should Follow State's Lead on Inclusionary Zoning—By Funding It

A new bill would mandate affordable housing in developments near major transit stops, using tax breaks to fund it.

Rep. Julia Reed (D-36, Seattle)

By Josh Feit

With little fanfare, state house legislators passed a game-changing housing affordability bill out of committee last week. The bill, HB 1491, would require more housing density around rail and bus rapid transit stops and mandate on-site affordable housing as part of new developments in those areas. The bill tanked during the last two legislative sessions. But this session, it includes a change that represents a tectonic shift in how affordable housing advocates are thinking about the issue of inclusionary zoning, a policy that requires developers to include affordable housing in new projects.

I'll get to the big shift momentarily, but first, a little history. Known as transit-oriented development, or TOD, housing around transit stops is a longtime priority for pro-density urbanists. In Washington State, I trace its origin back to the 2009 (!) legislative session, when the housing advocates at Futurewise first took up the cause.

At that time, their nascent pro-housing movement unwittingly stirred up a hornets' nest of anti-development opposition from both the homeowner right (who are touchy about "neighborhood character") and the social justice left (who often equate new housing with developer giveaways and displacement).

Thankfully, a lot has changed since then. First of all, gentrification has escalated exponentially under Seattle's low-density status quo, a trend that calls b.s. on the NIMBY thesis that denser zoning is the cause of gentrification. If anything, the last 10 years under single-family protectionist policies show that it's the opposite: Sequestering multifamily housing into a minuscule slice of the city's residential areas causes gentrification.

And, more importantly: The pro-density "Yes In My Backyard" (YIMBY) movement of the past decade has re-framed the density debate in a way that has attracted social-justice lefties. YIMBYs now talk about municipal land use regulations in the context of historic redlining and current exclusionary zoning laws that wall off huge portions of cities like Seattle from lower-income families and renters. As a result, lefties no longer stand in lockstep with wealthier "neighborhood character" obstructionists like they used to.

Certainly, knee-jerk opposition to developers (along with real issues like displacement) persist, but 1491's sponsor, Rep. Julia Reed (D-36, Seattle) let go of the orthodox left's antipathy toward for-profit developers by accepting a Republican amendment from Rep. April Connors (R-8, Kennewick) that includes a new tax exemption to make the housing mandate pencil out. Thanks to Connors' amendment, Reed's inclusionary zoning bill, which passed the housing committee 9-5 with two GOP votes, is now a funded inclusionary zoning bill, or FIZ.

"The goal of this bill," Reed said before last week's vote, "is to try to address the urgent housing needs in our state, to ensure some public value capture for opening up new areas to development, but also to ensure that builders are incentivized to build, and that cities have the flexibility they need to manage this development effectively."

Funded inclusionary zoning is exactly what it sounds like. Rather than simply making developers include affordable housing in a portion of their new developments, FIZ also helps pay for the affordable housing. In this instance, the amendment authorizes a 20-year property tax exemption on the development, and provides two options for affordability; a developer who builds in a FIZ zone can either make 10 percent of the project affordable to people making 60 percent or less of area media income (AMI), or 20 percent for people making 80 percent of AMI.

This is a classic compromise: Developers don't like inclusionary zoning, but were willing to go along with it if it was subsidized; and lefties don't like giving tax breaks to developers, but they like affordable housing. "This is a supply bill that ensures affordability while offsetting the costs for new development," said Futurewise executive director Alex Brennan, who is encouraged by the sudden momentum for his group's longstanding TOD bill.

The funded inclusionary zoning compromise, something I advocated for in this column a year ago, combines two well-intentioned, but limited, affordable housing policy tools: First, traditional inclusionary zoning, which requires developers to add affordable housing if they want to build a project, and second, the state's existing Multifamily Tax Exemption (MFTE) program, which gives developers a tax break if they choose to include affordable housing in a project. By combining the two tools, 1491 makes the prospect of actually adding affordable housing to the state's housing stock more likely.

Seattle has had our own inclusionary zoning program, Mandatory Housing Affordability, since 2019. MHA requires developers to either include some affordable housing in new developments or pay into an affordable housing fund. Reed's bill exempts cities that have their own inclusionary zoning programs from following this new affordable housing mandate. However, let's hope Reed's smart bill, which is likely to encourage more housing starts thanks to the tax exemption, prompts Seattle to consider a FIZ program of its own,.

Similarly, the increased zoning 1491 contemplates wouldn't have a big effect around Seattle's light rail stations, because Seattle has already upzoned those station areas to the same or greater density as what the bill would allow. But the legislation could increase density around many Seattle bus lines where its upzones are greater than Seattle's current requirements. Seattle's Office of Planning and Community Development hasn't done a full analysis, but a spokesperson said, "There is a larger difference between existing zoning around BRT stations in the city and the potential new requirements than there is for zoning in the light rail station areas."

And the legislation could add more density to Seattle in another way. The bill defines transit areas as locations within a half-mile of rail stops or quarter mile of bus rapid transit. This geographical definition of TOD would overrule the current minimalist "Neighborhood Centers" proposal in Seattle's pending comprehensive plan, which would limit new density to developments that are just 800 feet from major bus stops. Seattle's slow-growth council is actually trying to scale back that already-timid TOD plan. Thankfully, if HB 1491 becomes law, Seattle will get more housing and more affordable housing despite intransigence from City Hall.

The TOD bill is currently in the house appropriations committee.

Josh@publicola.com