Twisted Logic or Political Expediency?

The Seattle Council Proposes a Housing Tax Termed Linkage Fee

The Seattle City Council believes that new jobs and new development make housing less affordable, and it has proposed a square footage tax on new commercial and multifamily development. In response, the SEATTLE KingCounty REALTORS® is part of a coalition in the real estate industry to identify housing affordability solutions that actually work and don’t jeopardize our economic vitality.

Following the 2013 upzone of Seattle’s South Lake Union neighborhood, the Seattle City Council felt the need to review the fees paid by developers for affordable housing due to concern that the current “incentive zoning” fee model was too limited in scope and failed to raise adequate funds.

Recently, the City Council adopted a resolution that proposes what amounts to a tax of $5-$22 per square foot on new commercial and multifamily development. Revenues will be applied to subsidized housing projects. The fee is based on the specious claim that new jobs and new development make housing less affordable.

The following is an excerpt from a city staff memo, explaining the fee proposal:

Unlike the incentive zoning program whereby a developer can choose to take advantage of bonus residential or commercial floor area above a base height or density in exchange for providing housing affordable to moderate income households or make an in-lieu payment, under a linkage fee program a developer would be charged a fee to mitigate the impact on the demand for affordable housing attributable to new commercial and residential development. Alternatively, a developer could provide some affordable units in a project or offsite to mitigate the impact. Revenue from the linkage fee would be used to develop housing affordable to moderate and lower income households.

The Association, along with many others in the real estate industry are concerned the proposal will increase the cost of housing by making projects more expensive and reducing the feasibility of other projects.  There will be a reduction in housing production and the housing that is produced will be more expensive.

In addition, we are concerned that passage and implementation of the linkage fee will lay the groundwork for a host of additional fees that make housing more expensive.

If Seattle is successful in establishing a linkage fee, it is reasonable to expect that other King County cities would follow Seattle’s lead.

The Association has joined with others in the real estate industry to identify housing affordability solutions that actually work.  Solutions include improving existing programs such as the housing levy and multifamily tax exemption while encouraging production of market rate housing as a mechanism to  keep prices in check by absorbing growing demand.

Additionally, we are reviewing the tenuous legal basis for the linkage fee.

The Council is expected to begin debate on the legislation in May 2015.