Seattle's Misstep Highlights Need for New Approach

Last week, Seattle’s City Council did an “about face” revoking the onerous corporate head tax it unanimously enacted less than one month ago.

Its city council had approved an annual $275 per full-time employee assessment to fund homeless programs and affordable housing. The tax, which would raise $237 million over five years, was the subject of an employer-led referendum to abolish it.

The handwriting was on the wall. If the council did not rescind the tax, the voters would.

Tax supporters targeted the city’s largest employers. Amazon, which is actively searching for a second corporate headquarters (HQ2) outside of Seattle, was the bull’s eye. It would have cost Amazon an estimated $11 million annually.

Tax opponents feared that, if the tax went into effect next January, Amazon would shift its focus from Seattle and put over 40,000 jobs in jeopardy. Seattle could be left with large downtown buildings standing empty.

There is no question about the gravity of Seattle’s homelessness. A Puget Sound Business Journal study estimated the region is spending more than $1 billion a year on homelessness. It is straining the resources of government and charitable organizations.

The U.S. Department of Housing and Urban Development (HUD) reported on a single night in 2017, more than a half million people were homeless in America. There were more than 21,000 people homeless in Washington State last year.

In Seattle, HUD records show the unsheltered population grew by 44 percent over two years to nearly 5,500 and it is worsening.

Many cities are finding that affordable housing in urban neighborhoods is disappearing and replaced with more expensive condos and office buildings. Higher wage earners want to locate closer to work and avoid traffic congestion.

For example, Philadelphia’s City Council is considering imposing a one percent tax on construction of most residential, commercial and industrial projects. The tax would be calculated based on the costs listed on building permits and would raise $22 million a year.

Money raised from Philadelphia’s tax would be used to give qualified home buyers as much as $10,000 for a down payment and closing costs, the Wall Street Journal reported.

Some members of Philadelphia’s City Council preferred requiring property developers to set aside 10 percent of new projects as below-market units.

“Detroit in 2017 passed a law requiring developers that receive city subsidies or discounted land to set aside 20 percent of units for low income households, typically those making between $34,000 and $41,000 for a family of four,” WSJ reporter Scott Calvert wrote.

Along with looking at project “set asides” for affordable housing, government officials need to look at ways to reduce regulatory costs.

Nationwide, regulations imposed by all levels of government account for nearly 25 percent of the sales price of a new single-family home, according to a 2016 study by the National Association of Home Builders. It found that regulatory costs in an average home built for sale went from $65,224 to $84,671 between 2011 and 2016.

Regulatory costs impact rentals as well particularly in West Coast cities. RentJungle.com reports a two bedroom apartment in Seattle rents for $2,700 a month on average compared with $1,450 in Pittsburgh, PA. Rent in Austin, TX, is 20 percent lower and consumer prices are 30 percent below Seattle. (Both cities are attempting to lure Amazon’s HQ2).

Homelessness is a universal issue in which cities vying for Amazon’s HQ2 face. So is the availability of affordable homes and apartments to rent or buy.

Hopefully, the faux pas in Seattle will lead to a new and more cooperative direction. This problem has moved far beyond just one in which elected officials can address. It now requires business involvement.

(DON C. BRUNELL is a business analyst, writer and columnist. He retired as president of the Association of Washington Business, the state’s oldest and largest business organization, and now lives in Vancouver. He can be contacted at theBrunells@msn.com).