Councilmembers voted 6 to 1 Thursday to run an alternative ballot measure against Initiative 137. Councilmember Tammy Morales voted No, and Councilmembers Cathy Moore and Dan Strauss were absent from the special Council meeting. The vote came just one day before the Council’s hard deadline to act on I-137.
I-137 would create a new “excess compensation” tax on company payrolls for each Seattle-based employee paid over $1 million a year. It is estimated to generate more than $50 million annually to fund the Seattle Social Housing Developer’s work. The Council’s alternative would instead direct $10 million from the Jumpstart payroll tax for five years. The measure would limit the subsidy to units for people earning 80% or less of area median income, rather than up to 120% as I-137 would do.
Both measures will go before voters in the Feb. 11, 2025 election.
The Seattle Social Housing Developer was created when voters approved Initiative 135 in February 2023 57% to 43%. At the time, House Our Neighbors, the campaign behind I-135, said it would likely go back to voters to create a new tax source to pay for social-housing work.
This year it did exactly that, collecting more than 26,500 signatures from Seattle voters to qualify I-137 for the ballot. Once qualified and transmitted from King County Elections to the Seattle City Clerk, the City Council had 45 days to either adopt I-137 outright, vote to send it to the ballot for voters to decide, or create an alternative ballot measure to run alongside I-137. Sept. 20 marks the end of that 45-day period for the Council.
The Social Housing Developer has had a bumpy start, something its supporters blame on the slow delivery of startup funds from the city and state. It took more than a year to hire its first CEO, Roberto Jimenez, and the public development authority has struggled to comply with laws governing public records and open public meetings, according to reporting by The Seattle Times.
Councilmember Maritza Rivera, who co-sponsored the alternative, said the scaled-back funding measure is meant as a guide rail for the Seattle Social Housing Developer.
“It balances the need for innovation with the need for accountability,” said Rivera at Thursday’s meeting. “It also allows the Seattle Social Housing Developer, a new public development authority, the opportunity to show what they can build here in Seattle. But it won’t give a blank check to another new agency that does not have the experience creating housing.”
Councilmembers Bob Kettle, Cathy Moore and Tanya Woo co-sponsored the alternative. Mayor Bruce Harrell, the Seattle Metropolitan Chamber of Commerce, the Downtown Seattle Association and a group of housing advocates had all urged the Council in recent weeks to introduce an alternative to I-137.
In addition to directing $10 million in Jumpstart dollars to the Social Housing Developer, the Council’s alternative would adjust Office of Housing rules to allow the Social Housing Developer to compete alongside other traditional affordable-housing developers for Office of Housing development funds, provided the new entity has a CEO, CFO and “adequate financial controls.”
House Our Neighbors said that by limiting funding and limiting the income levels of social-housing residents, the Council’s proposed alternative could kneecap Seattle’s social-housing experiment before it gets off the ground, while redirecting Jumpstart money meant to pay for very low-income housing.
“It just shows how they’re more willing to take from low-income programs than they are from the wealthiest businesses in our region,” said Tiffani McCoy, House Our Neighbors policy and advocacy director. “It’s a quote-unquote pilot project that doesn’t work because it’s not a pilot of the actual social-housing economic model.”
Morales, a longtime supporter of social housing, spoke against the alternative when it was introduced at the Sept. 17 City Council meeting, suggesting that her colleagues were “completely misunderstanding” the social housing model.
“We are woefully behind in producing enough housing in the city for low- and middle-income individuals and for families,” said Morales. “We should be investing every cent we have into our housing and homelessness crisis. Pitting one type of development against another and making everyone compete for [Jumpstart] funding is the wrong direction.”
Social housing is a form of mixed-income affordable housing. It is meant to benefit a broad range of incomes, but primarily would serve middle- to upper-middle-income earners making 60%-120% of the area median income ($63,000-$126,480 for an individual).
While middle-income earners are not nearly as rent-burdened as low-income residents, the ever-increasing cost of living in Seattle has made it much harder for people in the 60%-80% income bracket to afford the city.
Having mixed-income tenants is key for the social-housing model. Higher-income tenants would pay higher rents than lower-income tenants in the same building. Those higher rents are meant to subsidize the rents of lower-income tenants and ongoing operation costs of the buildings. Low-income subsidized housing requires government grants and tax credits to subsidize rents and operations costs because the rents tenants pay are too low to cover costs.
In House Our Neighbors’ vision, the excess compensation tax would pay for the Seattle Social Housing Developer’s start-up costs as well as help fund acquisition and construction of apartment buildings, when coupled with money raised through bonding.
McCoy said the limits imposed by the Council’s alternative would make it extremely challenging for the model to pencil out. The alternative limits the public subsidy to units serving people earning 80% AMI or less, and suggests that the Social Housing Developer will need to seek other funding to pay for those apartment units meant for higher-income residents.
McCoy doesn’t think traditional banks will loan the developer money for those 80%-120% AMI units because it wouldn’t have a significant pot of money to draw on to start to pay its debt.
About two dozen public commenters testified on Sept. 19 before the Council voted on the social-housing tax alternative. All but a few spoke against the Council’s plan. Jon Scholes, president of the Downtown Seattle Association, was there in support of the alternative.
“While you don’t have the opportunity or option to stop [I-137] in its tracks, you have the opportunity to offer the public and voters a reasonable and more responsible alternative,” he said.
Representatives from several affordable-housing developers, advocates and financers – including Plymouth Housing, the Low-Income Housing Institute, the Housing Development Consortium and LISC, a community-development financial institution – urged the Council not to use Jumpstart funding for social housing, pointing out it would amount to $50 million over five years diverted from construction and operations of housing for Seattle’s lowest-income residents.
The social-housing model is well-established in Vienna, Singapore and other cities around the world, but is also starting to gain momentum in the United States.
Montgomery County, Maryland’s housing authority is building publicly owned mixed-income housing. King County Councilmember Girmay Zahilay recently proposed using the County’s bonding ability to fund construction of public mixed-income housing. And U.S. Reps. Alexandria Ocasio-Cortez and Tina Smith just proposed creating a federal social-housing program.
