The Feb. 11 special election posed two questions to voters: Should Seattle fund social housing, and if so, should the city impose a new business tax to do so or use money from the existing Jumpstart payroll tax?
Social housing advocates won by a wide margin. On the question of whether to fund social housing, 73% of voters said Yes vs. 27% No. On how to fund it, Proposition 1A (a new tax) beat Proposition 1B (existing taxes) 63% to 37%. The election results were certified on Feb. 21.
“We’re all astounded on our side. … we thought it might be close,” said Roberto Jiménez, CEO of the Seattle Social Housing Developer. “It gives us our clear mandate to move forward. We’re really excited about that and eager to get to work addressing the actual need that exists and is growing.”
Social housing is a form of mixed-income, publicly owned affordable housing primarily meant for lower-income to upper-middle-income residents. Residents will pay no more than 30% of their monthly incomes in rent (the standard definition for an affordable cost of living). Higher-income residents would pay higher rents, which would help subsidize the lower rents paid by lower-income residents.
Voters approved the creation of the Seattle Social Housing Developer in the February 2023 election, which had been put on the ballot through a citizens’ initiative led by advocate group House Our Neighbors. The same group collected signatures to put the new tax to a vote this Feb. 11.
The passage of Prop 1A created a 5% “excess compensation” tax on employer payroll expenses for each Seattle-based employee paid over $1 million in annual compensation. The tax is effective Jan 1, 2025.
Employers will pay a 5% tax on any dollar over $1 million in total employee compensation. It is estimated to generate about $50 million a year to pay for land acquisition, construction and administrative costs for the Seattle Social Housing Developer.
According to Julie Johnson, Office of City Finance communications director, it will take about a year to implement the new tax including building it into the city tax system, developing tax forms and doing outreach and education with businesses.
The city will collect the full first year of the tax at the beginning of 2026, then collect it on a quarterly basis moving forward. To receive the tax proceeds earmarked for social housing, the Seattle Social Housing Developer will have to provide the city with an annual spending plan including “documentation to back up the release of the funds,” according to Johnson.
Jiménez said the Social Housing Developer isn’t waiting around for 2026 funding to get started.
Step one is hiring more staff. Currently Jiménez, who’s worked in nonprofit affordable-housing development for 20 years, is the only staff member and the volunteer board has nine of 13 seats filled. Jiménez said they plan to hire a finance person, a housing developer and an administrative assistant.
The Developer is also starting to eye up property acquisition, though has not yet committed to anything. Jiménez said he and several board members toured an existing apartment building with over 200 units that they could purchase and manage as social housing.
“It’s quite a nice property, not one that’s aging that needs a lot of rehab,” said Jiménez. “That would allow us to really hit the ground running and build out our model in an existing property where there are tenants. … It would allow us to really focus on building infrastructure in real time with real people in real community.”
He said they’re also looking at a piece of land that would allow them to build a social housing development from the ground up. But ground-up housing construction typically takes at least three years to complete after factoring financing, permitting and building.
To pay for staffing, operations and development while they wait for tax proceeds in 2026, the Social Housing Developer will likely have to borrow money against future revenue to pay for operations and project development. Jiménez said that could be private borrowing or a loan from the city, but hopes it will be the latter since commercial lending rates are much more expensive.
The Social Housing Developer is also relying on startup funds from the city that were mandated by the 2023 ballot measure that created the Developer. According to Mayor’s Office spokesperson Callie Craighead, the city has disbursed $405,000 of the required $850,000 in startup money, and the social housing developer has spent approximately $350,000 of those funds. Craighead said the office is waiting on an updated invoice from the Developer to disburse the remaining funds.
Prop 1A faced significant opposition from the Seattle Metropolitan Chamber of Commerce and local corporations. A PAC funded by Amazon, Microsoft, the Chamber, T-Mobile and others spent more than $500,000 opposing the measure and supporting Prop 1B, which would’ve shifted money from the existing Jumpstart payroll tax to fund social housing.
Mayor Bruce Harrell appeared on a mailer funded by the PAC supporting Prop 1B.
“Mayor Harrell is on the record as a supporter of social housing as a novel way to combat the housing affordability crisis that impacts everyone in our city,” said spokesperson Craighead. “However, at this fragile moment in Seattle’s economic recovery and while legislators are discussing a potential statewide payroll expense tax, he did not think it was prudent to increase taxes, which is why he supported 1B.”
With the passage of Prop 1A, Craighead said the city will “follow the next steps as mandated by the Charter to support the objectives of the initiative.”
In addition, the Mayor’s office gets to appoint one seat on the Social Housing Developer’s board. Their previous appointee, community development expert Chuck DePew, recently stepped down from the board. Craighead said they plan to appoint someone soon with housing development experience to replace DePew.
Social housing advocates are worried that the Chamber or a Seattle business could sue to stop the new tax from being implemented. The Chamber sued the city after Seattle created the Jumpstart payroll tax, but was ultimately unsuccessful, after a state appellate court deemed the tax legal.
Tiffani McCoy, House Our Neighbors co-executive director, said the group is preparing for a possible lawsuit. “Their concerns were always about the wealthiest not paying one dollar more in taxes to address our affordable-housing crisis. So we expect it fully.”
The Chamber did not respond to a question about the possibility of a legal challenge.
“The employer community will be tracking the progress of the Social Housing Public Development Authority, now that it will collect an estimated $50 million a year, every year, in perpetuity – roughly half of the Seattle Housing Levy’s annual spending,” said Chamber CEO Rachel Smith. “We hope it can hire the necessary staff, beyond the single staff person it has today; develop needed financial, construction, and acquisition plans – instead of its ‘hypothetical business plan’; and deliver on campaign promises, which includes creating 2,000 units of housing in the next 10 years.”
Now that the Seattle Social Housing Developer is off the ground, and voters have approved a new tax to help pay for it, the advocates at House Our Neighbors are looking for more places to campaign for social housing.
McCoy said the group has been talking to other King County cities about social housing and lobbying in support of a bill from state Rep. Julia Reed, D-Seattle, that would require the state to support social housing developers the same way they do traditional public housing authorities.
