Seattle's City Council wants to take on housing affordability as its next breakthrough cause. The stakes are much higher than with the $15 minimum wage.
When Seattle embarked on the $15 minimum wage policy, I wrote that the city was prosperous enough to take the chance. The immediate predictions of doom — closed restaurants, ruined franchise owners, laid-off low-skill workers — haven’t come true. As to the long-haul, it is too soon to tell. But I am skeptical that it will prove ruinous. It will help many.
But it won’t fix the problem of affordable housing in the city for many low-wage workers. Even if a worker can piece together 40 hours at minimum wage — no easy task — he or she would be grossing about $30,000 a year (with two weeks off). That’s nearly $10,000 higher than the federal poverty level for a family of three. But the purchasing power is severely undercut in a relatively expensive city such as Seattle.
The City Council is struggling to find the best response. One would be so-called linkage fees; another rent control.
Linkage fees — a type of impact fee or tax — are charged to developers, generating funding for affordable housing. San Diego passed a modest version last year. Rent control — think price cap — has a controversial history and generates much debate over its effectiveness.
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Beyond a certain threshold, taxes inhibit economic behavior — thus the crying need for a carbon tax as a response to climate change, or a transaction tax to tamp down the casino behavior on Wall Street. At the right level, however, taxes or impact fees can mitigate externalities or fund public goods without driving away the economic actors (i.e., killing the golden goose).
The biggest risk for Seattle is that developers go elsewhere, such as the Eastside or Austin. Lesser Seattle fans might cheer until they realize these capitalists provide a big chunk of the funding for the City Council’s pet progressive projects and “the neighborhoods.” A companion danger is that the response — and this is especially true of rent control — actually reduces affordable housing or incentives to build.
Never confuse brains with a bull market, the axiom goes. Seattle’s elected officials should not confuse their supposed policy acumen with a historic boom driven by forces almost entirely outside of City Hall. If they think investors, site selectors and corporate leaders will pay any price and bear any burden to be in this city … that’s quite a gamble.
As I wrote about the minimum wage, the anger and angst in blue Seattle is entirely understandable in a time of outrageous inequality. But endangering the larger business climate, which a heavy hand against developers would mean, is very different from the $15 campaign. The first people hurt would be the working poor.
First, do no harm.
One intelligent response hiding in plain sight before council members — but not readers who responded to my poll last Friday — is transit.
The region does have affordable housing. It is also blessed with a high concentration of employment in downtown Seattle and Bellevue — blessed because sprawling out into more office “parks” is ruinously inefficient, car-dependent and adds to emissions. The challenge is to better link these two assets: locations with affordable housing and the concentrated employment centers.
No single mode is sufficient, certainly not buses. The City Council would be best served to work regionally to speed up construction on light rail, improve heavy rail commuter trains, as well as the bus connections. A subway would be nice, but let’s start with those first three.
Affordable housing is out there. Connect it with fast, convenient transit.
Today’s Econ Haiku:
Mark Driscoll’s bad odor
Aussie church says stay away
There’s always Wall Street