OLYMPIA — It’s the centerpiece of Gov. Jay Inslee’s 2023-25 budget proposal: a plan to borrow $4 billion to fund an aggressive push to build affordable housing and shelters in Washington.
A few weeks into the 2023 legislative session, it’s not clear whether Inslee’s proposal will get the necessary support from lawmakers to pass. In its current form, the unprecedented effort to address homelessness and the dearth of affordable housing would also need approval from Washington voters.
“Until we fix our housing crisis, thousands of people will remain homeless,” Inslee told a joint session of the Legislature on Jan. 10. “And we need a fix that provides a level of speed and scale beyond anything we’ve done in the past.”
Here’s how state officials say it would work.
States, including Washington, routinely borrow money to pay for big projects, like a new bridge, or a new building on a university campus.
The idea is to borrow money to make a major, long-term purchase and then pay it off over time. It’s a bit like buying a house by getting a mortgage.
Inslee’s proposal would treat homelessness and the housing crisis as the big purchase, borrowing the $4 billion over six years to build housing and shelters.
The state would sell general obligation bonds to raise the $4 billion. It would pay that money back in increments over a longer period of time.
Move requires voter OK
Before Washington could borrow that money, though, Washington voters would have to approve the idea, allowing the state to borrow more than the debt limit set in the state constitution.
In basic terms, the proposal would let the state borrow and spend a large amount of money for housing separate from money borrowed for other capital projects.
“The capital budget does not have a lot of excess capacity, and it was simply a non-starter to think about slashing billions from the things currently funded like K-12 schools and our new forensic hospital,” said Jaime Smith, executive director of communications for Inslee, in an email to The Seattle Times.
“The reason to go to the people is so that it doesn’t count against the regular, conventional debt limit,” David Schumacher, director of the Office of Financial Management, told lawmakers in a committee hearing. “That in no way means that it is any less backed by the state of Washington than any other debt.”
Washington has high credit ratings, which helps the state get lower interest rates on any debt it takes on.
Some lawmakers have expressed worry that borrowing so much so quickly could hurt those ratings, which could make it more expensive for the state to borrow money because its interest rates are higher.
Misha Werschkul, executive director of the Washington State Budget and Policy Center, said the proposal is “a move away from the more incremental approach” Washington has taken to building affordable housing and addressing homelessness in the past.
“It’s a real step up of the level of investment that Washington state has been able to make in housing and homelessness in recent years,” Werschkul said. An “upfront investment” enabled by borrowing could save money in the long term, she said.
Where the money would go
Inslee has proposed sending the money to build thousands of housing units and shelters for unhoused people. The $4 billion figure was based on the estimated need for housing in the state, according to his office.
“The idea was really a result of the math,” Smith said.
Washington has about 25,000 people experiencing homelessness, and $4 billion “would allow us to build about that many units through a combination of supportive shelter, supportive temporary and permanent housing, and affordable housing,” Smith said.
Legislators could change how much money the state would borrow, over what time frame, and how the money would be spent — and whether it would still need to go to voters.
Senate Democratic Leader Andy Billig, of Spokane, said it may make sense to spend money on housing within the existing capital budget, which “takes away the uncertainty of having to wait until there’s a vote in November.”
But the constitution, according to the governor’s office, says the election on this type of referendum could be held at the next general election in November, or in a special election on a date specified by lawmakers.and interest rates in the future by borrowing so much so quickly.
Senate Republican Leader John Braun, R-Centralia, voiced doubts that even the $4 billion would be sufficient to build the amount of housing and shelter the proposal calls for.
“We need to make it so that there’s affordable housing for everyone in Washington state that is sufficient and affordable,” Billig said. “And we need to take some pretty dramatic steps to make that happen. I really appreciate that the governor came forward with this proposal, which is sort of a new idea. In terms of whether we go with this exact proposal or not, I’m not sure.”
Cities, states look to borrow
Many cities issue bonds to build affordable housing, said Garth Rieman, director of housing advocacy and strategic initiatives at the National Council of State Housing Agencies.
State and local governments already issue housing bonds, which differ from the general obligation bonds Inslee is seeking. Those housing bonds, authorized by the U.S. tax code, are capped by state population. The interest is tax exempt, and they can be used to build affordable rental housing or help first-time homebuyers.
While uncommon, it’s not unheard of for state governments to issue general obligation bonds for housing, Rieman said. That could be increasing as housing continues to be unaffordable in many areas of the country.
“Some states are realizing, you know, all of our existing tools don’t really give us enough money to address the problem the way we want to,” Rieman said. “So they’re looking for other tools to help.”
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