The City of Seattle has proposed “The Grand Bargain” to fix its affordable housing crisis. The epic title doesn’t meet expectations. “The Grand Bargain” would force housing developers across the City to set aside a percentage of their developments as rent-restricted affordable housing units. Or developers can opt for an in-lieu fee. As a sop to ease this burden, the City will offer ad hoc increases in allowable square footage. But this proposal will fix nothing.
These affordable housing programs, often called mandatory inclusionary zoning, just don’t deliver. They increase the costs of development–costs that either stop projects in their tracks or trickle down to the tenants. And in the case of Seattle, the offer of increased square footage won’t even offset the cost of building that extra space for many projects, much less offset the costs of shouldering the burden of an entire city’s housing crisis.
Worse, the Grand Bargain violates the Constitution. Under the Fifth Amendment’s Takings Clause, cities can’t place conditions on building permits that require developers to fix messes they didn’t make. Builders of multi-family housing don’t cause affordability problems–they generally alleviate them. As we’ve argued elsewhere, cities can’t use permit applications as a chance to demand ransom.
Seattle hasn’t bothered to offer other workable solutions. For instance, the City could encourage microhousing by upzoning or expanding the multi-family housing tax exemption. Market solutions of this sort would do more to ease affordability problems than more bureaucratic meddling. The grandest of bargains would be to allow people the freedom to bargain for themselves.