A few years back I reviewed about 30 years of spending on housing by the State of Washington using the Housing Trust Fund. I found the state’s greatest housing shortage was in rural counties not Seattle. However, most of the money spent on housing was in Seattle and its county, King. With the help of Hamilton College student Chris Akuleme, I took a quick look at about a decade’s worth of money distributed to subsidized housing projects in Washington through the Low Income Housing Tax Credit (LIHTC) program. The results were, unfortunately, the same: money from the LIHTC favors wealthier and whiter urban King County over poorer rural counties.
To gather data from 2011 to 2020, we used the Department of Housing and Urban Development’s LIHTC Database. This is not the best source of data. However, to get full project information would require a lengthy disclosure process, and since the database exists, it seemed worth it to use it to take a look at tax credit investment over a period of years. It’s value is limited, but it is still a useful tool to get a broad picture of the use of tax credits.
Right up front, I should also say that I hate the use of averages to describe issues related to affordability, the qualitative relationship consumers have to price. An average doesn’t capture outliers (anecdotes do that) and they leave out the fact that even when average prices are high and average wages low, there are still many units that people with low wages can pay for. Finally, the tax credit program doesn’t provide the bulk of funding for these projects. As non-profit advocates say, the tax credits are “leveraged” with other subsidies, or other subsidies are “leveraged” tax credits. It’s not clear from the database just how much this funding formed the final budgets of these projects. With those caveats, here’s what we found.
First, the LITHC program allows a taxpayer to use a contribution to subsidized housing to get a credit to reduce her taxes in an amount greater than her contribution to the program. The actual money ends up in the hands of state housing financing agencies that allocate those dollars in the form of equity to mostly non-profit (some for projects are for-profit projects) builders. So, the money in this analysis is real money, however the process of it getting from taxpayer to subsidized housing unit is complex.
Here’s a table that describes what we found in two counties and cities in Washington.
Looking at the numbers: More poverty, less housing in Yakima
Let’s look at tax credits in two counties, King and Yakima.
King county did get a disproportionate amount of tax credits based on population. But over the period of review, Yakima County was allocated tax credits consistent with its population size. This is often what people will point out to me when I say that more dollars of housing subsidies flow into King County and Seattle than anywhere else: they have more people. And many would point to the other measures in the table, especially cost burden, the percentage of gross monthly income spent on housing.
Clearly, housing is cheaper in Yakima county and in the city of Yakima than in King County and Seattle. Looking at the cost burden in the two counties and cities, the problem is worse in Seattle when income levels drop to half the AMI. But this an obvious problem; people with fewer dollars see more of their income consumed by higher housing costs because fewer dollars to start with. If one looked only at average incomes and average rents, it would seem fair to push more money to King County and especially Seattle where the cost burden rises to above 50 % percent of average gross monthly income.
In Yakima County, where the poverty rate is 16.5 percent, one of the state’s highest, the median income is $51,637, but in Yakima, the has an average median income is $44,950. The average rent in Yakima is about $868, an amount affordable to someone earning 100 % of AMI and even 80 % of AMI. At 50 % AMI the cost burden goes up. While Seattle’s rents are higher and consume even an even greater percentage of people’s income, there is a lot less housing being built in Yakima.
One source has the direct vacancy rate in Seattle at 8.11 percent and about 2.5 percent in Yakima. The numbers I use come from the University of Washington, and that review of vacancy rates across the state pegs the vacancy rate in Yakima county at 1.2 percent and King county’s at 5.3 percent. While rents are higher in Seattle and King County there is more housing available. And taking a look at housing production over the review period, 2011 to 2020, housing production wasn’t keeping up with growth anywhere in the state, including in Yakima.
The Office of Financial Management, using data from The United States Census, shows about 13,000 new people coming to Seattle between 2019 and 2020. In Yakima that number is only about 1,050 new people, the city grew from 94,440 people to 95,490 people, while Seattle grew from 747,300 to 761,100 people, or 13,800 new people,
If we look at housing production for that year, 2019 to 2020 the housing unit count in Seattle went from 367,806 to 376,117 an increase of 8,311 housing units or about 1.6 new people for each new housing unit created. In Yakima, the housing count went from 36,233 to 36,566 an increase of 333 housing units or about 3 people for each of the new housing units created.
Over the longer 2011-2020 period, the ratio of new people to new housing is lower in Seattle, about 2.3 people per new unit versus 2.7 per unit in Yakima county and 2.6 in the city of Yakima. Because we know there are more people in poverty in Yakima county, even though the ratios look similar, the real impact is greater since there just isn’t that much housing available in Yakima. When a new person arrives in the city or county, they are likely to have a lot less money than a new arrival in Seattle. In Yakima that new person is like to be a migrant Farmworker.
Demographics: A new ethnic majority represented by a political minority
Who lives in Yakima County? Only 43 percent of people in Yakima county are white, while about 49 percent are Hispanic and 70 percent of people living in the county are foreign born. Yakima is largely a county of immigrants of color. King county on the other hand is 57 percent white with a Hispanic population of about 9 percent and an immigrant population of about 34 percent. Seattle’s whiteness is even more blinding, with the city having a huge majority of white people, 75.9 percent with only 5.52 of the population being Hispanic. While it claims to be a city of diversity, it’s whiter than the state and King county.
As I pointed out in the post linked at the beginning of this post, rural Washington is poorer, more diverse, with older building stock, and a lot less housing than King County and Seattle. There’s no way to avoid it, more housing resources end up in the wealthy and politically powerful, Democratic Puget Sound, not in more rural and Republican Yakima county. As with Housing Trust Fund dollars, the irony is tragic for rural Washington. By any measure, there is more need for the construction of more housing – market rate and subsidized – in rural communities. Yet, Seattle has a local government that has its foot on the brake of production of new housing with too much regulation, rules that impact the development and construction of both market rate and subsidized housing.
Given their public posturing, one would think that the Democratic power structure in the state would be concerned about the large number of public resources being consumed by overregulated Seattle. It would also seem that Democrats would champion more of those resources for a community that fits their vision of a more diverse future, a county with a majority minority population of immigrants who work in the state’s largest industry, agriculture. Instead, Democratic legislators that dominate policy making on housing continue to make policies on things like eviction that will make matters worse for people that need housing in Seattle, what would almost seem like sabotage to justify more spending on the “crisis” there.
Market rate housing is hard to build in Yakima because people there can’t pay the rents required to cover the costs of land, construction, financing, and operation of new housing. Too many people there are struggling with poverty. When it comes to subsidized housing, the political process favors wealthier, white, and woke King county and Seattle, a city that hasn’t seen a housing regulation, fee, and tax it doesn’t like. Furthermore, when cost of building subsidized housing is taken into account, far more units could be built in places like Yakima, where it is needed most. The per unit cost based on the tax credit data I used is much lower, $10,625 in Yakima versus more than $23,000 in Seattle. One project’s total development cost was $47 million for 88 units, roughly $500,000 per unit.
The answer to the imbalance is pretty straightforward.
- Allow more housing of all kinds to be built everywhere in the state, including in Seattle. The benefit is more choice and lower price for all consumers.
- As long as Seattle refuses to liberalize its regulations, subsidies there should be primarily for direct cash assistance for rent, not new construction.
- More money and tax credit funds should be aimed at states with high needs based on income, poverty, vacancy rates, and age of building stock, not ability to assemble capital and work the political system.
- Worker housing is key. Like it or not, agriculture all over the state is still the biggest economic engine in the state, not tech. Keeping the state competitive means being able to ensure these workers have housing.