This document summarizes key issues with Seattle's incentive zoning policy for affordable housing. It argues that the policy focuses on the wrong problem of workforce housing rather than more pressing needs of households below 50% AMI. It also questions several assumptions behind the policy, finding that incentive zoning fees are too low to be effective, produces fewer affordable units than other tools, and does not support the city's comprehensive housing goals. The document concludes by recommending fixing incentives to encourage more housing supply, focusing on more productive tools, and using the right tools to meet policy objectives.

1. INCENTIVE ZONING:
A REALITY CHECK
February 2014
DSA Workforce Housing Subcommittee

2. Seattle’s affordable housing strategy is
failing.
Seattle is focusing on the wrong problem,
which leads to the wrong solution
and limited outcomes.

3. Income disparity results in housing disparity
80% AMI
$56,480
$35,300
$27.06
$16.91
83.1%
Annual income for 2-person
household in Seattle
50% AMI
37.3%
Hourly wage equivalent
% of Seattle rental units
affordable by income level
Seattle’s most significant affordability gap is at 50% AMI and below,
not at 80% AMI.

5. Assumption 1: Seattle Doesn’t Have Enough Workforce Housing
The Facts:
According to the most recent data available from King County:
• 83% of Seattle’s rentals were affordable to incomes at 80% area median (AMI)
• In contrast, only 37% of Seattle’s rentals were affordable to incomes at 50% AMI
Conclusion:
There is no shortage of workforce housing, and Incentive Zoning’s focus on it
neglects Seattle’s much greater affordability need for households at 50% AMI and
below.

6. Assumption 2: Incentive Zoning fees are too low
The Facts:
• At current fees, 62% of eligible development in Seattle did NOT to use the incentive since 2001
• In South Lake Union alone, 14 of 20 projects did not use the incentive
• Significant public benefit was left on the table as a result of projects in downtown and South
Lake Union building below zoned capacity:
Conclusion:
Increased Incentive Zoning fees will lead to even less participation in the program,
resulting in less housing supply, less revenue for affordable housing, and loss of many
other significant public benefits.

7. Assumption 3: Incentive Zoning fees are an effective way to create
affordable housing
The Facts:
Over the past 12 years:
• Incentive Zoning has resulted in funding for the equivalent of only 616 units of
affordable housing, compared to 46,000 total units developed in Seattle.
• The Housing Levy produced over 3,700 units and the MFTE Program produced 2,563
units, with another 4,312 units in the pipeline.
Conclusion:
Incentive Zoning accounted for less than 2% of Seattle’s new housing supply
in the last 12 years. Under any approach, Incentive Zoning will supply only a
fraction of Seattle’s affordable housing needs; other tools are needed.

8. Assumption 4: Requiring affordable housing in on-site performance in highrise buildings makes sense
The Facts:
• High-rise construction costs 1/3rd more per
unit than mid-rise “5-over-2”
• For the same amount of money, 1/3rd more
affordable units could be produced in mid-rise
construction
Conclusion:
Requiring affordable housing in high-rise
buildings results in fewer homes for
workers, as 1/3rd more affordable housing
units could be produced for the same
resources in mid-rise construction.

9. Assumption 5: Incentive Zoning supports the city’s comprehensive plan
goals
The Facts:
• Incentive Zoning charges an extra fee for zoned capacity that increases the cost and risk
to produce the housing supply goals established by the Comp Plan.
• Incentive Zoning taxes housing supply, ironically, in an effort to produce housing supply.
Conclusion:
By increasing the cost to produce additional housing, Incentive Zoning is a
deterrent to building the housing supply envisioned by city policy.

10. Incentive Zoning is not working – so what should we
do?
Fix the incentives:
• Establish true incentives to encourage developers to build to maximum capacity
and increase housing supply.
• Re-examine fee rate and the base height to increase participation in the program
– leading to more housing supply and contributions to the program.
Focus on more productive tools:
• Incentive Zoning accounts for less than 2% of the housing supply while other
tools (Housing Levy, MFTE) have been 10X more productive
• Use of City-owned property
• Up-zones around transit areas
• Expansion of the MFTE program
• Purchase/conversion of multi-family properties
• Encouragement of market innovations such as Micro-housing, ADU’s, etc.
Using the right tools to tackle the right job, we can meet the
policy objectives driving zoning increases in designated urban
centers.

11. Citations
Slide 3
• City of Seattle Office of Housing – Income and Rent Limits – MFTE
• 2009 King County Benchmarks: Affordable Housing
Slide 5
• 2009 King County Benchmarks: Affordable Housing
Slide 6
• Data accumulated from City of Seattle Department of Planning and Development
and Office of Housing
Slide 7
• Data accumulated from City of Seattle Department of Planning and Development
and Office of Housing