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Seattle “Grand Bargain”

Overview

In July 15, a group of 10 city officials, private developers, and affordable housing advocates signed what has come to be known as the Seattle “Grand Bargain,” an agreement negotiated among the parties to implement an inclusionary zoning and linkage fee program in upzoned neighborhoods throughout the city. Named after the unprecedented negotiations and collaboration that led to the agreement; the Grand Bargain’s cornerstone proposal is the Mandatory Housing Affordability (MHA) program, which requires the inclusion of rent-restricted units for low-income households in new development, but only within neighborhoods upzoned for increased density. Thus, the Grand Bargain ensures that new development includes affordable units while also providing development incentives that allow more units to be developed on a given lot, offsetting revenue loss associated with the affordable units. Additionally, the plan offered further flexibility to developers by giving them the option to pay an in-lieu fee for properties that do not meet the Bargain’s affordability requirements. 

In negotiating the Grand Bargain, the city hoped to simultaneously expand the overall supply of housing (by increasing density) and the supply of dedicated housing affordable to lower-income households (through the mandatory inclusionary requirements).  In theory, this dual approach would help to improve affordability on two fronts while also increasing buy-in from both the private developers that sought higher density and the affordable housing advocates and practitioners that sought a mandatory inclusionary housing requirement.  However, opposition to neighborhood upzoning efforts has slowed down its implementation. Although there have yet to be any formal evaluations, the Grand Bargain will likely require time to make a meaningful impact in increasing density and affordability.

Key takeaways

  • The Bargain was able to receive support by public officials, equity and housing affordability advocates, and private developers, for all had their interests represented in the proposed plan. By having a wide array of stakeholders involved in HALA’s development, all parties were able to advocate for their policy positions. Importantly, all sides agreed to concessions as well.
  • By limiting the Mandatory Housing Affordability program to upzoned neighborhoods, the program received less opposition from developers. The plan offered further flexibility for developers by giving them the option to pay an in-lieu fee to properties that do not meet the Bargain’s affordability requirements. 
  • While in-lieu fees and off-site options offer flexibility for developers, some worry that allowing the construction of new housing without on-site affordable units may perpetuate or exacerbate economic segregation. Developers that are unable or unwilling to include affordable units in units subject to the MHA have the option to either create equivalent units off-site or pay an in-lieu fee. However, the Bargain does not specify where these units are to be developed, leaving some equity and affordable housing advocates to worry that the Bargain may facilitate economic segregation.
  • Despite opportunities for community members to participate in the development of the Bargain, the plan’s rezoning efforts still received strong community opposition. While the plan works to address some of the community’s affordability concerns,  local opposition to neighborhood upzoning efforts has slowed down its implementation.
  • Increased density without additional regulations may facilitate the displacement, and economic segregation, of low-income residents. Council members and residents worry that the plan’s in-lieu fee option may lead to the increased displacement of low-income residents, for it provides a way for developers to increase density without providing on-site affordable units. Furthermore, because the Grand Bargain does not provide guidance on where the off-site units are to be constructed. Some advocates worry this arrangement may result in the majority of these affordable units being constructed in already dense, lower-income areas and perpetuating economic segregation.

Description

In 2016, Seattle’s City Council voted to adopt the Grand Bargain’s Mandatory Housing Affordability (MHA) program into law. The program calls for (1) zoning code updates to increase density across much of the city, (2) the creation of a mandatory inclusionary housing program requiring new apartment complexes to meet certain affordability requirements, and (3) commercial linkage fees in which owners of new commercial space would be required to pay a fee to help fund the construction of affordable units in the city. 

The MHA served as the centerpiece of then-Mayor Ed Murray’s Grand Bargain agreement with Seattle’s Housing Affordability and Livability Advisory Committee, which consisted of city officials, housing advocates, and residential and commercial developers. Both the City and developers have agreed to work collaboratively to ensure the production of 6,000 affordable housing units within 10 years for families at or below 60 percent area median income (AMI). To meet this goal, the residential Grand Bargain outlines 65 individual policy recommendations (view all objectives), most notably the creation of the MHA.  As part of the MHA, the city will implement zoning changes to increase density in the city’s commercial and multifamily residential areas, as well as neighborhoods near transit lines. In return, the developers are required to include dedicated affordable housing within new construction in those areas. 

The MHA consists of three main policy tools:

Neighborhood Upzoning 

To increase the overall supply of housing and generate revenue to offset the costs of including affordable units within new development, representatives from the city agreed to increase residential density in select neighborhoods in exchange for certain affordability requirements in new development (described below). The original terms within the Grand Bargain state that all zoning changes would require the completion of an Environmental Impact Statement (EIS) and legislative approval, with all zoning ordinances to pass by September 2017. 

Under the MHA, only about six percent of single-family zones will change to a newly created designation called Residential Small Lot, which allows for multiple “cottage” homes to be built on the same lot, as well as the creation of duplexes and row houses. In some cases, single-family zones will be modified to allow triplexes, townhomes, row houses, and three- to four-story apartment buildings.

While the City Council voted unanimously to upzone several communities in 2017 (including the city’s University District, Downtown, Chinatown-International District, and Uptown), legal challenges delayed the adoption of further upzoning efforts. It was not until March 2019 that  the Seattle City Council unanimously voted to upzone an additional 27 neighborhoods, a change that affects 6 percent of Seattle land now zoned for single-family houses.

Mandatory Inclusionary Housing

Once an area has been rezoned to increase density, the Grand Bargain provides that residential, multifamily developers creating new units would be required to include units affordable to families at or below 60% AMI. Specifically, the Mandatory Inclusionary Housing program only applies to the construction of new buildings and/or to alterations of an existing building that increase the total number of units within the structure, and requires that a percentage of units constructed be rent-restricted and remain restricted for at least 50 years. Affordability requirements vary by market, but the agreement states that between 3-7% of units be subject to the stated affordability requirements.

If residential developers choose not to incorporate affordable housing into their development, they must pay the City a per square foot in-lieu fee ranging between $5 and $33 per square foot, depending on the size and location of the development. Additional payment and performance option information can be found here.

Mandatory Commercial Linkage Fees 

Once an area is rezoned to increase density, commercial developers are required to pay a linkage fee on new developments, ranging from $5 to $17 per square foot. Fees vary by building size and location and apply to all new construction, building expansion, or the conversion of a building from residential to commercial. Linkage fees will be given to nonprofit organizations to contribute to the construction of affordable housing in Seattle. Additional payment and performance option information can be found here.

Policy’s position within a broader housing strategy

The policies at the core of Seattle’s Grand Bargain represent an important step toward the development of a comprehensive housing strategy.  But as Seattle recognized, a broader set of supporting policies are also needed to ensure the city’s housing strategy could support the achievement of their housing goals. Accordingly, as explained in greater detail below (see “Process”), the Housing Affordability and Livability Agenda prepared by Seattle’s Housing Affordability and Livability Advisory Committee outlined 65 recommendations needed to address Seattle’s affordable housing needs and produce a net increase of 50,000 housing units over the next decade. While the MHA program serves as HALA’s key recommendation, other strategies outlined in the report include establishing a Real Estate Excise Tax to fund affordable housing, boosting the production of Accessory Dwelling Units, seeking authorization to enact a property tax exemption for landlords who commit to income and rent-restrictions, modifying building codes to facilitate development, and more. 

Process and timeline

The crowing shortage of affordable housing 

After Amazon opened their headquarters in Seattle in 2010, the population of Seattle increased by almost 19 percent over the course of the next decade, making it the fastest-growing city in the country. As the city and its surrounding neighborhoods increasingly attracted Amazon workers,  the demand for housing has greatly outpaced the city’s supply and housing prices began to rise, a phenomenon referred to locally as the “Amazon Effect.” Between March 2019 and March 2022, approximately 5,275 homes were scheduled for construction, compared to the demand for over 27,900 new homes. As of early 2020, 42.6% of renters and 24.9% of homeowners were cost-burdened, paying more than 30 percent of their incomes on housing. 

Developing the Housing Affordability and Livability Advisory Committee

To address its affordability issues, the city established the 28-member Housing Affordability and Livability Advisory Committee in September 2014. The group, which was empaneled by the Mayor and City Council, consisted of renters, homeowners, for-profit and not-for-profit developers, and other local housing experts, and was tasked with identifying and evaluating policy options and creating a plan for increasing the supply of Seattle’s affordable housing. After nine months of meetings, the committee published a report, known as the Housing Affordability & Livability Agenda (HALA), outlining 65 recommendations needed to address Seattle’s affordable housing needs. HALA’s key recommendation would be the creation of a Mandatory Housing Affordability program, which would consist of a Mandatory Inclusionary Zoning program and commercial linkage fees upon the adoption of zoning regulations that increased density.

Approving the components of the Grand Bargain

On November 9, 2015, the council approved a bill that established a commercial linkage fee scheme, as well as a resolution outlining its plan for mandatory inclusionary zoning. However, the commercial linkage fee program would not be implemented until the following year, when the required zoning regulations were enacted. In August 2016, the Seattle City Council approved the passage of the full Mandatory Housing Affordability portion of Grand Bargain. 

Building support for zoning reform

Beginning in October 2015, thousands of community members had the opportunity to speak with representatives from the City of Seattle and the Advisory Committee (see the full list of Outreach Activities starting on page 11), to discuss the housing crisis as well as how the MHA program will guide growth in Seattle’s neighborhoods and their desired community benefits. The city held numerous events, such as Neighborhood Council Meetings, Telephone Town Halls, and Focus Groups, to ask questions about HALA and provide feedback on the MHA. Over the next two years, the city continued to gather input through community engagement, which was used to guide the first draft of MHA zoning maps that the City Council considered in 2018.

On June 8, 2017, the City of Seattle released its draft Environmental Impact Statement (EIS) and accepted comments from the public through August 7, 2017. Despite the community outreach conducted by the City, the Seattle Coalition for Affordability, Livability, and Equality (SCALE) claimed that the implementation of MHA disrupted individual neighborhood plans. The group appeal, filed in November of 2017, took on nearly every aspect of the EIS; it took nearly a full year for the case to be resolved. 

On November 21, 2018, the Seattle Hearing Examiner approved the City’s final EIS review of MHA, stating that the report adequately addresses the greatest impacts of the proposed legislature as well as policies that could be executed to prevent those identified impacts.

Adopting the MHA

Finally, on March 18, 2019, the City Council unanimously voted to enact the affordable housing requirements in 27 additional urban villages across Seattle, a change that affects 6 percent of Seattle land now zoned for single-family houses.

Current outcomes and continuing concerns

As stated above, the Mandatory Inclusionary Housing components within the MHA do not take effect until neighborhoods are upzoned, and since the program’s adoption, the city’s upzoning efforts have been met with litigation and community opposition. After nearly four years of legal challenges, the Bargain’s agreed-upon timeframe for adopting all zoning changes has extended well beyond its original 2017 deadline. According to the city’s website, the MHA’s implementation proceeded as follows: 

Finally, in March 2019, the Seattle City Council voted to upzone an additional 27 neighborhoods, a change that affects 6 percent of Seattle land now zoned for single-family houses. View the MHA Adopted Zoning Changes.

As of the writing of this case study, no data have been released on the number of units produced through the MHA’s performance or payment options. Local officials estimate that fewer than half of the 6,000 planned affordable units would be generated by residential developers citywide. Officials estimate that the MHA’s linkage and in-lieu fees paid by developers will generate a greater number of units built elsewhere throughout the city. However, because the Grand Bargain does not provide guidance on where the off-site units are to be constructed, some advocates worry this arrangement may result in the majority of these affordable units being constructed in already dense, lower-income areas, perpetuating economic segregation and negatively impacting housing affordability in the long-run. Finally, some residents who oppose the upzoning efforts worry that the plan could lead to gentrification and the displacement of low-income residents by encouraging developers to replace older housing units with luxury apartments. 

Members of the HALA committee recognize that the MHA is just one policy response in the larger HALA plan. According to Councilmember Sally Bagshaw, “I regard this as a very important drop in the bucket, frankly.” The city is already taking action to implement a number of the Agenda’s other suggestions, including the adoption and/or improvement of laws protecting renters from sub-standard housing and discrimination.

Policy significance

Seattle’s Grand Bargain achieved national attention in large part due to the breadth of the stakeholder coalition that participated in developing and agreeing to the Bargain and to the corresponding breadth of the policy framework that promised to simultaneously expand supply by increasing density and ensure the inclusion of dedicated affordable housing within new development. The hope was that Seattle could serve as a model for aligning stakeholder interests around a comprehensive framework, facilitating the adoption of policies that might otherwise be opposed by one or another part of the universe of housing stakeholders. Within Seattle, the Grand Bargain represented an unprecedented collaboration and political alliance between city officials, private developers, and affordable housing advocates during the plans’ development.

The Grand Bargain is significant in that it seeks to remedy two of the city’s most pressing housing challenges: a housing supply shortage, as well as a shortage of units affordable to low-income families. By passing zoning changes to increase density, the city has taken steps to increase its housing supply by facilitating the development of new multifamily buildings. While in theory, an increased supply of housing may improve affordability in and of itself, in practice the supply deficit in high-cost cities is often so great that the initial expansions of supply will still go to meeting unmet demand, and do not have an immediate obvious effect on housing prices. By marrying increased density with a mandatory inclusionary housing requirement the policy ensures that lower-cost units will become available to low-income families and stay affordable through legal restrictions.   

Related resourcesThese resources provide helpful information on the topic and include sources relied upon in preparing this brief.

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