The Goldy Plan
During debates, I have a habit of live-Tweeting. We had a mayoral debate in Seattle, recently, and while I wasn't super-Tweeting, I got a few pops off here and there. One that seemed to attract attention was about housing, and one way to make it more affordable:
People who have followed by political shenanigans were obviously not surprised by this Tweet, as it broke no new ideas. In 2015, one area where Rob Johnson and I (hi, Amy!) had a significant disagreement was on whether the City of Seattle should get into the real estate game. And not to purchase and transfer to non-profits, or land-lease for affordable housing, or sell off to the highest bidder - but to hold properties and collect rents without providing a subsidy.
In 2015, I referred to this as the Goldy Plan, after David "Goldy" Goldstein planted the idea in my head. See, instead of just relying on tax dollars to purchase and subsidize rents for low-income and no-income folks, the idea would be to craft a bond issuance to purchase multifamily buildings that are on the market, and repay those bonds with the rents.
Municipal bonds are seeing a yield between 2 and 4 percent over 20 years. Seattle's credit rating has already seen us able to sell bonds at a rate below that of inflation. We have the credit rating, and the good history, to begin a program of investment, and begin participating in the market.
The idea is simple enough: the City finds multifamily buildings that are in good repair and for sale, and buys them. The City sets rents at a level that will repay bonds, and pay for administrative costs and basic maintenance. The City keeps doing that. Sometimes buildings will need to be replaced in time, and other times the City will be able to hold a structure well past the bond cycle - and just make 100% profit (profit that can be re-invested in emergency rental support vouchers, or supportive services for folks transitioning to permanent housing.
Notably, the idea is that these units aren't set-aside for people at certain income levels. They become part of the market, and are wholly unsubsidized. As I understand how the market works, this would create downward pressure on rental units - the amount of which would be dependent on the total amount of properties the city purchased.
In 2015, I pointed to the Linda Manor apartments. For those who recall, this was a multi-family structure in West Seattle that sold for about $1.5 million. Following the sale, rents increased dramatically (50-130%). The reason, according to the new owner, was so he could pay the $1 million dollar loan he took to purchase the property. But here's the rub: based on all available information, the building was bringing in $12-14k per month in rents. The increases brought that number closer to $24k per month. Yet, assuming a 10-year loan at 10% interest (unheard of for commercial loans), as well as property taxes, the total need in monthly rents to cover all costs plus some room for basic maintenance plus some profit would be, if memory serves (I'm not going to re-do my math from 2015) in the $16-18k range.
Now, if the city were to do the same, and use borrowed money (bonds) for the full $1.5 million, over 20 years, the total needed to pay back the bonds with a little bit extra for administration and maintenance (minus taxes): closer to $8-10k. So, had the city been in the business of being in the market, this building could have been purchased, the rents left where they were, and $2-4k per month could have been added to our budgets for housing and human services. That's not a ton of money, but $24-48k per year isn't nothing, either.
There are numerous multi-family properties across the city that are in good repair, and that would be ripe for public ownership without public subsidy. By getting into this market, the city necessarily would be ensuring that these "naturally affordable" homes stay that way, and provide some downward pressure on the market as a whole. If two similar units in a similar neighborhood are priced drastically different, one will necessarily decrease in price. By providing this (along with other measures to increase the total stock of housing), we provide not only relief for renters who are not supported by other programs (80-120% AMI folks are basically hosed in Seattle right now, absent luck), but create more opportunity for people to save and move into homeownership if they so choose.
There is the question, of course, about the legality of such a system. Notably, the Washington State Constitution bars public funds for private benefit, except to help the poor and infirm. Arguably, one could say that the MFTE program in its entirety violates this clause, in that it provides a tax break to help folks who are at 80% AMI (and does that qualify as "poor or infirm"?) However, a system wherein the city itself simply owns properties, and recovers enough in rents to repay bonds, take care of the properties, and pull in just a little bit extra - no major profit motive involved - I wholeheartedly believe would pass constitutional muster.
This is also one of the easiest and quickest things that the city could do to help address the affordability crisis. The benefit from swelling supply (not that we are actually doing that, but it's a fun term) won't be felt for years thanks to construction not finishing up overnight (DAMN YOU, QUALITY AND SAFETY!!!!). The same for the MHA program. But properties are selling today, and those could be locked in at much more affordable prices, and help to tamp down a market that is profit driven as it applies to so-called "naturally affordable" units.
For me, it comes down to a simple question: is housing a human right? I believe that it is. And that belief informs me that keeping housing solely as a commodity to be traded is wrong. By getting into the game, the city can reduce that burden that is being felt by renters, and acknowledge and expand the ability for more families to afford to live in the city. The option is a city for the very rich and the very poor, and I know we can do better.
