The Basics of the Mandatory Housing Affordability Act
When we talk development news, particularly development news in major urban centers like Seattle, countless factors go into how many new property buildings are currently in the development process. From the economy, to world events, to market trends, a developer is often forced to wait for the right timing, plan for delays, and stay on top of current news and regulations. Some of these regulations appear as curveballs when it comes to getting a new project off the ground, but there’s often sound reasoning when we take a look at the bigger picture.
If you’re not familiar with Mandatory Housing Affordability, it’s a Seattle act that both allows for more development and puts a higher tax burden on developers. According to the Seattle city website, “To achieve the goal of providing affordable housing in Seattle, development subject to the MHA requirements must contribute to affordable housing as part of most commercial, residential, or live-work projects.”
Essentially, the city recognizes the need for more available affordable housing for residents, wants to encourage builders to build more properties by giving developers more density and increasing property zoning, but also needs funding to be able to build the affordable housing units. Therefore, they’re implementing a tax which will then go back to the city and towards the goal of building these units. As a part of Seattle’s “One Seattle Plan,” the city aims to increase the missing middle in expectation that by 2050, the population will have reached 1 million and the current zoning will not be able to provide adequate housing for a large majority of the city’s residents.
So, when will this tax be required? When a property requires an increased maximum height or floor area ration or different zoning designation than the standard allowance. There’s also a “performance option” that allows builders to add affordable units into their proposal, instead of making a payment to the city. Ultimately, the goal of the act is clear: increase affordable housing within the city. However, there have been some issues with the act observed since 2016 when it went into effect.
Recently, it made news as being a major factor in a civil lawsuit filed by a Seattle homeowner who wanted to build an addition on their property and learned that they would have to pay $77,000 in fees under the program. In these types of situations, the act has worked as a barrier to creating more housing for the average single-family homeowner. For developers, the taxes have also created additional obstacles in getting their project off the ground as it's an added expense, leading some to explore their options to develop elsewhere.
Today, there are so many hoops to jump through to develop that I can understand why some developers would be exasperated at the thought of one more—and a costly one at that. I can also understand the city’s reasoning for attempting to solve one of Seattle’s biggest issues: a lack of affordable housing. It’s certainly a topic I’m interested in hearing more viewpoints on. If you’d like to discuss the act, recent development news in the city, or more real estate trends, please reach out to me.