Balancing Affordability with Public Benefits

Housing developers often accuse local governments’ review processes, fees, and requirements for driving up the capital costs of their projects. They claim that these lengthy processes and requirements, in turn, reduce the affordability of the units. The recent Urban Land Institute report Bending the Cost Curve seems to confirm this claim and suggests that cities should work to eliminate the barriers that hinder efficient development of affordable housing.

On the other side of the coin, however, cities are responsible for ensuring that new developments will not impose significant impacts on their communities and are continuously looking for opportunities to leverage private financing for public projects. In Seattle, for example, most new multifamily housing projects are required to provide a certain amount of off-street parking, construct or restore sidewalks and curbs, and install landscaping and lighting. Seattle is also now working with some large-scale developers, such as Vulcan, to fund larger projects that help to implement the City’s transportation plans. Other cities in Washington charge additional impact fees from new developments to help pay for infrastructure and public services.

While these policies all have clear public benefits, they also work to drive up the cost of new housing units, which is an important consideration in increasingly unaffordable cities, like Seattle. To balance these needs, cities should consider applying project requirements that are scaled to the projected affordability of the units being developed. This would not only provide an additional incentive for developers to construct more affordable units, but would also serve as a mechanism for taxing high-end urban condominium projects. While scaling requirements to affordability would require developers to make pricing projections early on, it would give them the opportunity to find additional ways to cut project costs. Cities could also use this scheme to incentivize other desirable aspects of new buildings as well, such as LEED certification and green features.

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