Attention Urban Homeowners – Make Money by Doing Nothing!

The State of Washington employs a tax break system called the Multifamily Tax Exemption. This system allows developers to avoid taxes if they provide housing. The system functions to subsidize a Developer’s project. However, the land owner receives nothing in this deal.

A new City of Seattle program will create an MFTE system which issues landowners tax breaks in return for up-zoning from Single Family to a more dense zone. Landowners will simply hold a vote – they have no obligation to sell or build, but in return for a zoning change receive a future tax break.

This program accomplishes all the goals that the city wants and also allows the SF homeowners to ‘beat the government’ – which Americans love even more than their backyards!

  • The City gets an upzone without an unpopular unilateral decision.
  • Apartments are built, resulting in more supply and a more affordable city.
  • The City doesn’t actually pay any money, instead they forego future revenues, which is easier to pull off.
  • SF homeowners receive tax breaks for X years and have no obligation to sell their homes – though many will sell in order to make money and fulfill the American Dream!

This program would repackage the American Dream by allowing urban SF homeowners to obtain wealth by allowing density – in this deal both the existing homeowners and the future apartment residents have taken one step closer to the real American Dream. For areas that are in high demand, this simple change in zoning would result in a large market push to create new apartments – many of which could even take advantage of the existing MFTE program to provide affordable housing.

Why does this program work? Let’s take a look at the American Dream from a somewhat unpopular angle and we can understand some of the social and psychological forces at play.

The American Dream is inherently tied to individualism. The fundamental notion is that there is no limit to what an individual can accomplish, earn, buy. The goal is to amass huge sums of wealth and own real property, private property, houses, boats, cars, pay for your kids to attend college. We as an American society either explicitly or tacitly agree to this goal being paramount.

Even our political system is designed around the individual. Everyone votes, and it is presumed that people will vote for what is best for themselves. Single Family homeowners influence local politicians in order to keep their homes, and why shouldn’t they? Of course people don’t want to give up their Single Family zones close-in to the city – they have achieved the American Dream! And someone wants to take it away? HECK NO! A true American will fight until the death to protect their family and their wealth – this is the American spirit we so revere.

HOWEVER, we know from much research (ULI Terwiliger Center for Housing, New York Times, Glaeser, Hurd) that density can help make a city affordable. Replacing Single Family homes with denser buildings would help cities grow and stay affordable. So how do we reframe the issue and incentivize actions to help the collective rather than continue to have a few individuals clutch, claw, and hold onto the American Dream?

**NOTE: This program is entirely fictional and was envisioned by a University Student – It is unlikely to be adopted because the city council would never support a policy that was openly established as a way to “beat the government” even if it accomplishes all the council’s goals.


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s