What does a Housing Benefit District actually do?
Experience tells us that land prices go up upon the news that a station will be built in a particular neighborhood, quickly outpacing any hope for affordability. Housing Benefit Districts are specifically designed to preserve affordability by assembling key parcels of land from scattered parcels here and there before a station opens, then reserving that land until an affordable housing sponsor is ready to begin– at that time, the land is sold at a discount to the affordable housing sponsor, enabling them to build affordable housing next to transit that they otherwise would not have been able to. Developers of market rate housing, however, pay the full market rate price for land from a Housing Benefit District.
What does this enable cities to do that they currently cannot?
A city that establishes a Housing Benefit District can access the technical expertise provided by a state-wide advisory board to make planning and investment decisions. The bill also provides the Housing Benefit Districts with access to funding to implement the plans, through land acquisition and infrastructure investment. Lastly, the bill establishes a template for adjacent cities to work together and achieve shared goals more quickly.
Are there examples of this in other parts of the country?
Denver, Minneapolis-St. Paul, and the San Francisco Bay Area are among a number of other areas who have recognized the importance of land banking as a tool to enable sustainable TOD.
What transit areas are you focused on?
The goal of Housing Benefit Districts is to invest in land acquisition around transit hubs in advance of the development of those station areas. For that reason we expect this model to work best in areas outside of Seattle.
How Does it Work?
What area and entity constitutes the Housing Benefit District?
The Housing Benefit District encompasses the entire area of the jurisdiction that chooses to establish it. The Housing Benefit District will be governed by the council of the jurisdiction that chooses to establish it. The dollars raised however, will be focused on the half-mile radius around a transit station.
How is a Housing Benefit District established?
Housing Benefit Districts are established by a city council or county council. In cases where cities or counties want to team up to form a larger Housing Benefit District, they would establish a Housing Benefit District together through an interlocal agreement.
Is a vote required to pass the tax?
Yes, although a small amount of property and sales tax is permitted as councilmanic action, which will help the District with start up costs, the majority of the taxes for the Housing Benefit District must be approved by the voters in the community.
Who is assessed the tax?
In jurisdictions that choose to establish a Housing Benefit District, everybody in that jurisdiction is assessed the tax since the entire jurisdiction benefits from the advancement of housing near transit at affordable levels. Ultimately, the tax base for the jurisdiction will grow as a result of the Housing Benefit District investment and, in turn, support the sustained financial vibrancy of the entire jurisdiction.
How do you ensure affordability?
The bill requires that a part of any funds raised or allocated be used to execute a detailed housing strategy for the district including preventing displacement of low income and Black, Indigenous, and People of Color households. Also, any land acquired would be resold to for-profit or non-profit housing developers with restrictions that ensure a station-area-wide outcome of a third of units as low-income, a third middle-income, and a third market-rate.
What about cities that won’t have a light rail station?
The bill also assists communities with Bus Rapid Transit (BRT) stations. The objective is to take full advantage of the synergy around high capacity transit that will incentivize housing opportunities with a little help from the Housing Benefit District to begin the transformation.
How do you know this will work?
Using a small grant from the State Legislature, Sound Communities, the bill sponsor, partnered with the University of Washington to test the theory. Three groups of University of Washington Real Estate Masters students created models around the Everett and Tacoma light rail stations and the Renton bus rapid transit station. Working with the cities, and using proprietary data informing current and projected property values in a half mile radius, they modeled a 20 year cycle of Housing Benefit District investment in infrastructure and land acquisition. The models projected that, compared to a scenario where no public action is taken, the application of Housing Benefit District funds would generate more housing, much more affordable housing, and housing development earlier in the development cycle. More details about this project can be found here.
Is the property tax subject to prorationing?
Similar to the affordable housing levy permitted by RCW 84.52.105, a property tax levy for Housing Benefit Districts is excluded from the $5.90 limit on junior taxing districts. It remains subject to the Constitutional limit of $10.00/$1,000.
Who Will it Benefit?
Does this bill enrich market rate developers?
No. Any benefit to market rate developers is incidental to the affordable housing. The tax does not provide any special benefit to developers of market rate housing as any land the Housing Benefit District sells to them would be sold at market rate. The Housing Benefit Districts take advantage of buying land early in a development cycle and reselling that land at appreciated value to market rate developers, and at below market value to affordable housing developers. Market rate developers will benefit along with affordable housing developers and all residents in the area, from Housing Benefit District-enabled infrastructure investments and advanced planning.
Who is served by Housing Benefit Districts?
The Housing Benefit District bill has specific income targets including 34% of housing in the station area to be affordable for low income households at or below 80% of area median income (AMI). Because the goal is not to create low income housing only at 80%, that goal is further broken down into 5% for extremely low income households (0-30% AMI), 10% to very low income households (30-50% AMI) and 19% for low income households (50-80% AMI). In addition, the Housing Benefit District bill includes a requirement that 33% of the housing units be for households between 80% and 120% of AMI.
Why can’t all of the land be sold for the purposes of creating affordable housing for low-income and middle-income housing since we know those are the groups with the biggest need?
Land subsidies to affordable housing providers depend on Housing Benefit Districts’ ability to sell some property to the market rate developers at fair market value. Due to the land holding period, these sales to market rate developers generate a “profit” to the Housing Benefit District which is passed on to affordable housing developers in the form of “free” land banking and sales at below market valuations.
How Does This Benefit Underserved Communities?
How does the bill mitigate displacement impacts?
Housing Benefit District funds enable local governments to not only assess displacement risk for current low-income residents and underrepresented racial and ethnic minorities, but also create proactive and meaningful displacement mitigation plans. The bill is also currently being amended to require local governments to produce a net gain of affordable housing within each quartile below median income within the station area.
Why does the advisory board not include groups and people who can speak to the housing needs of local residents?
The advisory board is a statewide entity whose primary purpose is to ensure that the local area plans are consistent with regional growth strategies and to provide technical advice to Housing Benefit Districts. Station area plans will reflect the community vision shaped by the needs and perspectives of local residents.
How does the bill ensure that these benefit districts actually result in homeownership opportunities?
The bill requires and provides funding for Housing Benefit Districts to engage in robust station area planning that includes promoting equitable homeownership opportunities for underrepresented racial and ethnic minorities, and assessing alternate pathways to ownership models such as community land trusts and limited or shared equity cooperatives. The plans must be approved by the Advisory Board before a Housing Benefit District is authorized to seek taxing authority.
How Does This Fit into the Bigger Picture?
How does this relate to the overall housing strategy/existing affordability programs?
There are a variety of housing finance tools such as the Multifamily Tax Exemption, Tax-Exempt Bonds, Housing Trust Fund and Low Income Housing Tax Credit, among others that may be used to finance the construction and development of affordable housing. Housing Benefit Districts are laser-focused on the purchase and assembly of land to facilitate development on that land.
Why do you choose to focus only on land acquisition and not construction?
There are a myriad of tools available for construction (see above). The urgency and focus needs to be on acquiring key properties before they appreciate out of reach for affordable housing.
Does this authority duplicate what housing authorities do?
The intent is not to duplicate the authority of other existing entities, including housing authorities. Housing Benefit Districts are focused on planning, land acquisition and deployment. They are not intended to be development entities (as are housing authorities and public development authorities) or finance agencies (as are housing authorities, public development authorities, and the Washington State Housing Finance Commission).
Would Housing Benefit District taxes compete with local housing levies and other local affordable housing taxing options?
Housing Benefit Districts are focused on a land banking strategy and for that reason are seeking funds for a different purpose than existing local levies. As envisioned, a well-executed Housing Benefit District would enable a local jurisdiction to need fewer dollars for affordable housing development because it would lower the overall cost of the affordable housing.
How does this work complement the work that Sound Transit is doing for station areas?
Sound Transit’s 80/80/80 affordability requirements can only be applied to the parcels that it directly controls. Housing Benefit Districts take a comprehensive look at the entire ½ mile radius around the station area, working in close partnership with Sound Transit as necessary, to ensure that affordability can be preserved in the entire station area.
Since this is to accomplish regional housing goals, why is this overseen by cities and counties, rather than a regional authority?
As every community is unique, one of the most important goals is to ensure local control and engagement, with the option for logical regional affiliations. At some point, the size and scope of successful Housing Benefit Districts may suggest improved efficiencies and impact through a regional agency.
How does this intersect with opportunity zones?
In Census tracts where opportunity zones apply, the tool is still very viable for the entity that purchases property from the Housing Benefit District as they can take full advantage of the tax benefits of a completed project.