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Rebuilding Place in the Urban Space

"A community’s physical form, rather than its land uses, is its most intrinsic and enduring characteristic." [Katz, EPA] This blog focuses on place and placemaking and all that makes it work--historic preservation, urban design, transportation, asset-based community development, arts & cultural development, commercial district revitalization, tourism & destination development, and quality of life advocacy--along with doses of civic engagement and good governance watchdogging.

Monday, July 17, 2017

Local elections in Seattle, 2017

Local elections are underway in Seattle/King County Washington. The state has mail-in ballots, and the primary election date is August 1st.  Seattle is one of the nation's leading cities--the other is San Francisco--pushing a significantly progressive political agenda.  (Cities like DC vie for a similar title, but aren't really in the same league.)

Much to the consternation of the center-right Seattle Times newspaper, the city tends to be  supportive of local taxing initiatives to support transit and other endeavors, even when such measures fail at the scale of the entire county.

A couple elections ago, Seattle switched from an nine seat at-large Council system to seven districts and two at-large seats.  Just before the switch, the city elected Kshama Sawant, affiliated with Socialist Alternative, to Council.  With the switch to districts, she was re-elected as a representative for the Capitol Hill district.

The Seattle Port Commission, which runs the airport and the seaport, is publicly elected too.

In this year's election, 21 people, including former mayor Mike McGinn, are running for mayor.  The incumbent, Ed Murray, declined to run after being accused of non-work related improprieties.

The Stranger is Seattle's leading alternative weekly (although compared to most other cities, the second alternative paper, the Seattle Weekly, holds its own).  It's endorsement articles are always a great read, as is the one for this election, "The Stranger's Endorsements for the August 1, 2017, Primary Election."

Reading their endorsements of Jon Grant for an at-large seat and Cary Moon for Mayor make me feel conservative, although I have to admit that my progressivism is mediated by pragmatism and acceptance of the status quo shaped by the Growth Machine/neoliberalism.

Grant is affiliated with Socialist Alternative.  Moon co-wrote a series of articles in The Stranger on Seattle's housing crisis of high velocity in pricing appreciation, and the loss of lower priced housing to redevelopment:

-- "Hot Money and Seattle's Growing Housing Crisis: Part One"
-- "Parasitical Finance and Seattle's Growing Housing Crisis: Part Two"
-- "Why NIMBYs And Their Haters Can't Offer a Deep Solution to Seattle's Growing Housing Crisis: Part Three
-- "Solutions to Seattle's Growing Housing Crisis: Part Four"

It would be unheard of for a candidate for election in DC to produce the equivalent.

The Seattle Times concurs that the field of Mayoral candidates is surprisingly deep ("Election shocker: This is the best field of Seattle mayoral candidates in decades." While the Municipal League didn't rank highest the most radical candidates, the columnist Danny Westneat called Cary Moon and Nikkita Oliver the smartest. From the article:
The Municipal League of King County has been using citizen volunteers to interview and rate candidates for a century. This year’s Seattle mayoral field got by far the highest rankings in the past 50 years (that’s as far back as I looked).

The Muni League approaches it as a job interview: Do the candidates have the background and the skills to be mayor? This time, three earned the top grade of “outstanding.”

No Seattle mayoral field going back to 1977 has had more than one “outstanding” candidate. And in four elections — 2001, 1989, 1985 and 1981 — the medal-deserving volunteers couldn’t find a single candidate that earned an A grade.

The A grades this time went to former state Rep. Jessyn Farrell, state Sen. Bob Hasegawa and former U.S. Attorney Jenny Durkan. ...

I haven’t even mentioned the two smartest candidates. Urban planner Cary Moon and educator Nikkita Oliver often drive the mayoral debates with their ideas. Neither has much experience for the job, especially on the managerial side, yet both still earned “very good” ratings from the Muni League.
An interesting tax measure on the ballot applies to King County's entirety, not just Seattle, King County Proposition No. 1 (Sales Tax for Cultural Access Program). The proposed sales tax increase would fund (1) cultural programming in schools; (2) transportation to cultural programs for public school students; and (3) an expansion of programming by cultural organizations to serve underreached, low income, populations.

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10 Comments:

At 7:33 PM, Anonymous charlie said...

Interesting.

Speculation Tax. What is it?

https://www.change.org/p/tell-seattle-and-king-county-council-tax-foreign-real-estate-investors-to-keep-seattle-affordable

Seem like they want a tax on non-us buyers (hard to administer) and on empty houses.

DC could administer something like that but would be disasters with WB/IMF workers + embassy staff. I talked to the British embassy at some point about this and they have about 20-30 properties they lease out to employees.

Income tax:

Again, DC can already do that.

Seattle population is about the same as DC. Seattle budget maybe about 6B, DC now about 13-14B.

Looking at their budget, basically just sales tax+ real estate taxes is the city revenue.

Again DC is lucky although the system is misbalances. We need higher taxes on people making more than 250,00K, lower income taxes for the rest, and higher property taxes.

 
At 11:24 PM, Blogger Richard Layman said...

1. There is a similar tax I think now in BC, on foreign purchases. I don't think it would make much difference here. That's not what's driving the market, although I suppose a bunch of the housing Downtown is 2nd/3rd/4th properties.

WRT embassy/international NGOs, it's reasonable for them to have these properties without their being taxed more, as it is relevant to their work. It's not speculative. It's not parking money from overseas, it's germane to public policy goals.

2. WRT "I don't think it would make much difference here" I don't mean, "so charge it."

We basically do for vacant properties already, the 5x surcharge, although there are many ways around it.

More than 10 years ago, SF passed a law to make demolition very hard. This was "to keep property prices down/reduce teardowns" not for historic preservation.

The thing is, as you indirectly pointed out in past comments, properties should depreciate as soon as they are constructed. They don't, because you're buying place/location and that goes up in value. But every 1 to 1.5 to 2 generations, the house needs to be "renewed." That's what flipping does.

While it's bad that a lot of the work is bad, much isn't, and people watching HGTV can't be expected to be happy with 80 year old stoves (like we are).

3. In Seattle, what's happening is that houses are being torn down and small apartment buildings/condos are built in their place. From say 2-3 units to 20 units. (Plus big ass houses, McMansions, that can be gross. That happened next door to some friends of ours in Ballard.)

But as you know, it's a function of demand. It's like what happened in college towns like Ann Arbor in the 1960s, and so I saw the results block by block in the student ghetto when I was there--a mix of older houses (dating to the 1910s and earlier) and newer apartment buildings of varying sizes, with the largest houses broken up into apartments.

4. At some level, we can't deal with "the market" because of the constraints that are unmovable (land controlled by federal govt. not available for development) or movable (height limit) and the increase in demand to live in the city.

The only way to address it is to allow more "maximal" development, as we have discussed ad infinitum over the years. Don't lop off floors. Provide density bonuses. Do everything you can to encourage maximum development of properties, not be satisfied with minimal matter of right. ADUs. Increase the height limit.

Plus purchase of properties to maintain affordability, etc. At some level we have to be satisfied with lower value households living in PG County as a better use of scarce resources.

5. What it means is accepting the upward revaluation. Recognizing the build out constraints, etc. Recognizing that only over multi-decade periods will the market settle down.

I do think there is a ceiling somewhat based on the average/median income of two-earner households. I think that $1 million is a ceiling for many neighborhoods. Although many houses go over that depending on the neighborhood and/or the size.

6. Not that I like the idea personally, but you're right about residential property taxes, probably owner occupied residential property taxes should be 50% higher. The incorporated cities in Montgomery County have taxes more than 2x DC's. Even the incorporated cities in Prince George's County, like Mount Rainier, have higher property taxes.

Then again, g-d knows what the money would be wasted on.

7. e.g., "homeless." As I keep saying, it's not a lake it's a river. It's a dynamic, not a static population. It's not "fixable" in that sense. It will always be there.

The only way to deal long term is to "fix" the population susceptible to it.

 
At 10:45 AM, Anonymous charlie said...

RE: foreign purchase.

Agree, not a huge issue in DC.

"
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https://www.ft.com/content/4db14eab-ee08-35cc-84c4-b8e034191f14

Foreign investment in US residential real estate hit a new high for the year ending March 2017, according to an annual survey from the National Association of Realtors.

Foreign buyers and recent immigrants bought a survey record of $153bn of homes, up from $103bn for the year to March 2016 and $104bn for 2015. It represents around 10 per cent of the dollar value of existing home sales in the US, rising from 7 per cent for the previous year.

The growth, concentrated in Florida, California and Texas, comes in spite of dollar strength making it more expensive for foreign buyers to purchase properties.

“While the strengthening of the U.S. dollar in relation to other currencies and steadfast home-price growth made buying a home more expensive in many areas, foreigners increasingly acted on their beliefs that the U.S. is a safe and secure place to live, work and invest,” said Lawrence Yun, chief economist at NAR.

Buyers from China continue to be the biggest source of foreign investment at $31.7bn for the year. Canadians saw the sharpest increase in purchases, from $8.9bn in 2016 to $19bn this year, thought to be the result of higher domestic home price increases, especially in Vancouver and Toronto. Buyers from the UK, Mexico and India make up the rest of the top five.
"

As you said parts of the downtown condo market and in particular Georgetown is where people park millions into real estate then don't "use" it to avoid DC income tax residency.


Banning sales to LLC would also be a good step for DC.

 
At 11:11 AM, Anonymous Richard Layman said...

Don't have a problem with banning sales to LLCs. Don't think that the 3rd/4th etc. properties make a huge difference in the market, but somehow have some effect, and I don't have a problem with taxing them more.

The idea I suspect behind lower property taxes is that resident owners are also paying income taxes.

So properties that don't have income tax dwellers get a break "they aren't entitled to." Don't know exactly how to make it up.

... similarly, wrt those British embassy etc. owned properties, I hope they aren't exempt from tax. I doubt it, unless it is a federally-passed exemption. DC tends to only give tax exemptions for locally serving organizations, with the exception of whatever Congressional exemptions are passed.

=====
wrt foreign investors in the US market, I was never saying it isn't an issue, but that it isn't an issue so much in DC.

Our issue is that more DC neighborhoods are attractive within the metropolitan market, and there isn't enough housing to satisfy demand.

In NYC, SF, South Florida, etc., each market has different dynamics. Crazy s*** in South America makes Miami a place for South Americans to park funds, buy real estate, etc. NYC is a whole different dynamic. Asians find West Coast property attractive, etc.

 
At 11:12 AM, Anonymous Richard Layman said...

sorry to be pedantic. It's not like you don't know that...

 
At 12:28 PM, Anonymous charlie said...

no -- we agree on the foreign buyers.

One datapoint is we have an overseas chinese buyer in our condo -- all cash transaction (closed in 3 days).

But overall yes not a huge issue in DC; with the exception of WB staff which has a decimated bank to getting employees mortgages.


Just a FYI, I'm thinking of the issue of "fiscal sustainability" of DC. Several Koch groups are making an issue of it, but they leave DC out of their lists. I suspect the issue in DC is pensions, don't know how they are being handled.

Larger point which intersects you -- as much as it is good that DC City-state can do a tripod of taxes I wonder how much more can be raised. Yes, property tax is low but doubling it (without removing income tax) would result in a lot of fiscal pain for DC. See proposal to double property tax in metro transit basins.




 
At 4:24 PM, Blogger Richard Layman said...

Well, I never wrote it up but I had this idea for a book in college, probably mentioned it, about the difference between intensive and extensive use of resources. This was when Japan was kicking the US auto industry in the butt... they grew their economy on intensive use of resources because they imported all their raw materials.

DC's growth opportunity is mostly extensive -- growing through population which adds income tax and property tax revenue.

Irrespective of raising property taxes.

Saving money some, which is intensive, but I think it's completely out of the skill set. And as you point out, the massive increase in social-human services spending since the Williams years is more the way things go.

... on a DCPS list me and this guy used to argue with the rest of the list that the then Brookland Elem. school sending students to the elem. school down Michigan Ave. by bus for after school programs, it was a waste of a couple million, when they could walk. The rest of the list thought "forcing the students to walk" was anathema.

Puncturing the height limit is a form of intensive growth, but would be extensive too -- more, bigger -- not just the same, but more intensively.

In both cases, that's the primary opportunity for revenue growth.

One mayoral candidate, Leo Alexander, otherwise somewhat wacked, in 2006 made the point that every 10% reduction in people on welfare would save the city $150MM. (Hell, these days, that's about 1% of the budget.)

I suppose to push the height limit concept forward, and to better explain the need to add population and buildings to the tax rolls, ought to make people get a better handle on that as an alternative to raising property and income taxes on the existing base.

======
and yes, thanks for that interesting data point about your condo. Out in the outer city, we never see that kind of stuff.

 
At 5:09 PM, Blogger Richard Layman said...

On impact of foreign purchases in Toronto:

https://www.theglobeandmail.com/news/toronto/how-much-have-foreign-buyers-affected-torontos-housing-market/article35698275

Interesting paragraph:

U.S. researchers have examined a similar issue: the influence of out-of-town second-home buyers on housing
markets in several U.S. cities in the 2000s. In a paper published in The Review of Financial Studies in 2015, they
found that every percentage-point increase in the fraction of sales to non-locals in a given month was linked to a
1.9-percentage-point increase in price appreciation over the following year.

Haven't read the paper. I wonder how much it is focused on submarkets, because that's what really matters.

Although ... as I have written, as people (higher income households) are crowded out of particular submarkets, they move to other ones with similar characteristics, crowding out comparatively higher (but lesser than them) income households, pushing the process forward.

... which is a process described by a professor quoted in the Globe & Mail article.

 
At 5:11 PM, Blogger Richard Layman said...

this is the paper.

http://www.alexchinco.com/misinformed-speculators-and-mispricing.pdf

but it's likely too "mathy" for me.

 
At 5:20 PM, Anonymous charlie said...

Interesting paper.

Probably skewed a lot because of vacation houses in FL, NV, NC and other places that were creamed in 09 and never recovered.

Are out of town buyers dumb in a simpler question?

In terms of finance by city,

https://wallethub.com/edu/best-run-cities/22869/#detailed

again you can quibble with the presentation (designed to be like a INC magazine report on best place to retire from the 1980s) but gives you some idea of where DC is


1) DC highest budget per capita

2) at 101 for total financial stability level

3) "stability level" is debt+credit rating, so DC's credit rating helped it.

 

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