A story in Washington Post on May 15, 2015:
After Amazon opposition, Seattle passes compromise tax to fund homeless services
I used to live in the Puget Sound region. The Navy sent me initially to the Bangor submarine base, and then I spent the majority of my career in the area. Afterward, my family lived on Whidbey Island and in Snohomish County. My daughters are still there (ex-wife, too, I believe, although why that matters, who knows).
The point of all this is I’ve watched the kerfluffle develop over a couple of generations. I’ve been a business owner, although never on that scale. I’ve also been on the edge of homelessness. I see both sides of this and understand the passions involved. It seems to have evolved over time. The thing is, it’s a history lesson.
Seattle has been considered a desirable place to love for many decades now. It took pride in its unique culture and style, which made it attractive. But it became a victim of its own success. Some businesses had their stock prices skyrocket (Microsoft Millionaire, anyone?) while others established their name in the region – Starbucks, REI, Amazon, Expedia for example. Me, I wasn’t lucky enough to hit the dot-com jackpot — I worked for a company called Laplink and our killer app was going to be something that made it possible for you to copy and transfer MP3 files faster. Not play them, just copy them. It went quickly from killer buzz to buzz kill. For the average joe like me who wasn’t riding the boom, wages weren’t going up anywhere near that fast. That, you see, was the start of a problem.
Seattle proper sits in the center of King County. The city itself is on a pretty narrow strip of land between two bodies of water – Puget Sound to the west and Lake Washington to the east. This geography meant that once the area was built out, to the city limits, there was only one place to go for expansion – up. As they say, there’s one thing they just aren’t making more of – land. But Seattle had beautiful vistas, with the Cascade mountains to one side and the Olympic range to the other, Mount Rainier waiting to blow up just south of the city. Big, tall buildings are so New York, so Chicago, so… everywhere else. The citizens insisted on city ordinances banning them.
Now the pressure is on housing stock. There’s only so much to go around, and the laws of supply and demand kicked in. Prices start to climb, both in the city and the region beyond. I lived in a suburb forty miles outside the city proper, and my house went up 70 percent in value in five years. But this rise hit both purchases and rental properties. In other words, rents went up – but wages didn’t.
People got squeezed. How bad? The median cost of a home in Seatle is more than $750,000 – $777,000 to be exact. Stop, take a minute, breath. I know. I said that too when I read it. Three-quarters of a million for an AVERAGE house.
Now, Seattle is a liberal city. It was one of the first to enact legislation to declare a $15 minimum wage. Yet if you do the math, a full time, 40 hour per week person making that will take home about $900 after taxes every two weeks. What does that get you?
I did a search on Zillow. You can get a 250-square-foot studio apartment with a bathroom (a toilet and a sink, no door), a stove and a microwave, and lots of natural light, for $995 per month.
So, what’s a fellow to do? Some of your choices when you’re priced out of the market like that:
- Find a new job in a less expensive housing market
- Find a less expensive dwelling within a reasonable (or semi-reasonable) commute. You define reasonable. I once commuted 150 minutes each way.
- Keep your job but become homeless to stay in the city you love. As one person put it, either be homeless and eat well, or live in a beautiful place and starve.
Lots of people are choosing Curtain #3. Hence the record homelessness now.
You have too many people wanting to live in Seattle. Period. That’s it. So what are your solutions?
- Create enough housing so you can depress the price to the point that allows people to live in the region affordably under the existing wage structure.
- Raise wages enough so people can afford to live in the region at the current housing prices.
- Decrease the popularity of the region so there either a decrease in the net population growth relative to the rate of new housing construction or an actual reduction of population in the area.
Which of these has been tried?
Regarding new housing, the prohibition on tall buildings has been lifted. But in the downtown buildings, the units are either at full cost and rent for over $2500 per month, well above a middle-class income, or are subsidized to help toward the homeless issue. The middle class has been squeezed out of the city center.
Even in the traditional single-family neighborhood, builders are now able to put multi-family units on these lots, an attempt by the city to bring more people into somewhat gentrified areas. Needless to say, the gentrified are less than thrilled. For one, the issue of parking isn’t really addressed (a building with five apartments and one parking space is never a great idea). As with downtown, these are mixed cost apartments, so the non-rent subsidized ones still tend toward cost prohibitive for a middle-class wage earner.
Regarding wages, since 2001, Washington State has always been at the vanguard of the wage equity movement, granting cost of living increases to the minimum wage every year due to a voter initiative. The $15 minimum wage in Seattle is a natural extension of that sentiment, in what is arguably the most liberal city in America. But in the face of runaway housing inflation, it’s like a squirt gun against a forest fire.
This brings us to the Employee Head Tax. I understand the reasoning behind it. These companies have money. Redirect it, and use it to fund “Homeless Services.” Great idea. But poor execution. Where to start.
- Three cities have had it – Chicago and Denver, which were $4 per month each, and now Seattle.
- Seattle’s tax will be six times as large as the other cities.
- No specifics on how the money will be spent or how it will be accounted for.
- All the rhetoric about this directed at a single company and individual (Amazon’s Jeff Bezos). It became about punishing him, rather than helping people. Yet it’s going to cast a much, much wider net.
- Seattle’s tax base has increased more than it’s population growth over the last decade, and it has had a declared state of emergency over the homeless issue for the past three years, but no progress has been made. They have no proof they know how to use or manage any funds or programs.
Major employers in the city, including Starbucks and Amazon, have all voiced their opposition. What this may do is the third option – decrease the popularity of the region. However, Seattle’s been there before. In the early 1970’s, after the SST program was canceled, another area employer, Boeing, laid off thousands of workers. So many workers left the region that the population of Seattle decreased by 10% over the decade. This famous billboard went up.
This tax program is an invitation for the same. Remove thousands of jobs, increase unemployment in the region to near double-digit levels. You might even increase the homeless population at first. But after a time, these people will see greener pastures elsewhere and leave. Reduce that pressure, reset home prices downward, and eventually, people will get a chance to live there again.
Of course, thousands will be ruined financially. Some will still fall through the cracks. And certain politicians will attempt to manipulate this process for their own personal gain. But then again, no plan is perfect.