Goldy

Councilmember Sally Bagshaw just doesn’t get it:

Bagshaw said: “More than frustrated, I am sad about how Sawant is acting. I perceive her as intentionally creating class differences for her own gain, whereas we could be shaking everyone’s hands and working together to solve this problem… “

Sigh. So, the thing is, to accuse Kshama Sawant of “creating class differences” is to fail to acknowledge that class differences already exist. And I think that helps explain Bagshaw’s failure to connect with working-class voters.

Also, while Sawant is certainly attempting to create class consciousness (and she may even be attempting to exploit it), none of this is for Sawant’s personal gain. She’s a true believer in the midst of a class struggle. Simple as that. Read your Marx and you’ll gain a lot of insight into what motivates Sawant.

But to attribute it to ego or self-interest is to misread Sawant entirely.

As for Bagshaw, I don’t question her intentions. Every conversation we’ve had has been pleasant and polite. I think we mostly get each other. But then, that is because Bagshaw and I largely hail from the same class. The overflow crowd at the affordable housing forum last week, not so much.

Personally, I struggle to overcome my own class prejudices and preconceptions, not always successfully. Empathy can be a poor substitute for experience. But one thing I know for sure is that these class differences—and the anger and frustration they are generating—are very, very real.

Hey look over there!

Seattle City Councilmember Sally Bagshaw says a town-hall meeting hosted by Councilmember Kshama Sawant at City Hall last week was really a “political rally designed to inflame emotions and get one council member re-elected.”

Um, with all due respect, Sally, that is total bullshit. And it is also a truly unfortunate and unnecessary distraction from the growing crisis over Seattle’s lack of affordable housing.

To be clear, I was at that town-hall meeting. I was the second public speaker on the agenda. And I spoke totally about policy. Not politics, policy. There wasn’t anything political in anything I said. Pure policy wonkery. Period.

Councilmember Sawant had invited me to speak so that I could present my proposal to tap into city and county bonding capacity to build affordable housing. In fact, she did more than just invite me. She and her staff twisted my arm to take an hour out from a really crushing schedule last week—to speak about policy! And a policy that has nothing directly to do with Sawant’s pet project of pushing for some sort of legal rent control.

It was, by the way, the exact same policy pitch that I personally made to Bagshaw just two days earlier at the 43rd LD Democrats’ straw poll. Was our one-on-one conversation a “political rally” too, Sally?

Sawant’s council colleagues would do better for themselves and their city by directly addressing housing affordability rather than attempting to distract from the issue by launching bullshit ethics complaints.

Job 3:2
He said:

Discuss.

Okay, so it’s not exactly statistically meaningful or predictive, but socialist city council member Kshama Sawant kicked ass last night at the 43rd Legislative District Democrats’ annual straw poll, winning 145 votes, more than twice the 70 votes of second-place finisher, Urban League president Pamela Banks. Former Equal Rights Washington director Rod Hearne came in third with 59 votes, followed by Morgan Beach with 52.

There’s been more than a little wishful thinking on the part of some establishment Dems that Sawant is on shaky ground with rank and file Democratic voters, but you wouldn’t know it from her reception last night. Sawant was surrounded by well-wishers all night long, while her challengers had to put a little effort into their mingling. If their bylaws didn’t prevent the 43rd Dems from endorsing a non-Democrat, I’m pretty sure she’d easily win the LD’s endorsement.

The fact is that few Democratic politicians speak to the values of the party’s progressive base as directly as Sawant does. So it shouldn’t really be a surprise that so many Dems are willing to overlook her socialist label.

Deuteronomy 28:22
The LORD shall smite thee with a consumption, and with a fever, and with an inflammation, and with an extreme burning, and with the sword, and with blasting, and with mildew; and they shall pursue thee until thou perish.

Discuss.

Rents at newer luxury “Class A” apartment buildings in Seattle are rising at twice the rate of rents at older “Class C” buildings, despite having twice the vacancy rate. Which which is weird because…

The data seem to defy the law of supply and demand. I asked Cain about it; he believes it has something to do with the different types of ownership models at luxury apartment buildings compared with the older ones.

Premium Class A properties are typically owned by institutional investors and managed by a national property-management company.

In contrast, Class C properties are usually owned by people with a connection to Seattle — either a family (though that’s become a lot less common in recent years) or a small group of local investors.

“Also, these owners seem to hold the properties longer,” Cain says, “and as a result, they have lower debt coverage ratios.” The less debt they have to service, the less pressure to push rents to the maximum.

In other words, many of these landlords aren’t jacking up rents to whatever the market will bear. It’s a refreshing change from the all-too-common stories of brutal rent hikes forcing tenants to relocate.

Except, of course, it’s not weird. Because there is no “law” of supply and demand. Supply and demand is a useful construct for describing, in general, how markets tend to work. But it’s not a law. People—and thus the markets they create—are a lot more complicated than any three-word phrase can describe. So no, merely adding more supply is not the only (or even an adequate) solution to Seattle’s growing affordability crisis.

I’m not saying we don’t need to add more housing units. Of course we do. Massively. But the market alone will not solve this crisis because the form of ownership matters.

Last week I upset some of my urbanist friends by once again suggesting that the market alone could not build its way out of Seattle’s growing affordable housing crisis. Yes, our current NIMBYist regulations have helped create the current crisis, so of course we need to free private developers to build more density. “But…” I insisted, “if we want to substantially add and retain middle and low income housing in Seattle than we’re going to have to build and retain tens of thousands of units outside of the market.”

So what exactly do I mean “outside of the market?” I mean the city is going to need to build and own these units itself. And if done right, we can do this at no cost to taxpayers.

Specifically, the city and county have hundreds of millions of dollars of untapped bonding capacity that we can use to build middle-income and workforce housing at below-market rents. And we can do this because municipal governments have three huge advantages over private developers: we can borrow money more cheaply, we don’t have to produce a return on investment, and have we no incentive toward extractive “rent seeking.”

Here’s how it works: The city sells bonds to purchase and develop a piece of property, pledging revenue from that development (not taxes!) to pay off the bonds. You know, just like private developers borrow money. But cheaper. We then hire the same private architects and private contractors that private developers hire, because that’s how you build stuff. No need to reinvent the wheel.

In fact, the whole process works pretty much like a typical private development, using the same standard math that private developers use to determine if a project pencils out (banks won’t lend to them if it doesn’t). The only difference is that absent a profit motive, the goal of our bond-backed public development will be to charge as little rent as possible, not as much. We want to build as affordably as we can on any particular piece of land while charging rents sufficient to service the bonds, pay for management, maintenance, and improvements, and keep sufficient financial reserves. The larger rental market will necessarily influence our design decisions, but not define it. As a result, we will make different design choices than the typical private developer.

For example, in order to keep costs down, we might opt for smaller bedrooms and communal laundry rooms rather than washers and dryers in every unit. And rather than providing an off-street parking spot for every unit, we might build only a limited number of spots, made available to tenants at an additional cost. On the other hand, we might provide onsite dedicated parking spots for car-sharing services like Car2Go and Zipcar, or in a family-oriented development, we might include space for onsite preschool and childcare, thus reducing the need for young families to own a car.

It’s not about building cheap. It’s about building smart. We want to provide those amenities that best serve the needs of median-and-below-income tenants, rather than those amenities that might fetch the highest rent from a crowded market of well-paid tech workers.

And finally, even if we initially fail to offer these units at substantially below market rates, public ownership will allow us to impose our own voluntary form of rent control, only raising rents to meet our actual costs or necessary improvements, rather than hiking rents to take advantage of whatever the market will bear. If managed properly, over time these public developments would grow increasingly affordable relative to the larger profit-driven market. In fact, if we meet or exceed our goals, we may even be able to collateralize these developments in order to free up bonding capacity for additional projects.

To be clear, this is not subsidized housing—although additional subsidies could be leveraged to further reduce rents for low-income households. It is more like a public utility: like Seattle City Light pledges revenue from ratepayers to bond the investments necessary to build and maintain a system that delivers some of the cheapest and greenest power in the nation. The goal is to provide affordable rent-stabilized housing to as many customers as possible.

Also, this is not an entirely radical idea. Many state and local governments already offer low-interest municipal bonds to finance projects from both for-profit and not-for-profit developers in exchange for setting aside a number of low-income units for a specified number of years. I propose departing from this model in two ways: 1) We build for median income households as well as low income, and 2) We maintain public ownership and operation, keeping these units outside the market in perpetuity. I don’t have all the details worked out, but the research I’ve done convinces me that the basic premise is sound.

As for the risk to taxpayers, of course, nothing is risk free. Gross incompetence, corruption, a natural disaster, or an economic collapse could leave taxpayers holding the bill. But that’s true of anything we bond. The upside is that we could leverage our AAA credit rating to add hundreds or even thousands of affordable housing units to the region every year… units that would stay affordable regardless of market forces.

Is that enough to address our affordable housing crisis on its own? Of course not. Above all, we need more density, and that’s mostly going to come from the private market. In addition to publicly built and managed housing, I believe we must broadly lift height restrictions throughout much of the city, particularly near transit hubs, while freeing up homeowners to build “accessory dwelling units” (ADUs), both mother-in-laws and backyard bungalows. Additionally, we should liberally waive the requirement to provide off-street parking for new construction, and do the best we can to streamline the review and permitting process while maintaining reasonable standards of safety and aesthetics. NIMBYism is the enemy of density; while neighbors certainly should have input into local development, they should not have veto power. I’m not anti-zoning or anti-regulatory—I also support workforce housing set-asides and fees—but I do believe we have to be a lot smarter about the regulations we have now, and a lot more resolute in resisting our “Lesser Seattle” instincts. We need to build more housing.

So I really wish density advocates would stop viewing me as the enemy. I’m with you on almost everything.

But that said, and for the reasons stated in my earlier post, the private market is not going to solve Seattle’s growing affordability crisis on its own. As long as Seattle remains affordable compared to competing high-tech centers like San Francisco and New York, added housing supply will only increase demand. And with the possible exception of some ADUs, private developers simply aren’t going to voluntarily build many units aimed at median-or-below-income households: Buildable land is scarce and high-end housing has higher margins, so developers are going to try to squeeze as much profit as possible out of every square inch by aiming as upscale as the parcel will support.

So if we want middle-class and workforce housing in Seattle, the city is going to have to build and manage it itself, outside of the larger housing market.

1 Timothy 5:23
Drink no longer water, but use a little wine for thy stomach’s sake and thine often infirmities.

Discuss.

In the wake of the news that Expedia will be moving its offices to Seattle’s waterfront, there’s been a lot of chatter lately that Chinese online retail giant Alibaba may be looking for up to 80,000 square feet of Seattle office space in which to set up its US headquarters. But why would Alibaba pick pricey Seattle? At least partially, because we’re cheaper than San Francisco!

In addition to much lower rents than the San Francisco Bay area and cheaper housing for workers, the region is filled with e-commerce and cloud computing talent thanks to Amazon and other growing Seattle tech companies, and Sea-Tac has recently increased the number of flights between Seattle and China. Alibaba could benefit from the four daily nonstop flights to China from Seattle-Tacoma International Airport.

Hear that? “Much lower rents!” I guess it’s all relative.

I’ve had this running argument with some in the urbanist crowd over Seattle’s growing affordable housing crisis. Free up developers to build more housing faster, I’ve been lectured, and the market will do its magic—you know, supply and demand, and all that. But I just don’t believe that the market can address this problem on its own.

Freed from neighborhood NIMBYism and municipal interference, no doubt developers would build more housing faster, substantially bringing down the price of luxury housing. But since developers will almost always target the top of the market first (in order to squeeze as much profit as possible out of any piece of buildable land), we won’t get many new units aimed at median income or below households. In fact, we may see a loss of affordable units as older buildings are torn down or converted to meet demand from more affluent renters and buyers.

But as Alibaba’s decision-making process demonstrates, our residential and commercial real estate markets don’t exist in a vacuum. Global financial capital is pouring into Seattle’s real estate market seeking a higher rate of return, pushing up real estate prices and rents with them. And when it comes to attracting high tech companies like Alibaba, Facebook, and HBO, Seattle is competing with cities like San Francisco and New York where office and housing costs are much higher. Ironically, the more supply we build, the more competitive we become, increasing demand, and pushing prices back up. And as more high tech companies locate here, attracting more talented high tech workers, Seattle becomes even more attractive, especially to companies doing business with Asia. Even our growing traffic congestion bumps up in-city demand by incentivizing the choice to live closer to work.

In this scenario, it’s not clear that the market alone can ever build itself out of our affordability crisis as long as there is such a huge cost disparity between Seattle and San Francisco. It’s kinda like attempting to build our way out of traffic congestion by just adding more freeway lanes: build it, and people will come.

So, yeah, I’m all for lifting height limits and other NIMBYist restrictions, particularly around transit centers. And of course we should be smart about streamlining the permitting and approval process. But I’m convinced that if we want to substantially add and retain middle and low income housing in Seattle than we’re going to have to build and retain tens of thousands of units outside of the market.

The Seattle Times editorial board has long supported spending more money on K-12, higher education, and other essentially services, it just never wanted to raise the taxes necessary to pay for it. Until now:

If some new revenue is needed — and that appears to be the case — the Legislature should vet a capital-gains tax proposal offered by the House Democrats. It is more conservative than Gov. Jay Inslee’s proposal, hitting relatively few wealthy households, while accounting for the volatility of capital gains with a dedicated fund that would fill in go-go years and could be drawn down in slowdowns.

Whether the Legislature is capable of such fiscal restraint — and not spending every dime, every year — is an open question. A serious proposal would lock revenues in a rainy-day fund, accessible only with supermajority. The Legislature also needs to weigh the potential to chase away startups seeking to launch in a state without an income tax. But the capital-gains tax is a provocative idea, and could ease a regressive tax code that favors Seattle’s accumulating tech wealth.

Of course, this capital gains tax proposal neither raises enough money to fill our K-12 funding shortfall, nor makes anything but a small correction in this, our nation’s most regressive tax structure. But it’s a modest step in the right direction, and a hopeful sign that our state’s paper of record may be willing to have a grown up conversation about taxes.

Malachi 2:2-3
If you do not listen, and if you do not resolve to honor my name,” says the LORD Almighty, “I will send a curse on you, and I will curse your blessings. Yes, I have already cursed them, because you have not resolved to honor me.

“Because of you I will rebuke your descendants; I will smear on your faces the dung from your festival sacrifices, and you will be carried off with it.

Discuss.

We can’t fund McCleary, we can’t provide proper care for our mentally ill, we can’t pave our roads or repair our bridges or pay for our public colleges and universities.

So what is Washington State’s problem? Money. We don’t have enough of it. Because we don’t have a tax system that is capable of growing revenue commensurate with our needs or our economy.

We can elect all the Democrats we want, but until we find a way to tax income, we will get the drown-govmint-in-a-bathtub Republican agenda default. There’s no way around it. It’s simple math.

Today, the Seattle City Council will vote on a resolution expressing concern about the Trans-Pacific Partnership trade agreement currently being negotiated, and the Seattle Times editorial board thinks that’s just plain silly:

The council’s ordinance sends a head-scratching message about the importance of trade. No American city, arguably, is more dependent on the import-export business than Seattle. The Port of Seattle is an engine of family-wage jobs. Overall, 30 percent of Washington’s exports — nearly $27 billion worth — went to countries participating in the TPP. Stronger U.S. trade ties with those 11 other countries would undoubtedly add to the total, especially in Japan, Malaysia, Vietnam and New Zealand.

Uh-huh. So, here’s the thing about “free trade” as defined by agreements like the TPP: it isn’t free. Sure, goods are free to cross borders, and financial capital is free to cross borders. And since goods-plus-capital equals jobs, the TPP frees more jobs to cross international borders.

But you know what’s not free to cross borders? Labor. And since jobs are mobile and labor isn’t, free trade agreements like TPP and NAFTA and all the rest end up distorting the economy in a way that advantages capital and disadvantages labor. I’m not making shit up here. The same neoclassical economic theories that argue for free trade will tell you that if capital is free but labor mobility remains constrained, then the labor market can never reach a state of natural equilibrium. Capital can (and will) arbitrage the price difference between various labor markets, artificially suppressing wages for all.*

Good for profits, not so good for workers.

Of course, that doesn’t mean we can’t have free trade. We could open our borders to all comers, and vice versa, allowing labor to move to where the good jobs are. We could actually allow the entire market to be free. But that’s not likely to happen. Or, we could all openly acknowledge that trade agreements disadvantage labor, and insist that they come with policies designed to ameliorate the harm and redistribute the profits more broadly. You know, if we actually gave a shit about workers.

But let’s not pretend that, on their own, free trade agreements are good for American workers. Because apart from those workers directly employed in import-export (and let’s be honest, mostly import), they’re not.

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* Not to be construed as an actual endorsement of neoclassical economic theory.

Leviticus 25:44-46
Your male and female slaves are to come from the nations around you; from them you may buy slaves. You may also buy some of the temporary residents living among you and members of their clans born in your country, and they will become your property. You can bequeath them to your children as inherited property and can make them slaves for life, but you must not rule over your fellow Israelites ruthlessly.

Discuss.

My boss Nick Hanauer is lighting up Twitter again, this time with a “quick” 19-tweet rant explaining the economic stupidity of Indiana’s new law permitting businesses to discriminate against gays. Except, the rant is not so quick, so I’ve reformatted it below for your reading pleasure:

1. A quick rant on the almost surreal stupidity of Indiana governor Mike Pence and his bill to legalize discrimination against LGBT people.
2. What’s really important to underscore is how totally clueless people in places like Indiana are about 21st century economies.
3. Growth in technological economies is all about innovation. The more innovation, the faster living standards improve.
4. But innovation is a combinatorial and cooperative process. Innovation happens when old things are combined in new and novel ways.
5. Innovation is an evolutionary process, and diversity is at the core of that process. It’s not how hard you try…..
6. It’s how many different ways you try that define success. Economic dynamism isn’t driven by sameness, but by differences.
7. Diversity does not hinder economic growth in technological economies. It super-charges it. Including more people is the key to growth.
8. This is why inclusive, diverse cities like SF, Seattle, New York, and Boston kick the shit out of exclusionary places like Indiana.
9. LGBT people are different. They are uncommonly creative, and innovative. Thus, they lead in many creative endeavors and industries.
10. That is why LGBT folks are packed into the most innovative and successful companies.
11. And why states like Indiana are increasingly becoming economic backwaters. Sad, forgotten places that smart people flee from.
12. Obviously, people who are different flee, but also, all of the smart people who know that differences are key, flee as well
13. Leaving behind a homogenized, narrow, and increasingly prejudiced population, who elect the same kind of leaders.
14. Who enact laws that chase more smart diverse people away, that creates a brain drain death spiral.
15. That in turn, consigns the economy to a backwater, or at a minimum, a low wage competitor to Bangladesh.
16. All of which is a terrible waste of real estate and capital improvements. But something that may in fact, be unavoidable and inevitable.
17. So, to all of you creative, innovative, different people in Indiana: The world faces tremendous challenges.
18. They will only be solved by people like you. Come to places like Seattle that will embrace you, and leverage your talents.
19. We need you. The world needs you. Indiana apparently, does not.

Many business leaders, particularly those in the tech industry, are expressing outrage over Indiana’s new anti-LGBT law, and an incipient boycott is already underway. For example, Salesforce.com CEO Mark Benioff has canceled all company events in the state, and Seattle Mayor Ed Murray announced today that he is barring city employees from using city money to travel to Indiana on business. But Nick’s invitation to LGBT Indianans to “come to places like Seattle that will embrace you and leverage your talents” suggests a much more lasting and effective economic sanction.

No doubt Nick is right that discriminatory laws like this result in a “brain drain” by driving talented workers out of state. But if the tech industry in Seattle, San Francisco, New York and elsewhere were to actively recruit LGBT workers and other Indianans who value diversity, that economic death spiral would quickly accelerate. And that would be an appropriately high price to pay for Indiana’s government sanctioned bigotry.