Seattle, like many cities, is experiencing a housing shortage—or what some city leaders call a “crisis.” But in an attempt to address it, Seattle has only made matters worse. In 2019, the city created the Mandatory Housing Affordability (MHA) Program, which places unique burdens on anyone building in certain zones throughout the city. In so doing, the city’s attempt to make housing more affordable has done just the opposite: it has made it more expensive to build affordable housing.
The city was warned that this would happen. The city-commissioned report on MHA’s “economic feasibility” acknowledged that its burdensome costs would stall new housing construction in the bottom third of the housing market. Nevertheless, the city put MHA into effect—trumpeting it as a “grand bargain” with “major players,” including large developers. But for ordinary Seattleites, MHA is no bargain.
Longtime Central District homeowner Anita Adams knows this firsthand. Anita wants to build a modest addition to house her two adult children. But before she can get a building permit, the city demands that she either build additional “affordable” housing units or pay nearly $77,000 into the MHA program. Those fees make Anita’s plans impossible—and leave the city with fewer affordable housing units.
Anita is not alone. Across the city, anyone wishing to construct a home must face incomprehensibly high fees or burdensome and intrusive new housing mandates levied in the name of “affordable housing.” And yet, the laws of basic economics (and common sense) dictate that these costs result in higher rents and fewer housing options.
Fortunately for Anita, the Constitution dictates that governments cannot use the permitting process as an opportunity to coerce money from property owners, and certainly not at the expense of the city’s middle- and low-income residents. Anita has partnered with the Institute for Justice to challenge Seattle’s counterproductive and unconstitutional MHA program and clear the way for homeowners to develop their own land without paying exorbitant fees.
Seattle’s housing problems date to the 1970s, when a number of unrelated city, state and federal housing policies, and a growth in Seattle’s population, led to a severe shortage of apartments. Since then, Seattle’s problems have only gotten worse. For decades, the city attempted to pass various laws to mandate affordable housing. But the government cannot just mandate that a scarce resource be cheap—efforts to do so have proven to be ineffective, counterproductive or unconstitutional.
The most recent example of this is all three. In 2019 the city created the Mandatory Housing Affordability (MHA) Program. The law requires that property owners in certain zones pay an exorbitant fee or actually build additional housing as a condition of obtaining a building permit for new construction. The law applies to all builders big and small constructing housing in zones across the city. From block-sized apartment builders to individual homeowners looking to make a small addition—the city gets them all.
Central District homeowner Anita Adams knows this burden firsthand. Anita’s family moved to Seattle more than fifty years ago looking for work and a new beginning. They settled in Seattle’s Central District, which has traditionally been home to many Black families. After years of responsible saving, Anita bought a home down the block from where she grew up. Now, she is the only member of her family to own a home in Seattle.
Anita shares that home with her husband and in-laws. But when the pandemic struck, Anita’s two children had to leave their college dorms and move into her basement. Frustrated with the living conditions of her family members and the cost of housing in Seattle, Anita decided to take out a second mortgage and build a four-unit unattached addition on her lot. The total addition would be about 2,200 square feet.
The city’s zoning code allows Anita to build such a structure on her property. But that does not mean that there were no city-imposed roadblocks to Anita’s dream. As she started to research the building process, she realized that the MHA program could make her dream impossible. At the MHA-mandated rate of $35 per square foot, Anita would need to pay roughly $77,000 in fees to the MHA’s “affordable housing fund” before she could break ground. The other option would require that she construct two additional dwelling units, then provide them as below-market “affordable housing” rentals for up to 75 years. Like most Americans, Anita doesn’t have enough money to do that and afford to build her own house.
The MHA has a waiver provision where the city, at its discretion, may waive the building requirement or fee because of a “severe economic impact.” That option, however, was essentially an illusion for Anita. The city requires an applicant to submit architectural plans and apply for permits before it would consider granting a waiver. Because these can cost tens of thousands of dollars, Anita would not have enough money to complete her project if the city imposed the MHA conditions—meaning that she would have spent a good deal of her savings just for the privilege of being told, “no.”
With her plans on hold, Anita’s children have had to move out of Seattle as they cannot afford the exorbitant cost of housing. They now have to endure lengthy commutes into the city each day, and they enjoy much less time with their parents.
Anita’s story is not unique. In 2020, for instance, Andre and Erika Cherry faced $11,000 in fees just to renovate their 1916 fixer-upper. Only after the Cherrys told their story to the Seattle Times did the city relent and grant them an exemption. But not everyone is that lucky.
Increasingly, ordinary Seattleites like Anita and others can no longer afford to own their own homes—in part, because of programs like MHA. For the same reason, ordinary folks like Anita’s children increasingly cannot afford to pay Seattle rent. Indeed, it does not take an economist to realize that making housing more expensive will, well, make housing more expensive. And, as it often does, it is the city’s low-and-middle income residents who struggle to pay the cost.
Seattle’s Unconstitutional “Grand Bargain”
When the city started working on the MHA, it openly acknowledged that the program was a “grand bargain” between “major players.” However, Anita and other small or individual developers were not part of these discussions, and they did not agree to any sort of “bargain,” which, in any event, they cannot afford. Yet they are being charged for it all the same.In July 2015, Seattle released a “Statement of Intent for Basic Framework for [MHA].” The city would agree to increase density/height allotment (i.e., “upzone”) zones across Seattle, and—in exchange—“the value of this available increment would be paid towards affordable housing whether or not the increment was used.” Various political players—including the mayor, MHA’s sponsoring councilman, and representatives of large developers—all signed the document, indicating “ 1 These obligations apply to both small and large developers, meaning that major developers and middle-class homeowners must pay at the same rate. But while the “major players” can afford to pay those costs and pass them on in the form of higher rent or listing prices, smaller developers and homeowners cannot.
The city knew that MHA would crowd out small developers and ordinary renters by discouraging everything but high-end housing. The city’s report on MHA’s “economic feasibility” acknowledged that MHA’s permitting costs would allow for continued construction of high-end housing. But as for new housing in the bottom third of the market, “nearly all development prototypes appear challenged” and many projects would “need to attain above-market rents in these areas to be feasible.”
In other words, Seattle’s “Grand Bargain” allows “major players” to build more high-end luxury housing while crowding out small and individual developers with exorbitant fees. As a result, small (that is, “low-market”) developers find it more difficult to build housing, resulting in higher rents, and renters in turn find it more difficult to afford to live in the city.
This scheme is not just bad policy; it’s unconstitutional. As described further below, cities are allowed to place conditions on land-use permits, but those conditions must be proportionate to the anticipated impacts of the new proposal. As the city has admitted, its formula for calculating MHA permit obligations does not seek to capture housing impacts but, instead, reflects the purported value of recent upzoning. However acceptable that might be for the large developers who agreed to it—and who can absorb high up-front permitting costs and utilize the upzoning to its full extent—it unconstitutionally burdens people like Anita from building a home on their own property.
Anita is a lifelong resident of Seattle’s Central District. Anita always dreamed of one day owning a house near where she grew up. After marrying her high-school sweetheart, she eventually bought that home. Now, she is the only Seattle homeowner in her entire family, for whom she’d like to build another home next door, on her own property. Yet the city won’t let her build that home—unless she first pays exorbitant permitting costs.
Anita is a proud, prominent member of Seattle’s Black community, which for decades has been centered in the Central District. Over the years, she has seen how it is increasingly difficult for people in her community (and other historically marginalized groups) to own their own home (or even afford to live) in Seattle—largely due to city policies that, however well-intentioned, in practice favor those with deep pockets. Upon learning that the city would charge her a $77,000 permitting fee just to build a house for her family, Anita met with other Black homeowners and renters across Seattle who told her similar stories and who, accordingly, are moving away. But Anita is not keen to let the city run her family out of town.
The Defendant is the city of Seattle, Washington, located in King County.
Anita is asking the federal courts to declare that Seattle may not apply MHA’s permit conditions to her or anyone else in her community. She challenges those conditions as violating her rights to due process, secured by the Fourteenth Amendment to the United States Constitution.
The Due Process Clause protects Americans from abuses of their fundamental constitutional rights, including the incorporated right not to have property taken from them absent just compensation. That right includes the right to be free from extortionate land-use permitting conditions, where government takes advantage of the permitting process as an opportunity to obtain uncompensated property (including money). To guard against such abuse, the Supreme Court has held that conditions on land-use permits must bear an “essential nexus” with, and a “rough proportionality” to, the anticipated negative externalities of the proposed new land use. 2
For example, a city may request that a property owner pay for replacement flood drainage in exchange for a permit to build on a floodplain; that would be a reasonable permit condition because the proposed development would otherwise require that the public pay for the new flood drainage. But the city may not use the property owner’s request as an opportunity to demand that she pay for renovations to City Hall, nor may it ask her to pay for extra flood drainage. If it did, that would be an unconstitutional demand for property without compensation—a violation of the takings component of the Fourteenth Amendment.
As Seattle has admitted, its MHA permit conditions do not reflect the anticipated impact of any proposed housing project. Instead, those conditions (and the formula the city uses to calculate them) represent the estimated value of being allowed to build a project. Yet the Supreme Court has stated that the ability to build on one’s own property is not a discretionary benefit for which the government may charge people whatever sum it likes. Under these circumstances, MHA ceases to be a legitimate permitting condition and becomes nothing more than an opportunity to use the permitting process to obtain property without compensating the owner—an “an out-and-out plan of extortion” that is neither just nor constitutional. 3
The Litigation Team
The litigation team consists of Institute for Justice Managing Attorneys William R. Maurer and Paul V. Avelar, as well as Institute for Justice Attorney Suranjan Sen.
About the Institute for Justice
The Institute for Justice (“IJ”) is the nation’s premier defender of property rights. At no charge to its clients, IJ defends the rights of homeowners against eminent domain abuse, as in Kelo v. City of New London and Bailey v. City of Mesa; uncompensated property destruction, as in Baker v. City of McKinney;abusive fines and fees against homeowners, as in Ficken v. City of Dunedin; and against abusive zoning laws, as it has done on behalf of the Catherine H. Barber Memorial Shelter in North Carolina and on behalf of mobile-home owners in Arizona. Moreover, IJ is fighting to end the unfair governmental practice of civil forfeiture across the country.
IJ is headquartered in Arlington, Virginia. It has state offices in Seattle, as well as in cities in Texas, Florida, Minnesota, and Arizona. For more on IJ’s work touching not only on property rights, but also on economic liberty, educational choice, police accountability, and free speech, visit www.ij.org.