For Seattleites, homeownership is still a foundation of the American Dream
In the raging debate over Seattle’s housing situation, it’s been argued that progressives must support City Hall’s plan to rezone neighborhoods.
That’s a ploy — are you with us or against us, liberals? — in a city that’s overwhelmingly progressive yet conflicted over developer-driven housing schemes that cast homeowners as villains.
But just as in the presidential election, Seattle is at a critical junction where people must do more than simply check a box that affirms their party loyalty. The consequences are so great, people must look past sound bites, consider potential outcomes and make up their own minds.
Seattleites are asking conservatives to do this with Donald Trump; can they do the same when their city’s future is at stake?
Progressives should be especially wary of the proposal by Mayor Ed Murray and City Councilmember Mike O’Brien to allow Seattle’s single-family homes to be converted to investor-owned, multifamily rentals.
This is presented as an affordability measure, but it would have the opposite effect on those trying to buy a home, which the vast majority of renters aspire to do someday. This policy change would make it harder, if not impossible, for people of modest incomes to fulfill this dream.
By making every house in Seattle more attractive to big investors, who can pay cash and outbid people just looking for a home, the policy would make Seattle homeownership far more unattainable for younger people and the lower to middle classes.
This prospect should have progressives marching with pitchforks.
“There’s a reason buying a house is the American dream: It provides stability, community engagement and helps buyers and their descendants prosper.”
For generations, homeownership has been the primary economic escalator for working people, people of color and immigrants. It was slowed by the recession, but its benefits continue.
There’s a reason buying a house is the American dream: It provides stability, community engagement and helps buyers and their descendants prosper.
“Homeownership has been a wealth builder,” said Ron Sims, a former King County executive and former deputy secretary of the U.S. Department of Housing and Urban Development.
Sims is passionate about this — he said owning a home while telling others to rent is “a rhetorical apartheid.”
“The people who tell you homeownership’s not important are the people who own their homes but have invested in companies that rent to people,” he said, recalling pitches he heard from investors at HUD.
“It’s such an issue of class — that other people shouldn’t have that same opportunity of homeownership that you have, that other people should not have the stability that you have.”
Beyond the individual, homeownership benefits society. Children do better in school and are more likely to graduate from high school if parents own rather than rent, even if they’re poor and live in rough neighborhoods.
Benefits to children and lower-income communities are established, so why is progressive Seattle pushing policies that overwhelmingly favor renting over ownership?
In addition to Murray’s affordability scheme, Seattle has been cutting the share of housing-levy support for homeownership programs. Just 4.7 percent of its new levy is for ownership, down from 11.3 percent in the 2002 levy.
Of the 4.7 percent, city officials intend to funnel some to quasi-ownership housing trusts, which sells houses on leased land and limits how much buyers gain from appreciation.
Seattle’s not alone. As regions around the country grapple with affordability, politicians generally respond with policies favoring rentals.
Politicians have long favored real-estate interests that support their campaigns, but new forces are entering the picture.
The continuing decline in homeownership comes as some of America’s richest investment firms are aggressively moving into the rental business. Over the last five years, a handful spent more than $28 billion buying and financing single-family houses converted to rentals nationwide.
They’re bundling rentable houses and loans — in the Seattle area, too — into investment products, similar to the way mortgages were commoditized before the 2008 market crash. Mega-investor Blackstone Group is reportedly spending $5 million a week buying houses, and firms are seeing 65 percent operating margins.
Whether it’s hedge funds or a small developer, Murray’s neighborhood rezones would create inventory they crave.
The policy is pitched as encouraging innocuous sounding “backyard cottages” — which are already allowed.
Actually the rezone would allow single-family houses to be converted to investor-owned triplexes, with three rentals per lot. Notably, it would remove the requirement that owners live on the property.
After blowback, O’Brien proposed a one-year holding period before these rental properties can be sold to off-site investors. But that still removes the owner-occupancy requirement.
If millennials and others are struggling to buy houses now, imagine them bidding against investors from Bellevue to Beijing on properties where rental revenue could be tripled.
Despite such competition, people of all ages and incomes haven’t given up on the dream and continue seeking homes in Seattle and surrounding communities.
“People are still able to buy houses,” said Cristie Stapp, a Northgate mortgage broker who has taught first-time homebuyer classes for decades.
It’s a difficult process. Stapp said buyers may need to make many offers, but all her clients found a home if they stuck with it.
Some use a state program for people earning up to $97,000. To finance down-payments, it provides interest-free loans up to 4 percent of a home’s price. Loan payments are deferred 30 years or until the house sells or refinances.
Those loans may cover down payments — which can be 3 percent — plus closing costs, Stapp said.
Prices have soared. The median house sold in King County was $505,000 last month. Still, that means half the houses sold for under $505,000. Half the houses in Snohomish County sold for under $385,000, and in Pierce half sold for under $280,000.
Buying is tougher for immigrants who don’t yet have Social Security numbers. To get mortgages, they need 40-percent down payments, said Stephanie Chavez, a housing counselor at Seattle’s El Centro de la Raza.
Still, that’s not dissuading some from pursuing the dream,
“A lot of people, they’re thinking is they’re paying a lot in rent, their money is pretty much being thrown away and not put toward anything. They want to leave something for their children,” she said. “They still have that hope that, maybe not right now, but if they start saving and work on their budget harder, it will be possible for them down the road.”
Chavez said a couple from Mexico that she’s helping has saved and worked hard for years, and has even started a cleaning business, to make a 40-percent down payment. They’re getting close.
How is it progressive to increase chances that big investors living elsewhere would bid against this couple when they finally have the opportunity to buy a house?
Brier Dudley, www.seattletimes.com, Aug. 19, 2016