In the midst of election season it’s hard to keep up with the volume of candidate questionnaires and the information they offer. One questionnaire might be interesting for readers of this website. Seattle Fair Growth, took the time to craft questions focused on land-use, housing, and zoning. These questions were likely crafted to further the group’s primary goals, articulated on their home page:

  • Reject citywide upzones–one size does not fit all
  • Give communities a voice in how they grow
  • Preserve existing affordable housing as part of a citywide solution
  • Require developers to contribute their fair share with impact fees for infrastructure
  • Be realistic about parking–we still need cars
  • Handle first things first. Solve existing problems before density makes them worse

Their questionnaire covers some interesting topics. For example: “Is Seattle Divided Politically Between Renters and Homeowners?” Since most people have close personal ties to folks who rent and own, it’s easy to see shared values. This suggests there is, or at least could be, political alignment.

Yet there are clear and stark differences between homeowners and renters. All city councilmembers and the mayor are homeowners. Gene Balk at The Seattle Times reports that only 28% of black households in King County are homeowners, compared to 63% of white households. Matthew Desmond at The New York Times reports that “The average homeowner boasts a net worth ($195,400) that is 36 times that of the average renter ($5,400).” Data from 2012–before rents increased about 57% –  show approximately 31% of homeowners were cost burdened compared to 47% of renters. And of course cost burden doesn’t consider the financial flexibility from having wealth in a home.

The wide demographic differences make sense because homeowners benefit from rising real estate values while renters suffer. Housing can’t be a good investment and affordable. In other words, homeownership, or lack of ownership, is likely a cause of demographic differences.

The term homeowners is a humanizing term, evoking our friends and neighbors. But homeowners belong to another group that is more clearly at odds with renters. Homeowners are landowners. There are probably no two groups whose economic fortunes are more opposed than landowners and renters.

Developing A Renter Political Constituency

Returning to the questionnaire, it first asked if renters and homeowners were politically opposed and then asked if neighborhoods and developers were politically opposed. Some people do see developers opposed to neighborhood interests. It’s worth asking, what particular activity is it that make developers opposed to neighborhood interest? Is putting nails in wood to construct homes the problem? Or is it the system that profiting by selling homes to the highest bidder? If the latter activity is the problem, why do homeowners get a pass when they do the exact same thing? One possible explanation is that keeping the focus on developers–instead of including landowners more generally–allows folks whose primary concerns are design, density, parking, and aesthetics to voice outrage in a socially acceptable way. 

These pairings disregard the most important point. The housing affordability crisis is laid at the feet of landlord and developers who are profiting off of land appreciation but rarely do we lump homeowners in the same buck. All three of these groups are landowners. Identifying landowners as a distinct political group, rather than separating homeowners from landowners, impacts how we think about policy. For example:

Homeowners shouldn’t be vilified. Homeownership offers many benefits (though the benefits are likely due to housing stability and wealth rather than homeownership itself). These benefits make homeownership a rational choice. However, homeowners are landowners and should be treated as such. Clarify the perspectives of landowners and renters within any policy debate will offer critical insights.

More importantly, while homeowners make a rataional individual choice, we must expect more from candidates and electeds. They must acknowledge that landowners, including homeowners, have conflicting financial interests with renters. There is no system in which we incentivize people to build wealth through homeownership that will work for renters. Any system that doesn’t work for renters will always leave behind a huge portion of residents. 

To illustrate this point, city council could pass funding today to provide vouchers to anyone that is or was economically displaced. This funding could come from a head tax or some other corporate tax that would would let landowners off the hook. Alternatively, the funding could come from a property tax that also automatically exempts low income folks and subsidizes cost burdened households in exchange for limiting their capital gains. The former funding leaves a vast amount of wealth untouched and taxes activities that could move to other municipalities. The latter funding hits the city’s biggest source of wealth, taxes many of the same companies and does it in a way that can’t really be avoided.

Most importantly though, candidates must focus on policy that increases housing stability. Policy needs to move away from a system that transfers unearned wealth from land appreciation to landowners.  Every time someone talks about housing policy, we should ask the question, “Does this center renters?”

Editor’s Note: The language about the evidence of who pays property taxes has been edited for clarity.

21 COMMENTS

  1. Although a good article, I think the mayoral candidate who truly addresses the Macro Picture, the Big Picture in Seattle and the Puget Sound region is Cary Moon, whose campaign plank states that corporate and non-resident house buyers should be taxed more so (real estate speculators).

    City 9

    Recently Seattle was named the city having the ninth most expensive rents of all cities in the country; quite the world-class recognition we can do without!

    And last month in June, the local Queen Anne neighborhood’s housing prices rose by 11% — that’s right, eleven percent!!!

    What does Jenny Durkan have to say about this? Nothing, so far . . . .

    Worse yet, property crime has risen dramatically these past few years, and those factors which have caused this occurred while Durkan was US Attorney in the region, and again she kept silent. (That would be when Gov. Christine Gregoire signed — as Gov. Gary Locke before her signed — the Interstate Compact on Adult Offenders, bringing 3 out of 4 ex-convicts to this area, i.e., brining murderers, rapists, robbers, etc., to this area, and last I heard there were over 500 outstanding arrest warrants for members of this group!)

    Along with that, Jenny Durkan, as US Attorney, never went after those super-crooks at Washington Mutual (see congressional investigation of WaMu in 2010), thereby reaffirming that local bankers and mortgage lenders can always get away free!

    High rentals, high housing prices and high property crimes.

    I’ll be voting for Cary Moon this election!

  2. The questionnaire answers were fairly lame, but they were more compelling than this. The strenuous effort needed to twist up a case for it, is argument enough that there really isn’t much of a division.

    1. “Homeowner” is a special case of “landowner”, and importantly here, distinct from landlords. The point of conflating homeowner with landowner looks kind of like “housecat is a humanizing term, but let’s not forget that a housecat is a CARNIVORE! Just like bears that scare your pants off in the woods!” It shouldn’t be difficult to see the economic position of a homeowner, without changing the question to “divided between renters and landowners.”

    2. The “investment can’t be affordable” article similarly bends over backwards to reach its conclusions. Community Land Trust is a constrained form of equity, but it’s equity when renting is not. Homeowners and renters are the same people – most homeowners have rented, and plenty of renters will tell you they intend to own. Making it easier would be a desirable outcome for everyone.

    3. Extreme land values are not as widely celebrated among homeowners as you might think. Few of us are really in a position to cash in, and economically it just ends up costing us in tax. And it’s a disruptive force in our communities, that costs us long time neighbors – renters and owners. There’s no question we have it relatively good, and it’s worse for renters, but it isn’t the symmetric relation you suggest where their loss is our gain – and our policy positions tend to bear that out, as we tend to detest the upzones that would in theory make our land more valuable.

    4. You seem to be making a case here for property tax as progressive taxation? This is such a bizarre novelty that I will leave it at that.

    5. A corporate head tax is a great idea, and from Seattle Times questionnaires, one that has some support out there, but what vouchers? What would a voucher be good for? Just trying to understand your idea there. Don’t worry about the corporations moving to other municipalities – a little of that would go much farther to address the problem than any vouchers.

  3. The citation about property taxes being born by owners begins with and ends by highlighting the uncertainty of the answer and that the research is in its “infancy”.

    • The paper is inconclusive because there is evidence pointing both ways. The article asks why people believe it’s paid by renters when there’s evidence to the contrary. My point was, people seem to assume it’s paid by renters when the evidence is not certain and sometimes suggests the opposite.

    • The reason property taxes are assumed to hit renters is that property managers keep spreadsheets. Both property taxes and utility increases are passed straight through to the renter. You’re a piss-poor manager if you don’t increase rents to cover costs. With commercial rents, it’s called NNN and the pass-through is in the contract. I’m astonished that you would question this basic business principle, or depend on bad/lazy managers as evidence of an exception.

  4. “There is no system in which we incentivize people to build wealth through homeownership that will work for renters”???? 100% not true. I was truly incentivized to build wealth by owning a house and not be a renter, very easy concept to understand the benefits of being a homeowner. “unearned wealth from land appreciation” – is this some Urbanist slogan? You may need to review some simple economic facts around capital, risks, costs of ownership, capital improvements, to understand what homeownership is all about, it is not “unearned wealth”.

  5. There should be common ground: wages rise at inflation+productivity, while housing prices rise at inflation. (This was largely true in most places, most of the time in the US until 1980). The benefit to homeowners is that their mortgage is fixed, inflation erodes the burden, and (typically) the owner’s income rises over time. After 30 years, mortgage paid, you own free and clear, and can age in place without being unable to pay your property taxes (or sell for modest but not windfall equity) .

    And the next generation of folks can still afford a home (or the rent).

    The only loses are speculators and folks betting on windfall home equity.

    Local gov can’t do much about wage growth but can aim for policy so housing rises not much faster than inflation.

    My only quibble with the article is that this regime would “center working people” rather than “renters” – but that’s a very small quibble… thanks for this article. 🙂

    • Sure, except that wages haven’t risen in 30 years, while debt from college loans is making a mortgage impossible for many of our most promising millennials.

  6. This paragraph is gobbledy-gook;
    “To illustrate this point, city council could pass funding today to provide vouchers to anyone that is or was economically displaced. This funding could come from a head tax or some other corporate tax that would would let landowners off the hook. Alternatively, the funding could come from a property tax that also automatically exempts low income folks and subsidizes cost burdened households in exchange for limiting their capital gains. The former funding leaves a vast amount of wealth untouched and taxes activities that could move to other municipalities. The latter funding hits the city’s biggest source of wealth, taxes many of the same companies and does it in a way that can’t really be avoided.”

    The property tax exemption in state law is limited to low-income (<$40k) seniors and is a pain to document.

    Subsidizing cost-burdened households in exchange for limiting their capital gains isn't accurate. Land banks such as HomeSight retain ownership of the land, making the home cheaper to buy, (not subsidizing them) in exchangie for retaining a share of the equity. There is no limit on appreciation, which is what you mean by capital gains. To be clear, we have no capital gains tax and all proposals would exempt the primary residence.

  7. Homeowners are homeowners. They include condo owners, who are not landowners, and who occupy dense, multifamily housing of the sort you want more of. Homeownereship has dropped from 63% to 60% if my memory serves. It still represents the American Dream. It dropped far more precipitously among African Americans due to the foreclosure debacle, because they were targeted for subprime loans and were victimized again when the Wall Street banks and especially Washington Mutual refused to abide by the workout rules meant to help those who were under water. The fact that these banks are racist doesn’t change homeownership (including condos) as the single best investment for building generational wealth.

    • Homeownership only builds wealth if housing prices increase. Housing can’t be both a good investment and affordable. We can’t create wealth through real estate without making housing completely unaffordable to a huge portion of the population.

      • Homeowners also accumulate wealth when they pay down their mortgage and increase their equity. Income can be spent on many things, only a few of which create wealth. This is the historical perspective toward home ownership; this whole investment concept of riding valuation increases is much newer.

        • In a well a functioning housing market, homeowners wouldn’t save money compared to renters when their mortgage is paid off. The ongoing costs for each should be basically the same.

          • ‘been reading Coase and Friedman? Notions about perfect competition, frictionless markets, and information equality are in heavy rotation right now in our housing discussions.

          • Ronald Coase and Milton Friedman. I don’t believe they ever worked together, but their work is important to my understanding of economics concepts and especially to public dialogues. What I recall is Coase forwarded the idea that with equal access to information and frictionless transactions (no regs), externalities would be solved in the market place. Friedman is known for many things, especially as one of the fathers of neo-liberalism and staunch advocate for market solutions to just about everything.
            Not perfectly related to the topic at hand, but helpful, still.

        • So you bought cheap, when housing prices hadn’t inflated and now your house is worth a lot more so it will be expensive for the next person that buys it. Where are we disagreeing?

          • Not sure what you are talking about. Buying a house takes sacrifices and financial discipline to make owning a house affordable. Owning a house is much smarter than wasting money year after year on rent. Not sure anyone can predict when I will sell my house or for what price. No on can predict if the price someone buys my house is “expensive” for the next buyer. You have a renter’s mindset and house envy, not a good combo.

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