a photo of a modern aqua and white five story apartment building
Housing Benefit Districts would fund affordable homes like Station House near Capitol Hill light rail station in Seattle. (Credit: Community Roots Housing)

One of the best bills this session has been quietly working its way through the legislature, and it’s time to pay attention as it must make it out of the finance committee by February 17th, if we want a chance to unlock billions of dollars for affordable housing. (Supporters can sign in and signal support here.)

HB 1880 would create Housing Benefit Districts (“HBD”). This ingenious policy innovation allows us to tap into property price growth on publicly owned land and add more public land in the process. Right now, we can only do that ad-hoc. But the bill will let us finally do it systematically and strategically at scale. 

HBDs take their cue from a battle-tested policy, called “Transportation Benefit Districts” (“TBD”). Like TBDs, HBDs give local jurisdictions access to expanded taxing options to fund transportation projects. To date, there are over 100 TBDs in Washington State. 

HBDs work similarly. Cities and counties can form HBDs that will allow them to raise additional tax money, which can then be invested into areas around rapid transit. They can put that money toward infrastructure improvements and buying up land, which they can develop, sell, or lease at a later date. At least a third of the land has to go to low income housing, at least a third to middle-income housing, and whatever is left can go to market rate housing. In addition, any profits from the sale or lease of land must go to subsidies for permanently affordable housing and permanently affordable homeownership, to promote community land trusts, or to infrastructure costs. Thus the profits from the increased land prices can fund enormous amounts of affordable housing.

The current legislation would fund four pilot HBDs directly out of the state budget. But the bill’s backers are working with a consulting firm to study three progressive funding options for a permanently available statewide funding mechanism next session.  

Meeting the huge need for affordable housing

This short legislative session has brought legislation finally grappling with the problem of restrictive zoning. But as encouraging as this is, it does not solve the problem of providing affordable housing to low-income households. Scholars at the UW showed that just among Washington renters, 500,000 households pay more than 30% of their income, 250,000 of them paying over half their income to stay housed. 265,000 homeowners are similarly burdened. In other words, we have about three quarters of million too few affordable homes in our state. 

None of our political efforts come close to closing the gap. The Governor’s proposed $815 million add-on to housing and homelessness budget deserves our support, but it also barely makes a dent in the problem. Even with partial subsidies and private partnerships, we’re facing at least $130 billion to fill this hole. Washington State’s entire two-year budget is $59 billion. 

After spending some time in the details, I’ve realized it’s the only proposal I’ve seen in the legislature that can even begin to think about touching the staggering scale of the problem.

How Housing Benefit Districts would work

Let’s take a deep dive into how they work. First, HBD funds can be invested into the half mile radius around major transit stops like light rail, commuter rail, and bus rapid transit stops. To establish an HBD, a city must meet certain minimum urbanist hygiene requirements, like bike, pedestrian and transit infrastructure enhancements, density requirements (minimum of 15 units per gross acre), and an anti-displacement strategy. They are also required to plan for the mix of low-income housing, middle-income housing, and market rate housing referenced earlier. Profits from the sale of land by the HBD must be used to fund subsidized housing. This first bill selected four pilot sites that meet these criteria, with the intention of setting these up as minimum requirements for future HBDs.

Once qualified, the HBD can start to make a long term plan. Planning inside a specialized legal entity like this can work wonders. Look at transit: although our transit isn’t stupendous, it exists, and we are actually building lots more of it, more aggressively than almost any region in the country. While we could be doing better, this looks like nirvana next to our abysmal affordable housing policy.

Once a legal entity like an HBD can plan, finance, and buy land early, it is on the only politically viable path to putting large amounts of affordable housing around our transit stops. By planning first, we flip the script on the current process. Instead of each layer of government looking around at its budget and deciding what to spend, we say, “Hey, this is what we want to build, and here is how much we need to build it.” Like light rail, once a blueprint is in place, we have the right kind of vehicle for attracting and deploying federal, state, regional and local dollars to fund ambitious projects.

HBDs also push local planners in the right direction. First, the initial good land use hygiene requirements for a city to establish an HBD like increased density and anti-displacement strategy, provide a strong start. But the big carrot comes from the fact that HBDs allow for increased land values to fund multiple rounds of land acquisitions. All of this creates a strong push for HBDs to pursue aggressive and intelligent urbanization, which will maximize the impact of their investments and the funds they have to work with.

Next is funding. Legislators are aiming to provide $10 million to $50 million each for four pilot HBDs: Everett, Shoreline, Renton and Tacoma. The expectation is also that a bill authorizing HBDs statewide will be introduced in the next legislative session, since the bill’s backers believe a new tax mechanism has a better chance of passing next year. Boosters are also working with an economics consulting firm to study several progressive taxing options for scalable funding. Once localities can create HBDs, they will have a strong incentive to do so. Washington state tax law makes it very hard for municipalities to raise enough money. Rules that create exceptions to these limits, like those involving TBDs, are popular. HBDs will probably be popular too. 

Finally, HBDs create the ability to acquire land, and the incentive to acquire it early in strategically situated spots, since the payoff will be bigger. Land banking might not sound exciting, but it does a lot of heavy lifting here. Let’s dig into why.

The importance of acquiring land early

Early land acquisition and assembly near transit creates opportunities for jumpstarting rapid urbanization. We can look at the private sector to get a hint. In the Spring District, sandwiched between Bellevue and Redmond, right near a coming light rail stop, a private developer assembled just 36 acres and is now on its journey toward building 5.3 million square feet of leasable space, despite repeated tantrums by the anti-transit, Trumpist real estate mogul Kemper Freeman. Given that a good bit of this acreage is dedicated to a walkable, short block street grid and a few open spaces, this is pretty intense urban development, especially for Bel-Red. Still, it’s too office focused, and provides far too little affordable housing or funding. The same could be said of most rapidly growing neighborhoods. This is just something the private sector is not equipped to deliver, which is why the public sector has to step up.

Land banking’s second advantage is about cost: it can save the public billions of dollars. The buyers, in this case HBDs, get to take the long view, which means they can acquire land before its price skyrockets to prohibitive prices. When HBDs can purchase that land early, they can save billions compared to buying it years later.

Finally, land banking’s superpower is its ability to generate public wealth for a public purpose, funding affordable housing for far more families than we do today. With a transit station nearby, and investments in local infrastructure, the price of the purchased land tends to skyrocket. This generates an immense wealth windfall for the public. Those of us lucky enough to have been able to afford to buy a home call this “appreciation.” Planning geeks and economists call the public version “land value capture.” 

HBDs have to put the money to good use, because they are required to use its inevitable increases in value to fund affordable housing. The design aims to maximize the total amount of affordable housing and to generate mixed income communities. At least one third must go to low-income housing, from extremely low-income (30% area median-income — AMI — or less) getting a minimum of five percent, very low income (60% AMI or less) getting a minimum of 10%, and low income (80% AMI or less) getting a minimum of 18%. At least another third will go to middle-income housing (80% to 120% AMI). The remaining third may be sold at market prices to ensure a diverse income mix in neighborhoods, and to generate additional profit to plow into even more affordable housing and new rounds of land purchases. For accountability, jurisdictions must regularly audit the current owners and operators of developments in the district to ensure that the mix of affordability is achieved and maintained. 

We know these kinds of mixed-income, amenity, and transit-rich communities are engines of upward mobility, and that when kids move to them they see drastic improvements in life prospects, including college attendance, income, and a lower likelihood of becoming single parents. 

Imagine, for a second, how this could transform a neighborhood. In Roosevelt, where I’m on the Roosevelt Neighborhood Association board, we are rightly proud of Cedar Crossing, a crown jewel of extremely low income housing for 250 families next door to light rail. But this looks paltry compared to what we could do with a well-funded HBD.

I noted in a previous article that we shut out the possibility of an additional 12,000 families living in the neighborhood by failing to upzone most of the walkable area around the Roosevelt light rail station. Had we formed an HBD and landbanked half those 86 acres, we would have made millions more in investments in local infrastructure. With an adequate upzone of just the public land, we would be on our way to 2,000 low, and 2,000 middle income homes, with another 2,000 going at market rates, just from the land banking! I showed how we could do similar work around the 130th Street light rail station and the Jackson Park Golf Course, raising enough for around 6,000 affordable units. Imagine the same in Mount Baker, the Spring District, or transit hubs in Spokane, Bellevue, Vancouver and Tacoma.   

Since land prices account for a large part of the cost of affordable housing, lower land acquisition costs make the overall project a lot cheaper, and can make the subsidies to build the buildings go much further. 

Study suggests HBDs would have huge impact

Don’t take my word for it. A UW grad student design studio partnered with the cities of Everett, Renton and Tacoma to see what the impact of HBDs might look like over a twenty-year period. Their simulation generated astounding results. In Everett and Tacoma, HBDs were drawn around future Link light rail stations and in Renton around a Stride bus rapid transit (“BRT”) station. They selected each site for its mixed income residents, high concentration of people of color facing a high risk of displacement, large potential to add high-density housing, and transit impact, and aligned political will. 

Using the planned HBD taxing mechanism, Everett and Renton each put a theoretical $50 million into land acquisition, with Tacoma at $38 million, due to land constraints because of surrounding freeways. Each also simulated an investment of $25 million in infrastructure, including items like public parks, bike lanes, underpass improvements, street improvements, stormwater infrastructure, environmental impact statements, museum improvements and the like. The simulation assumed a cumulative land appreciation of 20% over five years, or 3.7% per year. This seemed especially modest around incoming transit, as did the assumption that there wouldn’t be major upzones. 

Even so, the results were head-spinning. The sites generated 14,382 subsidized units instead of 3,199 they would produce without the HBD investments. Of these, 7,191 went to extremely, very, and low income units, compared to 1,682 under the status quo. Both represent about 4.5x better than the current trajectory. The extra 11,183 subsidized units cost the public a pittance: $12,340 per unit in initial land bank investment dollars, plus $6,707 on other infrastructure, which would be shared with all local residents. The rest of the cost was covered by the gains from owning the land early. 

Currently, a fully subsidized unit costs the public $350,000, and even middle-income and workforce housing paired with private partnerships usually require $70,000 to $120,000 in public money. With reasonable public investment into HBDs (including infrastructure) every biennium, we would seed 75,000 new subsidized homes each year. Even though it would take 20 years to fully build them out, the simulation showed strong enough housing production in the early years to make a massive dent in the problem

By 2044, we will have around 75 link light rail stations in the Seattle metropolitan area, as well as 20 BRT and Sounder stations that aren’t on Link, and many of these 95 stations are in denser Seattle neighborhoods. Simply scaled across the system, HBDs performing like they did in this conservative simulation would generate 97,850 homes for extremely low income people, 195,795 for very low income, 389,500 for low income, and 683,145 workforce homes. That’s a total of 1.37 million units! 

This doesn’t include hundreds of RapidRide stations around Seattle, or frequent bus service by the Spokane Transit Authority, Intercity Transit in Olympia, Pierce Transit, Community Transit in Snohomish County, Whatcom Transit in Bellingham, and C-Tran around Vancouver. If just another 50 stops out of the hundreds opted in and performed at even half the rate, they would generate another 360,000 subsidized homes over 20 years. And given that land values are rising faster in most of these places compared to Seattle, they may actually perform better. 

Not every community will opt in to an HBD. But the incentives, like extra infrastructure funding and affordable and middle income housing, are strong and the benefits to local communities are large, and so it is reasonable to expect more than token adoption. Even middling adoption would transform the lives of tens of thousands of families. And higher uptake of HBDs is the first policy to get real legislative traction that could actually scale to the size of the problem. 

Looking ahead

Despite flying under the radar with the public so far, the bill is rapidly gaining popularity with a broad array of interest groups focused primarily on racial justice, human services, affordable housing, the environment and the structure of our cities. 

When groups focused on equity and inclusivity and human services can ally with environmental groups and traditionally more conservative builders, you have what can be a real winning coalition. And when you pair this with a policy that creates long term, quality, planning, has the potential to generate billions and billions of dollars in public wealth for affordable housing, and builds lots of mixed income housing around transit hubs, increasing their utilization — you have the kind of bill that urbanists should be throwing their support behind. 

Speaking of support. Now is a great time to help. Please click here and to let the finance committee you want them to pass this out of committee. Please also share this link with your friends and community, and ask them to do the same. 

Article Author
Image description: Ron is a bald White man wearing a black shirt and a smile.
Ron Davis (Guest Contributor)

Ron Davis is a consultant that helps early stage companies take new technologies to market, specifically, products and services that improve the world for workers and citizens. He's on the boards of Futurewise, Seattle Subway, the Roosevelt Neighborhood association and the University YMCA, where he fights to make Seattle a more just, inclusive, green, walkable, city. He has a JD from Harvard Law School and lives in Northeast Seattle with his wife, a family physician, and their two boys.