Housing & Human Services Committee 6/12/2024

Good morning, everyone.

The time is 9.30 and the June 12th meeting of the Housing and Human Services will now come to order.

I'm Kathy Moore, chair of the committee.

Will the clerk please call the roll?

Thank you.

Council President Nelson?

Present.

Council Member Sopka?

Here.

Council Member Wu.

Present.

Vice Chair Morales.

Present.

And Chair Moore.

Present.

And I believe Vice Chair Morales is attending remotely.

Okay.

Why are we getting...

Apologies, let's see if we fixed that.

All right, so we'll move to approval of the agenda.

If there's no objection, today's proposed agenda will be adopted.

Hearing no objection, the agenda is adopted.

So the first thing we're going to do this morning is an award presentation.

So thank you everyone for being here today for the June 12th meeting of the Housing and Human Services Committee.

Today we are going to kick off our committee with an award presentation before continuing into our regular agenda.

So I'm honored that the Housing and Human Services Committee gets to host the award presentation for the Puget Sound Regional Council Vision 2050 Award.

And today we'll be hearing from Josh Brown, the Executive Director of the Puget Sound Regional Council.

We will then have the presentation of the award, then a group photo for all who came today to celebrate.

And then we will hear from the award recipient, Susan Boyd of Bellwether Housing, before we return to our normal agenda.

So if there are no questions from the committee, I will invite...

Josh Brown to please get us started.

All right.

Excellent.

Thank you, Chair Moore, members of the council.

Thank you for having me here today.

For the record, I'm Josh Brown, Executive Director of the Puget Sound Regional Council.

If you're not familiar with the Puget Sound Regional Council, we're the region's long-range, long-term regional planning agency.

We focus on land use, transportation, economic development, And we really try to look at long into the future out to 2050 right now, how we can continue to have a thriving central Puget Sound region.

I'm here today to recognize the Aries at Bitter Lake project with the Vision 2050 Award.

And the Vision 2050 Awards are our way of recognizing great work that's helping to implement our long-range plans.

So while my agency is helping to develop the long-range plans, it's really our partners, our membership, our cities, counties, ports, transit agencies, other partners that come together to implement those plans.

And this development specifically is being recognized in our on the ground category for an outstanding example of creating community through the built environment.

This project's created 200 affordable homes in a beautiful development that truly emphasizes community building and sustainability.

And we also love to see how it effectively, as part of this development, was able to take advantage of recent programs to bring affordable housing to fruition.

This was the first development from the new Evergreen Impact Housing Fund, and it also used the City of Seattle's incentives for affordable housing and brought Washington State's Evergreen Sustainable Development Standards to life.

So again, we know housing affordability is a major concern of the region's public.

We're building more housing than we've built in 20 years, but it's not enough.

There's more work to do.

So congratulations to the city of Seattle.

Congratulations to Bellwether Housing and for the project architects SMR for making this amazing project come together.

Great, thank you so much.

So I'd like to welcome Susan Boyd of Bellwether Housing to the podium to make a few remarks.

Thank you, Mr. Brown.

Thank you, Council Member Moore, Chair Moore, and thank you to the Puget Sound Regional Council for this award.

We are honored.

We are constantly looking for ways to live out our mission of creating affordable housing and equitable community in innovative ways and ways that support the long-term sustainability of our community.

The building, very cool.

Our first electric building, all electric building.

It's got a lot of sustainable features.

It represents a partnership with, it was the first project to be funded with the Evergreen Fund that is funded by the primarily Microsoft Fund and some Credit unions come together to create low interest loans to help us get this done.

I also wanna just talk about the people that live in the housing.

Over half of the units are two and three bedroom units, so families, lots of families there.

It's home to a mom and dad who had been raising their three kids in emergency shelter for the last two years.

It's home to individuals who'd been working and living in their car for months to try to find affordable housing.

And finally found a home here.

Home to a young family who had been living in Grandma and Grandpa's basement and now have an opportunity to live on their own.

To a retired teacher who'd been priced out of the community that she once served.

To a Ukrainian family escaping the ravages of war.

to a man recovering from homelessness and addiction and finding respite there at the Aries.

Just a few examples of the way we create community and the people who find community in our buildings.

Really honored by the award.

I want to shout out to Mindy Black who is our project manager on the building and really was the visionary behind doing behind the sustainability measures there and our architects, SMR architects.

Thank you very much.

Wonderful.

Thank you so much for that.

And I guess this is our opportunity for a photo.

We'll do the award presentation.

Everyone's welcome.

Yes, I'll follow up.

Great.

I'd love to start using it.

Proceed.

I'll follow up with you.

You're welcome, Council Member.

All right.

Well, I think great.

All right.

Well, that was fun.

So thank you, everyone, for participating.

They've all left in the presentation this morning.

So just as the chair of the housing committee and the district representative, I'm certainly honored to see the work that Bellwether has done.

Housing is done in our community, providing 200 affordable housing units and a sustainable and transit-oriented development.

So thank you, and thank you to my colleagues for being here to support this as well.

All right, so moving on to Chair's report.

Today, let's see, our first item of business, we have the Office of Housing to present a housing financing presentation.

This is a condensed version from what was on our May 22nd committee agenda.

The second item on the agenda is the first discussion of the 2023 Housing Levy Administrative and Financial Plan.

and the housing funding policies.

So we do have with us the Office of Housing to provide us an overview, and then we will, this will come back to a later committee for a vote.

And then finally, we have an update on the implementation of the recommendations from the Rental Registration and Inspection Ordinance from the Office of the City Auditor and the Seattle Department of Construction and Inspections.

So, we do have a packed committee agenda today.

I anticipate it will go right up to noon.

So, I would ask committee members to save your questions to the end, unless it seems appropriate to ask it at that very moment.

So, thank you.

Okay.

So, Clerk, can we move to public comment period?

Do we have any speakers signed up?

Currently, we have three in-person speakers and one remote speaker.

Okay, so each speaker will have two minutes.

We'll start with the in-person speakers first, and then can you please read, clerk, can you please read the public comment instructions?

Just one moment.

I want to get our technology sorted out.

Thank you for your patience.

The public comment period is up to 20 minutes.

Speakers will be called in the order in which they registered.

Speakers will hear a chime when 10 seconds are left on their time.

Speakers' mics will be muted if they do not end their comments within the allotted time to allow us to call on the next speaker.

Are we ready to call them up?

The first in-person speaker is Ryan Donahue, followed by Daniel Bannon.

Hello.

Trying to adjust that, sorry.

Hello, Chair Moore, council members.

As you already know, my name is Ryan Donohue and I'm the Chief Advocacy Officer over at Habitat for Humanity, Seattle, King and Kittitas counties.

We're here today to express Habitat's strong support for the updates for the housing levy administrative and financial plan, as well as the additional or the updated funding policies that you're going to be hearing about here shortly.

A few things particularly in this that I do want to highlight include the increase in per unit caps for both development and down payment assistance, which is going to incentivize the creation of much needed family size units, such as what we're building at our Yarrow Cottage projects over in South Park.

There are four families who are actually going to be getting their homes dedicated on Saturday that are because of these types of projects, incentivizing family style projects.

These types of projects and programs like this, like MHA, like Jumpstart, like the Seattle Housing Levy, help make these types of things possible.

The increased cap makes that possible, and the work that OH does makes that also very possible.

We also appreciate the flexibility of the first-time homebuyer definition to allow for more mobility for first-time homebuyers, depending on how family situations change.

Another particularly positive thing to highlight is the creation of the short-term loan program for construction financing, adding on to the already existing acquisition program.

these loans are a critical tool that will support the development of quality low-cost affordable homes in fact that project that i just mentioned we were able that's the first four out of 26 units that are going to be built on that site thanks to an acquisition and preservation loan that oh was able to provide for us thanks to having that program already existing we appreciate the work and commitment that the city staff and leadership have dedicated and look forward to working with the City of Seattle and the Office of Housing to continue to deliver on the vision of Habitat, to build on a world where everyone has a safe, decent, and affordable place to call home.

Thank you very much.

Next speaker.

Up next is Daniel Bannon, followed by Angie Gerald.

Hello, members of the committee.

My name is Daniel Bannon, and I am speaking today on behalf of the Rental Housing Association of Washington and nearly 6,000 small housing providers from across the state, many of whom are in Seattle.

I'm speaking to the audit report today.

This report confirms the decline in smaller rental housing providers in the city of Seattle.

This is something that we had warned the previous city council about many times before.

and restrictive rental housing policy in the city of Seattle is reducing supply and harming both housing providers and tenants.

Small housing providers are the canary in the coal mine.

The system is broken and it is only a matter of time before larger housing providers begin to fail as well.

Previous city councils broke our rental housing policy and you guys have the opportunity to fix it.

Thank you.

Thank you.

Our next speaker.

The next speaker is Angie Gerard.

Hi, my name is Angie Gerald.

I'm a small landlord in Ballard and a member of Seattle Grassroots Landlords.

The Rio rental registry that you'll be hearing about today confirms that Seattle has lost a tremendous amount of small rental housing.

We ask that you provide good governance, critical scrutiny for what the auditor's report is saying, and accountability for important aspects that were not included.

We heartily agree with the number one recommendation.

Seattle should enact policies that support single family and small multifamily rental housing and involve impacted stakeholders.

But council needs to openly acknowledge that it is illogical in the same report to downplay and distract from the resoundingly clear survey data that seriously flawed city regulations are far and away the core issue.

Recommendations that focus solely on administrative and informational improvements to RIO are based on skewed, mismatched objectives set in motion by previous council members.

While some RIO improvements are well needed, the report makes a slippery transition from acknowledging that housing providers continue to identify regulations as the most critical problem, but then it pivots to falsely assuming RIO fixes are the cure-all.

As one example of an eyebrow-raising statistic missing from today's slideshow, 41% of people who removed rentals said they reinvested outside the city.

Only 1% reinvested within Seattle.

It's not because of our flawed registry.

It's because of our flawed laws.

That's a terrible metric, and it's one of many that could be tracked and improved upon, but it requires a balanced change in policymaking.

Please consider the budgetary cost benefit implications of getting mired in this constrained scope.

Seattle can't afford diminished missing middle rental housing.

We need revised laws that adequately and holistically serve the need.

Thank you.

Thank you.

Next speaker.

The next speaker is our remote speaker, Ian Randall.

Ian, press star six to speak.

Okay, can you hear me okay?

Yes, go ahead.

Okay, thank you.

Hi, my name's Ian Randall.

I'm a business owner, small landlord, and a health economist at UW.

I'm here today to emphasize points I've made.

I'm sorry, sir, can you speak up a little bit?

We are having a hard time hearing you.

Of course.

My name's Ian Randall.

I'm a business owner, small landlord, and a health economist at UW.

I'm here today to emphasize points I've made to some council members in person as well as shared with state lawmakers.

The city's own RRIO data makes it clear that Seattle is losing single-family multi-bedroom homes and is only adding small units such as micro apartments, studios, and one bedrooms.

Adding smaller units is a recipe for reduced housing stock.

The number of registered properties decreased from nearly 34,000 in 2019 to less than 27,000 in 2023, based on the city's own data.

In that same time span, the number of units increased by more than 4,000.

What's clear in the data and oddly remains unexplored in the report is what is happening to net housing stocks because of this.

Small landlords in Seattle have said time and again that the regulatory environment is punitive and they're taking their units off the rental markets.

Seattle is building some large developments for now, but that will likely slow given interest rates over the past couple of years.

My own estimate indicates that this switch from small to large properties with smaller units and less bedrooms has cost Seattle more than 8,000 bedrooms over the past five years, and that's during a period of rapid population growth.

Housing providers are really appreciative of this council's good work, but more must be done to roll back the harmful anti-housing policies of the previous councils.

Housing providers need tangible relief from the punitive laws passed by past Seattle lawmakers.

Thank you.

Thank you.

Chair, that concludes our list of speakers.

All right, so thank you.

There being no additional speakers, we'll now proceed to our items of business.

Members of the public are encouraged to either submit written public comment on the sign-up cards available on the podium or email us at council at seattle.gov.

And we'll now move to the first item on our agenda.

Clerk, would you please read item number one into the record?

Agenda item one, Seattle Office of Housing.

Housing financing overview for briefing and discussion.

All right, so thank you.

So today we have with us Director Winkler-Chin, who's appearing remotely, and then we have Kelly Larson from the Office of Housing, as well as Tracy Ratzliff from the Council Central staff to walk us through their housing financing presentation.

This presentation is to help set the stage for our next agenda item regarding the housing levy, ANF, and housing funding policies.

So with that, I will turn it over to the Office of Housing.

And we have Director Chin?

Include Chin?

Okay.

Why is it not working?

Are we having problems accessing the...

Director, are you there?

I think we've lost Director Winkler-Chin.

Have you rejoined us, Director Winkler-Chen?

It's sharing, it's just not in presentation mode.

No problem.

There she is.

Oh, her volume is not working.

There we go.

We can see you.

We can't hear you.

We can see you.

All right.

Nope, we're having technical difficulties, and we're just going to do the PowerPoint this way.

So sorry.

We can't hear you, Director.

We can't hear you, though.

Maybe you can figure this out.

We saw that.

I'll start us off.

Perhaps try and restart.

Thank you, Chair Moore and members of the committee.

We are glad to be here today to provide an overview of housing financing and share more about how our city's funds work with other funds to invest in and open new rental homes throughout the city.

This is just not working perfectly, so we're just going to do the best we can here.

And Kelly, if you could speak more into the microphone, that would be very helpful.

Thank you.

This one.

Brilliant.

That worked.

It's one of those mornings, I think.

There we go.

All right.

So you are going to hear us using words throughout this presentation and beyond, and you probably already have in all of our meetings, that we do not use in normal everyday speech.

We're going to be using them in context of housing investment and production.

And I'm just going to walk through some of these terms.

AMI is Area Median Income.

It's a measure that we use to establish eligibility for income-restricted homes.

Income and housing cost limits are typically expressed as percentages of AMI and vary depending on regulatory requirements.

The geography for calculating AMI is usually the U.S.

Department of Housing and Urban Development's fair market rent area, which for the City of Seattle includes King and some other counties.

A NOFA, or Notice of Funding Availability, is an announcement of funding available for certain projects and programs.

For the Office of Housing, we have two NOFAs each year, one for rental housing and one for home ownership.

Within each NOFA is an outline of OH's priorities for choosing developments and how to apply for funding.

Funding each year is determined by how much money we have available through our fund sources, like the housing levy, payroll expense tax, and mandatory housing affordability.

An RFP or request for proposals seeks qualified developers and operators to submit proposals that meet requirements we've outlined for site specific developments.

Generally on the rental housing side, this means developments like Lake City Community Center, the Mount Baker redevelopment site and Fort Lawton.

We outline criteria such as how many homes are expected, affordability standards, and specific community priorities.

LIHTC is a big one that we talk about a lot, low-income housing tax credits.

It's a federal program that offers tax credits to affordable housing developers who then sell credits to investors.

The credits provide a dollar-for-dollar reduction on investors' federal taxes for 15 years in exchange for investing in affordable housing with rent restrictions for 50 years.

It's a system that facilitates private investment into affordable housing so we can stretch our public dollars further.

The LIHTC investment is a major component of most of our city projects.

Equity is a term we use in multiple ways.

It's the value of the private investment that goes into affordable housing.

It's the value of the affordable housing itself, and it is capital funds.

It's sort of used interchangeably at various points in the process.

Leverage, another term we use a lot, is the amount of other non-city fund sources that come into a project to support the development costs.

We often talk about LIHTC, state and private debt serving as leverage for city capital funds.

We also often say that city funds leverage other investment, meaning all fund sources work together to fully fund a project and ensure it is built.

There are two types of loans that our investees obtain, both from banks, both charge interest, but principal is paid back at different times.

The construction loan is used during construction.

They charge interest on the amount the project has used up to date, so interest payments are smaller at the beginning of construction than at the end.

Construction loan is used when the project reaches a level of stability, typically three months.

The principal is then paid back when the loan closes.

Permanent loan is a loan where payments are made with monthly interest and principal payments over an extended time, often 30 years or more.

Certain properties do not have the cash flow to obtain permanent loans.

Permanent supportive housing is an example.

Finally, OMS is Operating Maintenance and Services, the term we use for the cost of running affordable housing and supportive housing.

OMS can include personnel like janitors, case managers, property management, and other service providers.

It can include costs for maintenance and repairs, upkeep of the building and grounds, utilities, safety measures, and any costs associated with keeping the lights on and the water running.

The top two OMS costs for permanent supportive housing are personnel and utilities.

So what does low income mean?

This is, again, AMI is a measure that HUD establishes to help us determine eligibility for housing.

Low income households make less than 80% of area median income.

Very low income households make less than 50% of area median income.

And extremely low income households make less than 30% of area median income.

In Seattle, over one third of our households are considered to be low income.

So these are some key principles that guide our work and define our role in addressing the housing needs in the city.

By 2044, Seattle needs 112,000 more homes.

Seattle's housing need is greatest for those with the lowest incomes.

Leveraging other fund sources helps us maximize the city funds to build as many affordable homes as possible.

Existing homes also need support.

This is important.

It's not the emphasis of this presentation, but we are paying much more attention to our existing portfolio of investments as older buildings and longstanding organizations are wrestling with very difficult operating challenges, which have persisted for several years.

So we'll walk through just a few slides here about more of the data that drives our work.

This is about severe housing cost burden.

That means that someone is spending more than 50% of their income toward housing costs.

That leaves less money for other necessities like food, healthcare, and debt payments, which means that the housing costs are burdening their budgets.

This graphic shows severe cost burden for renters, and you can see the lowest income renters have the highest rates of severe housing cost burden.

This one data point explains in part why OH prioritizes investments for households below 30% of area median income.

It is generally believed that renters experiencing severe housing cost burden are those most at risk of eviction, displacement, and homelessness.

Here you can see Seattle growth targets established by the King County Growth Management Planning Council.

Seattle needs 112,000 new homes by 2044 with the majority of need in the affordable housing categories.

About 70,000 affordable homes are needed at or below 80% of area median income.

The greatest need for affordable housing exists at the zero to 30 level for those with the lowest incomes.

We need over 43,000 homes for extremely low income households.

This chart displays affordable housing need over the same period of the Seattle housing levy and what OH is able to accomplish with existing housing funds.

The teal bar shows the number of houses that have been or projected to produce.

This is all city investments, including our 2023 Seattle housing levy, which assumed $970 million from that source.

Jumpstart payroll expense tax, mandatory housing affordability.

This is over the seven-year period of the housing levy.

The orange bar shows how many homes we still need to come in line and achieve the housing goals that have been set.

OH administers several fund sources.

You can see our three primary sources here, housing levy, payroll expense tax, and mandatory housing affordability.

Each fund source carries different restrictions, programmatic priorities, with the housing levy funding the full range of interventions from homelessness prevention to permanently affordable home ownership, rental production, and preservation, as well as associated operating, maintenance, and services expenses.

Renters make up over 50% of the residents in Seattle, we understand how important it is to invest in rental affordable homes.

And the rental housing program is the majority of our funds for the Seattle housing levy payroll expense tax and MHA.

We recently announced the 2023 funding awards totaling 53 million to build 443 homes.

So now we will walk through this very complicated process.

Can you get a copy of this?

This is the process for typical affordable housing development.

Dollar amounts you see here represent estimated costs for the entire project, not only the city investment.

The timelines here are general averages for projects moving through the development cycle.

Phase one.

I'm sorry, Kelly?

Yes.

I'm just going to stop you for one minute.

It doesn't appear that everyone has the...

The slide deck that you're referencing.

So I just want to ask, we're going to make a copy for Council President.

Do you have the slide deck that's being referenced?

Thank you, Madam Chair.

I'm looking at the copy that's linked on the agenda right now.

Okay.

But would you like a hard copy of the one that's linked?

That would be preferred.

Okay.

And Council Member Wu, would you like a hard copy of the one we're referencing?

Okay.

Can we get three?

All right.

Sorry about that.

Thank you.

Yeah.

Just take a brief moment.

I'm going to have some water.

Okay.

We don't want any of your hard work to go unnoticed and referred to.

Yeah, and also this would be a good time for us to do an audio check for Director Winkler-Chin.

Do we have contact Houston?

Houston is here.

Can you hear me?

Excellent.

Like the Verizon ad.

Can you hear me now?

Am I there?

I think I am because you're laughing at me.

So I think we're good.

Yes.

Okay, great.

Chair Moore, I have a question, actually.

So you spoke briefly that 30% of Seattle's population is under 80% AMI.

Can we go back to that earlier slide?

I think it was in the first...

I think that's slide three where you're talking about what does low income mean?

Oh, 36% low income, which is under 80% AMI.

That is correct.

Yeah, actually.

All households, renters, and homeowners.

And so when we look at the subsequent slides after that, that's within the 30% AMI when we talk about low income income.

Housing.

Or this slide here.

And those stats, the 30, I'm sorry, 36, it was 38%.

Is that from HUD or where did that data come from?

Yes, that is HUD data.

Do we have a breakdown?

You have a 30% low income.

Do we have a breakdown for a percentage that's very low and extremely low?

Yes.

We can get that to you.

We may have had that in the earlier slide set.

Oh, okay.

We'll get back to you.

Great, thank you.

Appreciate that.

Were there any other questions about the slides we've covered so far?

No?

Okay.

Okay.

Actually, I'll take this time to ask a question.

I had a question.

When you were talking about key principles and you were saying that the existing homes also need support, that they are facing challenges, could you just elaborate on what those challenges are?

So we are hearing a number of concerns from our providers right now around financial concerns, rent collection, increasing operating costs, increasing insurance costs.

There are a lot of concerns around what we've seen in the data that we've reviewed is increasing area median income in the city and in the county.

So the area median income chart is based on everyone's income that lives in the region.

We have a significant number of higher income households whose income has increased significantly over a five-year period, and it has pulled the entire AMI chart up by 38% in five years.

That does not mean that everybody at the lowest end of the income chart is also growing at that rate, but that determines how rents are set.

That is typically how we've done the rent charts with AMI.

So we're examining what that means.

I think all of us are looking at this.

We've been having conversations with our colleagues, the other public funders as well, to examine what's happening with AMI in our communities.

And we hope to bring some more of that information back soon, probably as part of the MFTE reauthorization conversation.

We'll have some more data to share then.

But there are a lot of things.

There's a problem with our behavioral health safety net.

We have a lack of access for affordable housing, medical care, behavioral health care, and we see it outside all the time.

So there are a lot of things going on for providers, and they are in homes with folks a lot of the time, and there's just a lot of challenges with that.

So at the Office of Housing, we're trying to do everything we can to listen, consider how our investments can come to support folks, and also trying to collect more data so that we understand and can use a data-driven approach to best address some of these concerns.

Thank you.

And then I'm assuming that a lot of those challenges fall within the operating maintenance and services part of the budget.

I'm talking about people with high acuity and need for case management.

Certainly, that is one component of it.

And we're also looking at our initial capital investments and how we underwrite projects and the income targets that we set and prioritize for new investments coming in, given these new realities in the city.

Thank you, very helpful.

Okay, we're ready to go back?

Yeah, I'll take my hand down.

Okay, your hands down?

Okay, so where did we leave off then?

We are starting off on the development process.

Okay.

Yes, this one doesn't have a slide number, it's 12.

Oh, I'm sorry, I beg your pardon.

Council Member Morales, you had a question.

I was so focused on the...

That's okay.

Maybe I'll just ask one question and then continue and I'll save the rest for later.

But on slide eight, I don't know if it's slide seven or eight where you're talking about need versus production.

Yes.

So the green band is what Office of Housing is able to produce with the resources that are available through different resources in the city and financing.

And then the orange is what we still need.

So can you talk about what options we have for achieving those goals outside of what the city is able to do?

What else should, as a community, should we be looking at?

That's a big question.

I don't know, Director, if you want to offer but one major thing that we're very interested in hope and hoping for, and we've been advocating for for a long time is advocating for more low income housing tax credit and reform of that program to open up that resource and bring more of those resources into our community.

There's a lot of hope that we're going to achieve that.

And it may still happen.

So that's that's one major area that we've been advocating for with our community partners.

I would also add, if you can hear me.

All of their funding.

Yeah, go ahead.

was also going to say i think it's also important to think about where we build housing and how and why so it is some of the work that's happening through the comprehensive plan i think it's also considerations at the federal level outside of just the low-income housing tax credit uh reform it's how do you get production up because this is not a uh this is although the chart makes it look like uh there might have been a point recently where we were able to meet the need.

I actually think that the need has existed for 20 to 30 years.

Washington State has the lowest number of housing units per capita than anywhere else in the country.

So how do you get production up as well?

Just one more question about this slide.

Yeah, go ahead, Council President.

This slide is compelling, and I note that at the bottom it does say affordable for income zero to 80%.

And I think going back to the slide with the pie chart, slide number three, the question was, what is the breakdown of the 36% of households in Seattle that are low income?

How much is very low income?

So let's say zero to 30 versus 30 to 60 or whatever.

And that is really important information because There is no rental housing production for workforce or for between 60% and 80% that is funded by this housing levy.

And the vast majority of the dollars go to zero to 30. And so the graphics don't correspond to the...

to the levels of income that are targeted in the in the levy.

So when you do get that information back for the breakdown on slide three, that would be really helpful for me to understand what is actually the population in Seattle.

You know, what is the experience of how does the how does what we're funding correspond to the the need out there?

Thank you.

Thank you, Council President.

There also was another slide that came out of this version in the earlier version that did show how our fund sources work with other types of investments in housing and how other actors in the sector are building other homes for different income levels up the chart.

So as you see this chart right here, there will really be no market housing developed for those who are zero to 30% AMI the only way that zero to 30% AMI homes get built is with city investment and other public dollars.

There are other actors in the sector that are building homes above 50% AMI, above 80% AMI.

One of the ways that we help to incentivize that type of construction is through our MFTE program and MHA helps to support some of those higher income homes, as well as the private market is developing homes above 80%, a very median income.

but we will send that other chart over as well.

Thank you.

Okay.

Great.

Further questions?

Okay.

So we'll walk through our typical affordable housing development process.

Phase one starts with the very early conversations to talk about need, concept for the housing, concept for the community.

Developers work with their key partners and perhaps an acquisition occurs for the site.

Then you start working on financial feasibility, zoning analysis, environmental, geotech.

There's defining of all the different partners' roles and responsibilities on the development team.

You strive for site control and put in place a project financing plan.

Then bringing in pre-development costs and, again, acquisition financing.

This is the period of time that sponsors of projects are working really hard to put together all the different resources that are needed to fully fund a project.

This can take some time.

You can see the range is one to five or more years.

It really varies depending on all the fund sources that come together, the type of project, the type of site concerns that come up.

It's always an interesting, fun game to figure out for everybody who's involved.

It's very complicated.

Phase two, this is when we are finalizing financing, achieving permits, starting and managing construction.

This is where we complete all the financing and legal review.

Construction is achieved by the end of the two-year period, ideally, and then you're beginning outreach and promotion for the lease-up of your project to bring new residents inside.

Phase three is some of what we talked about earlier, about some of the needs that we're seeing in our portfolio.

This is the long-term financial stability and operating of the building itself.

We support long-term compliance and monitoring.

There's ongoing management of the development.

All sorts of things come up after the grand opening of a building.

The real things start to happen in a building.

You see how it lives with people in it, and new challenges surface every day when you're operating affordable housing.

You can see for operating every year, it's between about $500,000 to $3 million a year to operate, provide services and ensure these projects.

So that's a range from affordable housing to permanent supportive housing.

And many of the activities that occur on site, services, property management, maintenance, janitorial, repair and replacement costs.

This slide shows the OH specific role in each part of the development process.

So at the very beginning, OH staff are meeting with developers and partners to discuss the concept and review site questions, just doing early feasibility testing.

You go into the second section in gray.

As the project evolves and enters pre-development stage, OH staff continue discussing feasibility, provide technical assistance, and release funds for competition.

So that's our NOFA or RFP.

In blue, once projects are funded and moving into closing and construction phase, the OH team conducts more budget scrutiny, legal review, project underwriting.

We work with other funders to finalize loan documents, perform site inspections, and if needed, negotiate the OH contract for operating maintenance and services funding.

In yellow, the project enters the portfolio of our asset management team where it begins the monitoring and compliance phase of operations for many, many years and a lot of conversations every year about data, how things are going, how we can support folks, how things are doing, and ongoing review of projects.

These charts show example sources and uses of capital funding from a recent project OH funded.

You can see there's several key funding partners contributing to projects alongside the city of Seattle.

Here in this example, you can see private equity comprises approximately 50% of the total revenue sources for this development, 27% from the low income housing tax credits, 20% private debt.

The city is the next largest contributor at 24%, the state provided 11%, King County was also in at 11%, and the deferred developer fee is at 6%.

And then we flip to the right side.

On the expenditure side, the majority of funds are used for construction costs, 65%.

Professional fees take up another 14% of the budget.

This includes architects and engineers, technical services.

The acquisition of the land required 10% of the budget and the remaining 11% goes toward other development costs and financing fees.

These charts show example sources and uses of OMS funding from a recent permanent supportive housing project that OH funded.

It's two projects, actually.

OMS revenue can vary widely, so we have two examples here to show different funding packages that have gone in for revenue.

This first on the left shows a project primarily funded 50-50 by federal COC funds administered through the King County Regional Homelessness Authority and from King County's Health Through Housing OMS funding.

You have the State Department of Commerce also coming in and the City of Seattle filling small gaps.

The second example in the middle shows a project that received a majority of funds from the State Department of Commerce, a sizable 34% from the City of Seattle, payroll expense tax, and King County filling the gap.

On the expenditure side, you can see the majority goes toward personnel and utilities with smaller amounts for services and asset management.

Here we talk a little bit more about our production, our rental production timeline at the Office of Housing and how this works for us.

So in green, OH Capital awards are made in response to the NOFA or the RFP.

Our OH Investment Committee reviews applications and recommends awards.

Projects are selected and they receive an award letter.

In the green to yellow transition, this is the length of time it takes for developers to assemble funding from all sources, including state, federal, and private investment.

During this period, a fund balance may accrue in OH's books.

The majority of these funds are committed to actual projects.

Financing commitments will become closed loans once all financing sources are committed.

As you can see, there's a lag between when the city's funding commitment is made and when cash actually starts flowing during construction.

On average, that lag time is about three years.

In the yellow, city funding sources are identified.

The project has secured other non-city funds necessary to move forward.

If the project does not secure other required funds, the city funds are still earmarked and the project continues working on other financing.

The city loan will then close with other fund sources.

We establish a project disbursement schedule with a detailed spend down plan of city funds, and the first drawdown of funds is completed, so the first spending begins.

In blue, construction drawdown of funds occurs over the next 12 to 18 months as the project progresses, and the final 10% is held as retainage until our project is complete.

This final slide, we just wanna conclude to revisit the work ahead for the Office of Housing.

It's our mission to build as many affordable homes as possible.

And we build these homes for people.

You heard some wonderful stories from Susan Boyd, from Bellwether of the lives that are impacted by the homes that they've built at Bellwether, as well as the story from Ryan Donahue at Habitat.

We build homes for people.

There are great needs in our city.

We partner with our organizations and other funders to maximize the impact of our resources and doing everything that we can as well to support the existing portfolio of investments as we have many aging buildings and capital needs throughout the city.

All right.

Thank you very much.

That was a very helpful presentation.

Are there questions?

Yes, Council Member Morales.

Thank you, Kelly.

I first just want to go back to the last couple of slides, 16 and slide, I don't know, I think it was 11. I just really appreciate you walking us through what it takes to get these projects done.

To spend several years just pulling the financing together, getting designs, getting infrastructure, getting ready to do the thing can take several years by itself.

And I think it's important for all of us to see the way you laid that out, why it takes so long.

And on slide, I think it was slide 11, the typical development process You also have different levels of risk for the projects in different phases.

And I'm wondering if you can talk a little bit about what those risks are and why it goes up, for example, from the applying for funds phase to the development and construction phase.

Director Winkler-Chin, would you like to take that?

I can attempt to take that.

So Council Member Morales, you were If I understood you correctly, you're wondering why they're applying for funds as medium risk and then you shift into a higher level of risk, if I understood you correctly.

Having been working on the other side on developing these projects, it's always seen as a much bigger risk once you've committed to certain loans and obligations and once your shovels are in the ground because If you fail to finish construction, you are financially at much greater risk at that moment in time than you were in the planning phase.

In the planning phase, the financial risks to you and the organization are maybe a couple million dollars.

And that's not to make any light of it.

But oftentimes, the different fund sources for that are not requiring you to do something else, such as deliver filled units for tax credits.

When you move into that high risk period, you've then obligated yourself to providing a tax benefit for the equity investors.

You've obligated yourself to so much more.

And for the city of Seattle, we've tied into this project as we're going forward.

I see that Tracy and Kelly are chatting.

Maybe there's something else that I'm missing in that.

But I think that that is one of the reasons why it goes to high risk.

And then in the third column, the long-term operating, my eyes are not great, Kelly.

Can you tell me what that is?

It's medium to high risk and growing in risk.

It's medium to, yes.

So it is medium to high risk.

So once you've delivered the project, you're moving into leasing people up, which allows you to transition.

I think Kelly talked about that.

change over to the permanent loan.

And then you're just dealing with just the regular risks of housing, oh, I don't know, 100 to 150 households in a building that you're responsible for legally and oftentimes morally, right?

Because it's how you live out your mission.

That's right.

And you look at the dollar amounts in each of these phases.

In first phase, you know, up to $6 million to acquire land, $500,000 for some of that pre-development.

Once you go into the blue phase, $30 million to $60 million project, it is a much larger financial obligation for many partners involved.

Yeah.

And as just discussing with my colleague, inflation, interest rates, cost escalations, these will have major impacts on projects that are in process.

And so it's a very high risk time.

We want to make sure that cranes complete their work and that they don't sit on working on project projects around the city.

So this is a really high attention time.

We want to make sure that projects are completed.

Oh, sorry.

Does that answer?

Yeah, that's helpful.

Chair, if I might, I have another question, two more questions.

Yes, go ahead.

Thank you.

Sorry, I'm getting over something here.

So I have a question about expiring affordability requirements.

And I wonder if you can talk a little bit about what OH does to ensure residents aren't displaced due to economic eviction, if their salary goes up or if their rent goes up, I should say.

And then another part of that question is, I'm curious how many projects will have affordability requirements expiring in the next five or six years, how we help tenants maybe purchase these properties if the landlord isn't interested in renewing affordability.

So there's two questions about expiring affordability requirements.

And then my last question is how you balance the need to ensure that affordable housing is available all over the city so that we have both affordable rental and homeownership opportunities in all parts of Seattle.

Thank you.

So we looked at this data recently.

Thank you for the question.

This will come up as well in the next presentation because we have expanded our language and improved our program for addressing expiring affordability terms.

trying to scroll through to find my data.

We looked at approximately through 2027, I think we have around less than 10 projects that are expiring within our portfolio.

We've had a few that have expired in recent years.

Many of them will extend for another five year period.

Sometimes they come and request additional investments from us.

We do have preservation dollars available.

They are somewhat limited.

So with our new policies, we are putting in place a program and a more clear process for having these conversations with providers that are facing the expiration of their affordability terms to examine what are the capital needs, what is the benefit of the housing in the neighborhood, and how can we do everything we can to keep that project in our portfolio.

So we don't have a huge number of concerns in the near term, but it's very, very important.

And some of those buildings are a very big concern for the housing provider that owns and operates it.

So we will be having some of those conversations in the coming years.

Kelly, I think the other part of that question that council member Morales raised, if you could help me, is how do you, when somebody lives in a unit that is is living in a unit that has the expiring regulatory agreement and what does, how is that resident protected, especially if they still are low income in that time period?

There are relocation rules and there's eligibility for assistance.

That is SDCI's expertise, but there are protections in place for those renters to assist them if rents are raised significantly such that they cannot afford their home any longer.

Councilmember, I feel like there's a third part to your question, which was actually a two-question question.

The other question was about how we ensure affordability throughout the city.

And I'm particularly interested in whether there are zoning issues, the conversation we're having around comp plan, and the need to really address this giant gap that you demonstrated in terms of increasing the affordability of many more units, but also making sure that those units are available throughout the city.

I believe And Kelly, I believe that you're covering some of that in the next part about the housing funding policies, correct?

In the next slide deck.

We will talk a little bit about our prioritization and attempting to have a better geographic spread of housing investments or continuing to improve on our housing investments reaching every part of the city.

Okay, thank you.

Council Member Salka.

Thank you, Madam Chair.

Thank you, Director Winkler-Chen and Ms. Larson as well.

Appreciate the presentation here.

A couple, two quick questions.

My hope is they're fairly straightforward, especially this first one.

But just going back to, I think, slide five, one of the earlier slides where we talked about a few key principles guiding the work.

And that first one notes that in 20 years, by 2044, Seattle needs 112,000 more homes.

Presumably reasonable assumptions were made in arriving at that specific number, but can you help me understand a bit more about what some of those key assumptions were underlying that that estimate and it's no it's no secret that there's sort of a dearth of housing supply uh in Seattle today and so um would that number projection over 20 years allow us to meet the need and and kind of play catch up as well uh so yeah if you could talk just a little bit more about that and some of the key assumptions first question

So these are numbers provided to us by the King County Growth Management Planning Council.

I know Director Winkler-Chin and Chair Moore represent the City of Seattle, the Affordable Housing Committee.

There's a lot of work that goes into this.

The Office of Housing Staff play a minor role.

There are many other staff that play roles in developing these targets and examining data at the county level.

but it's reviewing significant housing needs and all the data that we have with HUD, some of what you've seen here today to develop these figures.

Michael, anything to that?

Councilmember, those figures are also developed by the State Department of Commerce and Office of Financial Management, and it's based on estimates of population growth over the 20-year period.

So they look at historical growth, and then they try to project out what they think for every jurisdiction they might see in terms of growth, and then that's how they deliver these growth targets that then are divvied up, so to speak, by different jurisdictions.

Interesting.

Okay.

Thank you.

And my next question pertains to slide 14, where talk about the rental housing development sources and uses.

So on that first chart there on the left hand side, it has an example capital funding stack.

So just curious, and that's kind of how things operate currently in Seattle today.

Just curious how this example structure in Seattle compares to other major jurisdictions, best practices in other major jurisdictions, particularly those that have been able to make a little better kind of progress in building affordable housing.

So yeah, just curious again, how this compares to this example funding stack structure compares to other major jurisdictions.

I'll start, Director, and please, please join.

From my understanding of many conversations that we have with other high-cost cities around the country, there's a lot of celebration of the way that our public funders work together in our region.

To see this type of diverse funding in a capital stack from a variety of funders is a big win because it stretches our jurisdiction's dollars as far as we possibly can.

to bring other resources into projects.

Every jurisdiction is different, but generally affordable housing can never rely on a single source to be developed, and it's one of the major complaints across the sector.

You make projects very complicated in bringing in a number of fund sources, and it is generally just required to make these projects work.

Some other jurisdictions have other fund sources that we do not have and can have different types of percentages.

But I think generally in the state of Washington, the fact that we dedicate our low income housing tax credits and prioritize them for affordable housing is significant and it's not the way that every state operates in the country.

So we see a lot of resources come into affordable housing with private investment that you're not seeing in other places.

Council Member Zaka, did you have any other questions?

That's all for now.

Thank you, Madam Chair.

Okay, thank you.

Any other questions?

Okay, great.

I just wanted to just make one note, which is in looking at slide nine, I thought it was interesting in looking at how the fund sources work together, and I would note that The housing levy is the only one that actually provides for homelessness prevention monies at all from zero to 50% AMI.

So looking at where we have limited fund sources for prevention work, which in my opinion is a key critical piece to addressing the overall need of homelessness and housing.

Anyway, thank you very much.

If I may, Chair Moore, I just want to be clear that for the Office of Housing, that is true.

However, there are many other fund sources that do fund homelessness prevention in the homelessness response system.

And as well as the King County Best Starts for Kids levy does have dedicated funding for homelessness prevention.

There are other resources, but it is an important part of the housing levy.

And they flow through the Human Services Department.

They have the prevention dollars due.

Okay.

I'm glad you mentioned that because it is less expensive to keep someone in their home in addition to, of course, much better for the person and the stability of their lives.

And so I push to get a little bit more support in terms of rent for people that are precariously housed.

But I will always be an advocate for more.

Excellent, thank you very much.

Well, thank you for the excellent presentation, and I think we will now move on to the next agenda item.

Madam Clerk, could you read that into the record?

Agenda item two, 2023 Housing Levy Administrative and Financial Plan and Housing Funding Policies Overview for Briefing and Discussion.

All right, so thank you.

I'm going to turn it back over to Director Winkler-Chin and Kelly and Tracy for their next presentation.

Great.

Oh, sorry, I want to acknowledge Councilman Rivera has joined us.

Thank you.

So I want to say thank you to everyone for giving initial briefings on this legislation.

It is heavy and impactful, so I appreciate the time everyone is committing to it.

And from these briefings and any discussion today, if committee members feel that they have changes they wish to bring forward, I ask that you reach out to Hannah in my office and Tracy before 10 a.m.

on Tuesday, January 18th.

So that would be for if you have any amendments to the AMF, ANF plan.

Okay, I will turn it over.

Sorry, Chair, did you say January?

Did you say July?

Change orders, yes.

Here we are, construction amendments.

Oh, June 18th.

What did I say?

January.

Oh, my God.

I'll take July.

Okay.

The days are just a blur.

Okay.

June 18th.

Thank you so much.

Okay.

Well, with that, it's already been one of these mornings, so I'm going to turn it over.

Let me proceed.

Thank you.

Thank you, Chair Moore.

I apologize, there's so much talking from me today.

So we're gonna start here by talking about the 2023 housing levy goals just as a level set before we dive into these policies.

The 2023 housing levy will generate $970 million from 2024 to 2030. And it will create over 3,100 new affordable homes, both rental and for sale throughout Seattle.

It will assist more than 9,000 low-income households to prevent homelessness and ensure housing stability.

It will support the workers, operations, maintenance, and services to keep our buildings running safely and stably long-term and prevent displacement, supporting community-based developments, reflecting the communities they are rooted in.

Overall, these policy documents set investment goals and program rules, including population priorities and competitive funding processes.

We establish eligibility requirements for developers and participants, eligible activities and uses of funds, and required reporting and monitoring.

There are two documents in this legislation.

The Housing Levy Administrative and Financial Plan is the shorter document.

It is about 12 pages long.

It is specifically attached to the 2023 housing levy to guide the use of funds.

This document is adopted by ordinance after each housing levy is adopted by voters, and it is updated generally every two years.

contains specific goals for each housing levy program established in the housing levy ordinance with additional policy direction from the accompanying resolution.

The housing funding policies are a longer document, about 100 pages long, that guide the use of all of our city fund sources for affordable housing across all OH programs.

This includes funding from the housing levy, jumpstart payroll expense tax, mandatory housing affordability, CDBG, home, and many others.

We adopt these policies generally by ordinance every two years with major updates every seven years.

And we are in that seventh year period right now bringing to you major updates to these policies.

We have had significant input and exchange with our constituents since 2021, receiving ideas, having conversations with our staff, vetting changes, a lot of meetings, a lot of discussions, some have been challenging, but we've ended up with really strong policy documents that we believe are better than they were last year.

So this is the policy language that's coming to you in this legislation.

I will now highlight some high-level changes that you'll see in the Housing Levy Administrative and Financial Plan.

We also provided two summary documents that provide summaries of the key changes for both of these documents.

Feel free to reference those as well.

The Housing Levy Administrative and Financial Plan will rename and consolidate new short-term loan program, which formerly was called an Acquisition and Preservation Program, as well as we had a separate Bridge Loan Program.

We're bringing those programs together into a new short-term loan program.

We are making investment earnings eligible for pre-development or interest earnings eligible for pre-development.

We are making administration funding eligible for pre-development costs and for the administration of public sites.

We have changed our annual reporting due dates from March 31st to June 30th.

We are adding language about community workforce agreement to provide community workforce agreement of four to six rental housing projects on public sites as agreed to in the accompanying housing levy resolution.

We also describe the Homelessness Prevention and Housing Stability Program, which is administered by the Human Services Department, the Permanent Supportive Workforce Stabilization Fund, and Resident Services Programs, which are both funded and operated by the Office of Housing.

The Permanent Supportive Housing Workforce Stabilization Fund ensures that the most vulnerable residents in supportive housing remain housed and supported well by bringing more resources to support the wages and working conditions for the workers in supportive housing.

Some of the reporting requirements that we are adding, we are collecting the number of staff in permanent supportive housing supported by this fund information on staffing levels, including opening rates and staff turnover, as well as information about wages.

The Resident Services Program assists affordable housing providers, not permanent supportive housing, to offer comprehensive resident services.

This reporting requirements, these include number of full-time staff supported, combined staff hours and services provided, the number of households served, and descriptive details about the services provided.

So I'm going to shift to the housing funding policies.

Are there any questions on the levy ANF plan?

Chair?

Yes, Council Member Rivera.

Thank you, Chair.

Thank you, Kelly and Tracy and Director.

On the comprehensive resident services, can you give examples of what type of services those are?

And then also, if you wouldn't mind on the, let's see on slides, that you worked with, would you mind letting us know who those constituents are just so we can get a clearer picture?

Thank you.

Yes, you bet.

So we did, I'll speak first to the constituents.

We, for the housing levy process, we had a number of engagement sessions.

We had a technical advisory committee that appointed a number of folks to a specific committee that met three times vetted proposals, had policy conversations and funding conversations that included representatives from housing development organizations.

We had Greg Colburn from the University of Washington.

We had United Way.

We had some for-profit folks, developers on the committee.

We can get you that list.

We had a lot of engagement throughout the process as well with our colleagues at the Chamber of Commerce, as well as the Downtown Seattle Association.

We're engaged in conversations throughout the development process.

Our labor partners, very important partners.

A lot of interaction with our home ownership folks, including Ryan, who you heard from earlier today.

It's a lot of input across all these different program types.

Homelessness service providers because of the homeless prevention program, which people really care about.

We had just open public meetings.

Our documents were open to the public for a period of time for review and comment.

And we had open public meetings as well on these documents.

So we've heard from a lot of people and had a lot of really great conversations.

On the resident services piece, this can be case management, it can be crisis response, it can be really light touch information and referral.

There's benefits assistance that occurs, assistance with nutrition, support of community events in order to really encourage community cohesion for these buildings.

It's sort of an array of services and we look forward to reporting more on what those services are in the report.

Thank you, Kelly.

It's really helpful to hear both those pieces, who you're working with, and then also on the services side.

What is it that residents need?

So super helpful to have the detail, even though it might be a little bit in the weeds.

I think it's super helpful.

Thank you.

Thank you, Council Member Wood.

Oh, thank you.

Could you clarify on page eight under community workforce agreement, four to six rental housing projects in public sites?

What does that mean?

So the community workforce agreement requires union labor on the project, as well as goals for priority hire, apprenticeship utilization, and other goals around workers of color, women workers on the project.

So we have the city of Seattle overall for public works has a community workforce agreement in place.

For the office of housing, we have signed an addendum to the city's community workforce agreement for the first two projects, three projects contemplated here, which are the Mount Baker UW laundry site, which has two buildings.

So that's phase one and phase two.

And the third project is the Lake City Community Center.

So those projects are moving right along.

They are in process and very close to achieving awards and will be the next community workforce agreements that we implement.

We also completed a community workforce agreement on the case site, which is now Kristen Benson Place that Plymouth Housing owns and operates.

Thank you.

For some reason, I was thinking you were having rental housing on the site while the site was in development.

But thank you for the clarification.

Any other questions?

Great, so we'll move on to the housing funding policies.

Changes in the housing funding policies, and we largely went into this work with the aim of better supporting our housing providers and workers and advancing racial equity, increasing access to affordable housing, given what we are seeing with the needs in our community, in our portfolio, as well as the needs in community for folks who need housing.

So starting with supporting housing providers and workers, we are providing deeper investments to ensure sustainable operations of city funded housing for capital and operating.

On the capital side, you see this reflected in changes to our developer fee policy and upward adjuster policy.

And we'll get to some of the other details around operating and home ownership later.

Sorry, I'll just change here.

Goodness.

There we go, thank you very much.

We've also established a new program with support from Jumpstart Payroll Expense Tax for supplemental operating support.

All of that language is now contained in the policy documents, so it is very clear what that program is intended to do.

We currently have a request for proposals out to community that's in process to bring some support to organizations that are facing some of the challenges we discussed earlier around rent arrears and operating financial challenges.

We are creating a clear process for rental housing with expiring terms of affordability in our long-term preservation of city funded rental housing.

We discussed this earlier with Council Member Morales a bit.

Just to be clear, we do everything we can to extend affordability as long as possible.

And we're always balancing the need for investing in our portfolio and the need to build new housing.

We are increasing the operating maintenance and services per unit cap for the housing levy from 2,500 to 5,400 per unit per year.

It's a significant increase.

However, this is a small percentage of the actual annual costs of operating permanent supportive housing, which can be around 25,000 to 30,000 per year.

It's an important per unit per year.

It's an important increase, and we worked with providers and advocates all through the negotiation of the housing levy to establish this in the ordinance that was passed last year.

We've also established Jumpstart Payroll Expense Tax, OMS, as flexible to fill operating gaps and services gaps as needed.

We are establishing to advance racial equity and increase access for affordable housing, establishing more explicit language to prioritize funding for organizations who serve communities that have been historically excluded from equitable access to housing.

We are ensuring through setting priorities that we achieve better geographic distribution of our housing investments throughout the city and reiterating our support and interest in seeing a range of housing options including permanent supportive housing, family-size housing, and homeownership investments.

Important to note that the homeownership investments for the housing levy have increased from $9 million in the prior housing levy to $50 million in this housing levy, which is very exciting to see for the pipeline of homeownership projects that we have ahead of us.

We are also providing an exception to the first time home buyer requirement for owners of resale restricted homes so that they can move within the portfolio and avoid displacement, remain housed in the city of Seattle.

We are increasing the caps on home ownership development subsidies, down payment assistance, and home repair grants to catch up with the current cost environment and help support projects to completion as early as we can.

We have changed the home repair grant program eligibility to raise it from 50% AMI up to 80% AMI to expand access for low-income households in the city of Seattle.

And as part of this policy effort, we completed three racial equity toolkits.

Two were, one was about resident services, one was about geographic distribution of resources, and the third was about our community ground floor uses, which is something we know Council Member Morales cares about.

We also coordinated with our change team throughout this process and on the racial equity toolkits.

For data and reporting, we are improving transparency and equity just by adding more language about our programs and the way that our office works so that everyone is understanding better all the ways that our funding goes out and is administered.

We updated all our reporting requirements for these programs.

We have reiterated that we will be collecting, analyzing, and reporting vacancy data at least annually, and we are looking to do that more regularly going forward as well.

We've also added home ownership stewardship and monitoring.

And finally, we just achieved general modernization of the document, updating terminology to align with current usage and practice.

We've removed gendered references to our director.

We've reorganized the content and formatting, bringing it into current day OH style guide standards, clarified policy and program language, and reiterating our language access commitment.

That completes our presentation.

All right.

Thank you.

Are there any questions?

Yes.

Council Member or Council President?

I am interested in knowing how your reporting requirements have changed because, as you know, I did ask, what is the current vacancy rates?

And I asked that question weeks ago.

And I finally yesterday got, I asked the current rates were and yesterday we got a memo saying that with 2022 data and so one question is do you have new data for vacancy rates for different kinds of housing i'm not talking about the mfte or the on-site units um for units in the MHA, I'm talking about our affordable housing providers, because how can you make new policies without knowing how the current levy is working right now, which depends on the vacancy rates.

So I believe that on page, let's see, In the plan, you talk about on page 40, there is a unit turnover and vacancy.

And I think that somewhere else in the report, it says that the goal is about 95% vacancy.

I mean, residents there, occupancy, excuse me.

So how are you going to address that?

And to what extent is current data informing these new plans and policies?

Thank you, Council President.

We have a longstanding system in the public funder world called WebRs.

It's a web-based annual reporting system.

For a long time, providers have been reporting annually.

Generally, we require due dates of June 30th.

So we have currently 2022 data.

We are imminently expecting 2023 data.

Much of it is in, but it's not all in.

We will assess the data that's in on the due date on June 30th, and we are happy to provide 2023 vacancy rates to council by mid-July.

Okay.

In our pre-briefing yesterday, you mentioned a fund that is going to be, there's about $14 million in a fund that we're going to be providing to providers who are having difficulty collecting rent.

Could you please talk about that?

Yes, you bet.

So that's the supplemental operating support that we're offering right now.

Some of the questions that we asked providers as they submitted applications for that funding were around their organizational finances.

We have audits from every organization as well as specific project operating budgets.

We're looking at their WebRs reports.

Some of them had 2023 ready, not all of them.

Many of them submitted 2022. So we're reviewing the financial status of projects that they have concerns about, the projects that are of most concern in their portfolio.

And that contains financial information, revenues and expenses, as well as vacancy rates.

So some of them we do have 23 data for, but just not all of them.

So we are currently reviewing all of that data to assess awards.

What are some of the challenges that providers are having right now in terms of collections?

So there is a percentage of folks that are reporting nonpayment of rent is a serious challenge.

We won't have, we can, I don't have data off the top of my head right now on what that looks like for this group that has applied, but we will be able to provide that.

We've also seen in those applications significant concerns about the increases in insurance.

So we're seeing a lot of providers who are reporting this that many of them are choosing to increase their deductibles in order to decrease their premium payments.

The premium payments are ongoing operating costs, and it puts them at risk if they have a serious incident.

Those deductible payments are rising higher and higher so that they can afford to pay their insurance premiums.

This is a very major concern for providers, and this is happening across the country.

We have an insurance challenge as well.

We are also hearing that there are a lot of folks who have lost income and who are very low income and they're living in income targeted units that are higher than what their incomes are.

So we are definitely seeing, I've seen in some of these applications, 75% of my building is regulated at 60% AMI, 75% of the tenants are at 30% AMI.

In some cases, tenants came in at the right income level and they have lost income.

Otherwise, it's challenging.

We're trying to examine what's happening in the market at large with some of these 60% units and what's happening for tenants and providers.

So we're in a period of exploration right now, trying to understand the data.

Well, I would suggest that a lot of what the affordable housing providers are experiencing is also being experienced by private homeowner landlords.

And we can talk about that a little bit in the next presentation.

But back in last, I think it was in February 2022, when we were discussing the eviction moratorium, there was one of the providers in have talked about the issues of impacts on the buildings that is impacting insurance rates and impacting other tenants.

And I do think that that is why reporting is so important is so that we can figure out how to address underlying issues with the provision of housing in general.

We agree, having more data is really important for us to understand.

Everything that we hear now are very complicated stories.

The stories of the households are very complicated and the systems that all sit around and support affordable housing are very complicated and strained.

So behavioral health, crisis response, as well as what's going on with our landlord-tenant eviction process is challenging.

So we're trying to understand and collect more information from folks so we can understand where we can have the most significant impact to make improvements.

Thank you.

Just make two comments and then I'll turn it over to Council Member Rivera.

Yeah, if we could get the data on the actual amount of rent arrears, that would be helpful that each of your providers is putting forth a request for help with.

And then I'm intrigued by the comment that you made about we're now finding that people who are coming in at a certain AMI unit have now lost income, and so they can't no longer afford the affordable unit, and just wondering if there is some way that we can adjust that make an affordability adjustment, and I don't know if that comes through the MFTE program, or just like to hear more about, and we can do that later, we don't have to do it today,

That would be great.

I think, you know, just kind of referencing earlier one of Director Winkler-Chin's points, it would be fantastic.

I think many high-cost cities around the country would love to see a voucher for every person from the federal government.

So real subsidy to support low-income folks to achieve and be able to sustain rent in any home where they land would be fabulous.

There's a lot of challenges that we're seeing for folks at the lowest end of the income scale, but we can talk about that later.

Great.

Thank you.

Councilman Rivera.

Oh, thank you, Chair.

I echo the concerns and comments from my colleagues.

I think that, you know, it's really important to know also when folks anecdotally, at least I've heard that during COVID, folks were housed in maybe AMI units that were not affordable to them at the time.

And I think that that's also part of the issue.

And so knowing the distinction between is it that they were in units that to begin with, they needed to be in other units and how do we help them achieve that?

Or is it that they've lost income?

I know I have a resident, I have a couple of, there are a couple of bellwether housing projects in the D4 and I have at least one constituent that I had to, we were trying to provide assistance to who was in a AMI that he could afford at the time.

And then there was a change to his income, which then precipitated him no longer being eligible.

He was in arrears.

Anyway, we all pulled together and I appreciate the partnership from many levels, including the Office of Housing and our central staff, even everyone pulled together to help.

But that is one individual and I know we have many.

And so this is something I really care about and making sure though, it all starts with having the information.

And I think that that is what we're all saying here.

We need the information so that we can help figure out how to do our part In this puzzle, and so I appreciate that information, you know I understand it's hard data to get and yet without it we're a little bit paralyzed, if you will, and so I'm just going to echo the importance of getting that data.

and anything that we can do to be helpful in obtaining that data, at least for my part, I wanna be helpful, so let me know.

And then in terms of, there's a slide here, 16, that talked about improving data and reporting addition of home ownership, stewardship, and monitoring.

I'm wondering what that means exactly.

So this is additional language within the permanently affordable homeownership portfolio, our for sale housing to improve support long-term of those homes and make sure that organizations are well supported to do that.

We've invested in the homes and I think there has been an acknowledgement over time that there's need to do more support around, put up more support around homeownership.

So we're starting that by adding language.

I think there's interest in bringing some more resources to that as well so that those homes can be in place and healthy for the long haul.

Thank you for the clarification.

So can you tell me when the information that I asked will be forthcoming in terms of just in general an average approximate vacancy rate across our affordable housing providers?

when we could know that.

I don't know how many providers need to get that information, but if our amendments are due on Tuesday, that puts us, I mean,

So we've provided the data that we have for 2022, which is a median vacancy rate across all city funded properties of 4.67%.

The mean is 7.69%.

We don't expect wide variation from year to year on that generally, because our providers have experienced long tenancy within these homes, but you don't know, we don't know.

As of June 30th, when reports are in, we can turn that data around in a couple of weeks.

So we can get it to you by mid-July for the 2023 data, but we have provided the 22 data, which we do have.

And this information was sent to you in a memo on the vacancy issue to all of the...

Yesterday.

Yes.

Yesterday, but I think it's old data you're looking for.

Yeah, I wanted current data on vacancy rates because you are providing some additional funding to help with arrears, so I'm just trying to put it all together.

whatever you have, we'll take.

We don't need the whole, I mean, ultimately we do, but for right now, whatever you have would be helpful.

Chair, if I may on this topic, you know, I think it's important as we're looking at making modifications to any legislation always, whatever we can do to speed up the process on getting this data would be really important.

We do have an opportunity to I would think with the legislation, do reporting requirements in a way that will help facilitate us getting this information sooner rather than later.

So whatever that can be identified to expedite that I think is really important.

Okay.

Tracy, it looks like you had a thought there.

Well, just that we've had conversations with the Office of Housing.

They are looking at a potential alternative way to start collecting vacancy data that's separate from the WIBARs, but it's going to take...

negotiation with our providers who are already reporting a lot of information, and also resources to create that separate system.

So there is a pathway forward here, and they are committed to looking at that.

That's not gonna happen tomorrow, but it does recognize that the current way that we collect information from the state system doesn't really meet our needs.

I totally understand.

And one of the reasons why I'm asking is because you and we both serve on the King County Regional Homelessness Authority.

And so there's always a question of availability of housing.

And the housing that is in the portfolio that is managed or that receives funding from the levy might not be this.

It's not the same housing that we're talking about for people for a shelter, transitional, et cetera.

Maybe there's overlap.

I'm not...

you know, there's permanent supportive housing overlap there, but just so we have a sense of what is the availability of housing for different populations and needs is really important, not just for my role on this committee, but also for the regional needs and what we're doing at the authority.

Okay, well, there are no further questions and I will just make my concluding remarks here, which is the first is I want to thank the Office of Housing and Director Winkler-Chin Kelly Larson and central staff, Tracy, for putting together a really helpful and dense package.

So I appreciate all of the information.

I appreciate the willingness to do a pre-briefing with us and make some modifications and then to be here today to present.

So thank you for that.

I just want to note that one of my largest priorities in this legislation is obviously to keep people housed and I'm looking at the tool of rental assistance.

I'm hearing a lot from my constituents who are truly struggling, as we've heard here today with rent, as well as providers who have tenants who are struggling to pay their rent.

And in my review of the city budget, I have found that we are not allocating nearly enough for rental assistance.

The last year we have seen a backlog of eviction cases and in King County, court system, and we need to be doing what we can to assist before tenants are months behind on rent and before housing providers have to turn to eviction over rent arrears.

And I would say in looking at our HSD and OH data, it clearly demonstrates that proactive measures in the form of rental assistance and rapid rehousing work And I would note that according to the data we received from the 2022 Levy Annual Report, that of the households who received prevention assistance in 2022 alone, 99% retained their housing during the six-month period after receiving that assistance.

To me, that's profound.

And also in the 2022 Levy Annual Report, it shows that 81% of households successfully achieved permanent housing upon exiting the rapid rehousing program, which is also not quite rental assistance, but it's rental assistance and getting people rapidly rehoused, which often requires financial assistance to do so.

So I think the data just screams for the fact that it is very successful and ultimately it's cheaper in the long run.

And also just the human cost of having people not having to, not winding up on the street, but even being able to keep people sheltered and housed.

So anyway, I just wanted to flag that because to that end, I will be bringing forward a change to the ANF plan to significantly increase, to the extent that I can within the parameters here, the amount of rental assistance available through the Homelessness Prevention Program.

So, I'm just flagging that for colleagues.

So, unless there are any concerns or issues with this legislation, it is my intent to bring it forward for a vote at our next committee meeting on June 26th.

Please feel free to reach out to me or anyone in my office if you have additional concerns about that or you have, obviously, amendments we're looking at to be presented on June 18th.

So, okay.

All right.

Well, thank you very much for your presentation, and we're going to be moving on to our next item.

Thank you.

Thank you.

So, let's see.

Clerk, would you please read agenda item into the record?

Agenda item three, rental registration and inspection ordinance audit for briefing and discussion.

All right, so thank you.

So today we have with us City Auditor David Jones and Jeff DeLent and Edwin Duran from the Seattle Department of Construction and Inspections to provide a status update on SDCI's implementation of the recommendations from the Rio audit.

So we will begin.

Good morning.

My name is David Jones.

I'm the City Auditor.

Jeff Talent with SDCI.

I'm the Rental Programs Manager.

Morning.

Edwin Duran, Code Compliance Operations Manager.

All right.

Good morning.

Please proceed.

Without further ado, we'll start unless the Chair has any remarks you want to make before we go?

No, I don't.

Thank you.

Okay.

We will go.

And Chair Moore, thank you for inviting us here to make a joint presentation along with the Department of Construction and Inspections about our December 2023 report on the City of Seattle's Rentals Registration Program.

For those in the viewing audience who wanna see the report, you can go to our website, the Office of City Auditor website, which is www.seattle.gov slash city auditor, that's one word, slash reports and look for 2023 reports.

It'll be the one you'll see first.

And it's a long report and I just wanna tell the council members, I'm not gonna be able to mention everything in the report today.

Chair Moore asked us for this presentation to focus primarily on the recommendations and what has been done to implement them.

So I'm gonna set up the recommendation and then folks from SDCI here will talk about what they've done to respond to that recommendation and any constraints they may face in implementing them.

Okay, so let me turn it over to SDCI, who's going to give you some background on the program, the rental registration program.

Thank you again for having us here today.

I will just touch very quickly on a Rio background here.

Just some reminders, it was established in 2012, so it's, I guess, relatively new by city standards, but starting to be a pretty mature program by now.

Our department administers it.

Its purpose is to ensure that all rental housing is safe and meets basic maintenance standards.

So there's basically two pieces to the program.

One is all properties must register with the city.

It's kind of akin to a business license.

You need to obtain a registration from us.

There are important exceptions.

The biggest one is Seattle Housing Authority and then a handful of other government-owned or operated housing providers out there.

The other part of the program then is properties have periodic inspections, and the way it works, they're randomly selected every five to ten years, and then property owners have a choice of having a city inspector do that, or if they don't want the city coming into their property, they can hire a qualified private inspector.

And then for properties which are under other programs, especially affordable housing providers, they can use the inspections that they perform under other federal or state or city programs in lieu of a real inspection.

So our Rio program, it really is very much a customer service oriented program.

We're dealing with a lot of customers.

Landlords are our primary customer.

The program is there to ensure safe housing for renters, but landlords are our customers.

They're who we have a relationship with.

We have tens of thousands of interaction with landlords every year.

But again, the program's purpose is safe rental housing, and so there's 4,000 about inspections each year, and we, you know, most properties pass or only have minor items flagged, but we do find about 5,000 items to be corrected each year when we're doing our inspections, or at least that was the 2023 number.

We really want to try and take a practical educational problem solving approach.

Again, landlords are our customers.

So if we do an inspection and we find a problem, the property dealer comes back to us and says, it's hard to get a contractor right now.

I can't fix this right away.

It's not a critical life health safety issue.

You know, we give them extensions.

We work with them on a reasonable timeframe to make progress.

I'll turn it back up.

Yes.

Thanks, Jeff.

So just for the audience and for any council members, just to be clear, we're going to be using two terms throughout the presentation, and those terms are rental properties and rental units.

And just to say, SDCI's rental registration program involves registering properties.

But as you can see here, if you look on the chart, a property contain one or more units.

You see you have a single family residence that's out for rent.

That's considered one unit, but you can have a big apartment building.

That's considered one property for registration's purpose, but you could have 120 rooms or units in it.

So just want you to all be aware of that distinction and terminology.

Next slide, please.

So why did we do this lengthy audit report?

Well, it's because back in late 2022, then city council members Peterson and Sawant wanted to know why there was such a big drop in registrations with the Rio program.

And they also said, hey, when you're when you're Looking at that, could you also, you know, any improvements in the administration of the program, could you point those out?

And I want to be really clear for this audit, the data we looked at was from 2016 to 2022. I know Jeff's going to be providing you with some updated 2023 information, but that's the period we were looking at for our audit.

The two council members who requested the audit got, you know, made some specific requests about what we look at, you know, rental property sales, demolitions of rental properties, conversion of rental properties to being primary residence.

for the owner or a direct relative of the owner, and also to point out any indications when properties were out of compliance with the rental registration ordinance.

In the report, we make nine recommendations about improving the program, and as we do this, we're gonna go through each of the recommendations in greater detail.

SDCI, the Office for Civil Rights, and the Department of Finance and Administration Services reviewed drafts of their support, and they ended up concurring with all the nine recommendations.

I WANT TO BE CLEAR, ALL NINE OF THE RECOMMENDATIONS ARE WHAT WE CATEGORIZE AS PENDING.

IN OTHER WORDS, THE AFFECTED DEPARTMENTS ARE STILL WORKING ON THEM, AND THAT'S NOT UNUSUAL.

SOME OF THESE THINGS TAKE A LONG TIME TO WORK OUT.

I WANT TO ASSURE THE COUNCIL AND THE PUBLIC, YOU KNOW, WE'RE GOING TO CONTINUE TO FOLLOW UP ON THOSE RECOMMENDATIONS AS WE ALWAYS DO UNTIL THEY'RE EITHER IMPLEMENTED OR CLOSED, AND WE WILL REPORT ON THAT ANNUALLY.

COULD YOU GO TO THE NEXT SLIDE, PLEASE, JEFF?

And again, could you go back?

I should point one thing out.

Yeah, look at why do they decline, why were there decline, and any recommendations about how you can improve the program, and then try and get an understanding about why did people opt out of the rental registration program.

Thanks, Joe.

So again, during the period covered by our audit, which was 2016 to 2022, we found that the number of registered rental properties in Seattle declined.

And an interesting thing we also saw that we found that the number of registered small rental properties, in other words, these are either single family properties, you know, one place, one unit, or multifamily properties with 20 or fewer units.

That's what we're calling small properties.

We saw a decline in the registration of those, fairly significant, but we saw there was an increase in the number of registered large rental properties and other properties with 21 or more units.

So that trend appeared.

And just on the slide, as you know, I think this kind of might get that, help you get that straight in your head.

While owners of large rental properties were just 6% of all rental property owners, they controlled 66% of Seattle's rental units.

Can I ask you before you go on?

When you're talking about they're no longer registered, are you suggesting that landlords are just dropping out of the program, or are these renters, are these units being taken off the market?

Council President Nelson, it could be either.

They could, well, it's three things.

They could either have just dropped out of the market and said, I'm not going to rent it anymore.

I or a direct relative are going to live in that property.

They could have sold it and then resulting in it being taken, perhaps taken off the rental market.

And then the other thing that happened is it's called an inactive rental registration.

They either forgot to renew it or they chose not to renew it.

Would you suggest the first two categories are more common?

I'm sorry.

Would you suggest that the first two just that they have sold the property or they've decided to occupy it themselves and therefore it's not available, that's more common than somebody just

FORGETTING OR...

THAT I CANNOT GIVE YOU A DEFINITIVE ANSWER.

I WOULD SAY, AND THAT'S ONE OF THE ISSUES WE'RE GOING TO TALK ABOUT LATER, THERE ARE A LOT OF PEOPLE WHO ARE PROPERTIES BASED ON THE DATA THAT'S AVAILABLE TO SDCI JUST SORT OF DROP OUT OF THE REGISTRATION SYSTEM.

So, and there's a slide that's going to be coming on that kind of explains some of the reason why that happens, you know.

So, but I would say there's kind of a large unknown category, quite honestly.

So.

Yeah, I'm just worried about losing that housing stock.

So, go ahead.

Yes, yeah.

Jeff, I think I'll turn it over to you guys and you can provide some information.

Yeah, in some ways this presents the same information in a different way, but shows it over time.

And then I was able to get some updated 2023 numbers since the auditor's report stopped with information in 2022. So you do see between 2016 and 2023, we saw a steady increase in registered rental properties up to a peak of about 33,000.

Then the pandemic came along.

I think that's part of the factors that happened here, plus some other factors that we'll discuss.

We saw a big drop in total registrations.

I do want to note for 2023, by the end of 2023, we saw a small rebounding in total properties.

And I just checked last night and there's another 500 or so.

So it's even a little bit higher halfway into 2024 here.

These are properties.

Again, it's important to make the distinction on units.

Units have grown quite a bit in the city because we are constructing lots of larger multifamily properties.

So we're seeing a little bit of return in properties.

I'm sorry, I didn't bring a slide on units, but we're seeing a significant increase in the total units registered.

focusing on smaller rental properties, just because that was the focus of the auditor's report.

Not quite the exact year.

I mean, it's been a little intermittent.

Like about every other year, we pulled the data on the breakdown by unit size.

But again, we saw a peak of small one single-family homes two to four and five to 20 unit properties in 2022, a big decrease by the end of 2020. We saw a peak, big decrease by the end of 2022. We're seeing a small rebound right now.

Okay.

What I want to do is just go over quickly five reasons why we believe there possibly could have been decreases in registered rental properties during the period 2016 to 2022. And the first one, which Council President Nelson alluded to, some of these, during that period, there were about 6,800, nearly 7,000 real properties that were registered, were sold, and most of these, 88%, were smaller units, properties with one to five units.

And if you look at national data and research that's done on this topic, it would suggest that most of these ones were taken off the rental market.

Now we can't definitively say, we didn't have the absolute data to say this, but the indications are they likely were taken off the rental market.

And what I'm saying, 76% were sold to individuals versus businesses, and 69% of the sold properties were single units.

These are all things that would tend to lead to an outcome in which they were taken off the rental market.

A SECOND THING WE NOTICED, AND WE WERE ASKED BY THIS COUNCILMEMBER'S SPECIFICAL ECOLIST, LOOK AT DEMOLITION PERMITS.

DURING THAT PERIOD, THERE WERE 768 DEMOLITION PERMITS FOR RIO REGISTERED PROPERTIES, AND MOST OF THESE, AGAIN, THIS TREND, WERE FOR ONES, SMALLER ONES, WITH 20 OR FEWER UNITS.

Number three, we looked, and this raises some questions that I'll talk about a little bit later, 10% of short-term rental properties, like Airbnb properties, that were supposed to be registered also as RIO properties.

So there are certain properties that have to be registered not only with SDCI and their rental registration RIO program, They also need to be registered with the Department of Finance and Administrative Services.

I know I'm getting in the weeds here, but some of them have to be registered with both regimes.

So when we looked at this, there were 10% of the properties that just did not have an active registration.

They dropped out for some reason.

And again, it's either because they maybe sold their property or they started occupying it.

or they forgot to re-register, or they chose not to re-register.

But that resulted in a decrease in the registration numbers.

Number four, and I'm gonna talk, this is based on a survey we did of landlords, and I'm gonna go in a little more detail later about that, because it wasn't a survey of all the landlords in Seattle.

It was a subset of that.

But of the people who responded to our survey, and we deliberately chose to survey people who were no longer registered in the Rio system, or we had evidence that they sold their house.

We looked at King County data to get that.

The survey of those folks who responded to our survey, the response was 21% said, I converted the property into a residence for myself or a family member.

Again, that could decrease the number of registrations.

And then finally, again, we talked about this.

There was just an increase in the number of registrations for buildings with a lot of units and a slowdown or a decrease in the number of properties with a small number of units.

So adding these things up, that explains or possible explanation for why the numbers went down so much quickly and significantly during 2016 and 2022.

I think Council Member Morales, did you have a question?

You had your hand up.

Sure, if that's okay.

Thank you.

Can you tell us, of the 6,800 properties that were sold, how many had a complaint filed against them regarding habitability or failure to comply with landlord-tenant laws?

I'm going to have to confess I didn't completely hear your question.

Could you repeat that and maybe speak a little louder?

I have aging ears.

I'm sorry.

That's okay.

Can you, of the 6,800 that were sold, do you have data on how many had a complaint filed against them regarding habitability or failure to comply with landlord-tenant laws?

I don't know the answer to your question.

I will get an answer to your question if it is available.

I don't know.

That's the top of my head.

Okay.

And then another question I have then is, what is the enforcement for unregistered short-term rental properties?

Enforcement for what?

Unregistered rental properties.

You mentioned, like, lots of folks sort of cycle off.

I'll defer to SDCI on that.

We go on.

I'm going to go on and talk about a lot of barriers, things, particularly with the IT systems that they have to deal with that make it hard for them to do as much enforcement as they want to.

But I'll defer to Jeff and SDCI about enforcement.

Great.

Thank you.

And I'll save the rest of my questions until the end.

Thank you, Chair.

Okay.

Thank you.

go ahead okay um so uh given this change in seattle's rental market um we made this recommendation which is and this is addressed to policy makers this is not in our purview this is you know this involves difficult trade-offs but just saying gee there's this trend of going from um smaller property rental properties decreasing where you see on the same time and growth in properties with a lot of units is that of concern if so you might want to think about doing something and we use the word consider because this is clearly in the policy realm and we don't we don't get into that So, and trade-offs between like, is it promoting more housing density?

One could argue that having a big building with a bunch of units is great, but how much do we value having a variety of rental housing choices throughout Seattle?

There are a lot of factors and I won't go into them, but this is just to draw attention to this issue and we don't presume to know what should be done.

But I know Jeff for SDCI has some information about things they've been doing that are related to this recommendation.

So yeah, so again, that is a policy, it's a recommendation directed broadly at city policy.

For us in SDCI, we've had a few things that we've done working in this space.

They were before the auditor's report, but I think they're important to mention.

We did some small landlord stakeholder work.

We had a stakeholder group in 2022 with sort of a cross-section of small landlords and Rental Housing Association as sort of an advocate for them and some affordable housing providers on like the section eight program.

So a good group of small landlords, um, we sort of analyzed where they were finding barriers and challenges, wrote that up in a report to council.

And then in 2023, we followed up with some policy or administrative recommendations for council to consider.

So, um, we're happy to reprovide those reports to you if they're not, you know, they're somewhere in the city system, but we're happy to get them to you directly if you'd like.

Um, And then, you know, we're always doing small landlord support.

Like I said, we're dealing with tens of thousands of landlords every year.

Most of those are small landlords.

The majority of landlords in Seattle are smaller.

The majority of units are in fewer, larger properties.

So just our regular work with landlords through the RIO program and then our outreach efforts, like landlord trainings and joint trainings with Office for Civil Rights.

Okay, what I want to talk about is we dug into the issue of why are people...

Can we go back to that slide?

You said continue to utilize the partnership with the Office of Civil Rights to support such as website and landlord trainings.

Is there evidence that...

I don't quite understand how that's going to help decrease the, to stop the bleeding of the loss of small landlord properties in Seattle.

The intention is it is support for small landlords.

It's giving them some coaching, some education on how the regulations work as they are right now.

Landlords can self-serve on the website and find information.

Again, the website is written with two audiences.

You have two doors you go in right at the beginning, tenant or landlord, and you can find the information that landlords need written to them as an audience.

And then we'll touch on it a little bit later in the presentation, but we're doing landlord trainings at least for this year.

They've been sold out so far.

Well, sold out is not the right term.

We don't charge for them, but we do preregistration and they've been at capacity for each of those trainings.

So that's the kind of regular work we do day to day in our department.

I certainly support more education and more training.

I guess I'm concerned that the underlying assumption is that it was the failure of landlords to understand the law that was leading to the loss of of properties being registered rather than perhaps a more systemic factor.

So I just want to make sure that we're not making that underlying assumption doesn't actually answer.

It's part of the puzzle, I guess, is what I'm trying to say.

It's part of the puzzle.

We're not suggesting it's the entire thing.

Yeah.

Thank you.

Council President?

Yeah, to pile on that.

Because this is referring to recommendation one, which is specifically talking about policies, not recommendations.

operations or education or training of landlords.

I read that to think of policies that, as you said, that will preserve and preferably expand the existence of rental properties available.

Yeah.

Yes.

Sorry.

Okay.

Council Member Rivera?

Sorry.

I don't...

Am I having trouble following the...

Why are these trainings under the Office of Civil Rights, and it almost denotes like there's some enforcement issue...

or some kind of issue that the landlords aren't following proper laws related to civil rights.

So this is a piece that I'm confused about, if my question makes sense.

The city regulation of rental properties is divided between two departments primarily.

So SDCI has most of the landlord-tenant protections.

Office for Civil Rights holds the anti-discrimination fair housing laws.

So we work closely with them because landlords don't know the difference between which department they're talking to.

So we try and do joint presentations, joint trainings, present our information together in an integrated way on our websites.

So you're not saying that there's anti or that there's discriminatory practices.

You're saying that STCI and civil rights holds both of the information for landlords basically.

And so they're either going to you all for some or to offices civil rights.

Is that my understanding that right?

We're trying to help landlords as our customers come to one spot to get the information rather than having to try and figure out which department they should be going to.

Great.

Thank you.

Thanks for clarifying that.

That's an important point.

Thank you.

I think the next slide will also move us on in that discussion.

Go ahead.

Thank you.

Okay.

So now, I just want to talk about the survey that we did to try and understand why property owners and why some of them have stopped renting in Seattle.

And so what we did is we conducted a survey of those landlords who stopped renting at least one rental unit in Seattle between 2016 and 2022. Now I want to emphasize, I said this before, it's not representative.

We did not survey every landlord in Seattle, but what we wanted to do is dig down on those folks who we had evidence that they had some evidence that they had left the rental market and decided not to register.

So it's people who either sold one rental unit or didn't renew their RIO registration for at least one property.

So, but looking at those survey results and you can see, you know, we sent it out to 13,000 folks, you know, data, email addresses provided to us by SDCI.

We got 635 survey responses, and the survey indicated many things.

I'm only going to talk about a few of them right now, but of the people who responded, most owned, like 70%, five units or less.

In other words, these smaller properties.

And most of the survey respondents, 74% said, hey, Seattle's rental regulations are hard for us to understand and to implement.

So if you go on the next slide, I wanna be really careful about saying this.

So what we found, we got data from SDCI and it turned out that most of the complaints from tenants dealt with landlords who had smaller properties.

And there was an increase from 2021 to 2022 after we came out of the pandemic.

So one of the things we wanted to do is to, and we made recommendations about this, and this is recommendation two, if you could go to it, Jeff.

I think it's on the next slide.

And this is really wordy.

But what we intended to do is help decrease the number of rental complaints.

And again, this isn't going to take care of every problem and every complaint, but this is within the control of the city right now by providing clearer, more comprehensive, user-friendly information to rental property owners and managers, landlords.

And it just seeks to improve the overall customer experience, and these are mainly landlords, with SDCI's rental registration program.

So that's what this very long recommendation seeks to do.

Again, it's not gonna solve everything.

It's not gonna solve what may be an exodus of small property owners.

But we wanna do everything in our command in the city to make sure that people understand things that's clear to them.

Because I know the Office for Civil Rights, if you look in the, I think in their appendix on a report, they have two pieces there.

I believe they refer to, you know, some issues they've found with people whose first language, or landlords whose first language is not English.

And, you know, trying to wade through some of these regulations and understand them, it may be just, They just didn't understand them.

It wasn't that they didn't want to follow them.

Again, this was a small subset they looked at on some of their enforcement actions that they took, that SOCR, the Office for Civil Rights, took.

So the idea is let's just make it as clear and comprehensive as possible so we diminish that scenario happening.

And Jeff, I think...

Yeah, so...

Again, this has been ongoing work in our department, so some of it precedes the auditor, but the auditor's report very much emphasized, underscored, and lended some support to this work we're doing.

So we are doing trainings for landlords.

We did them pre-pandemic.

It was interrupted for a few years there.

Well, people didn't want to do in-person learning, but we're back at it and excited about it.

We've had two of four planned landlord trainings so far, about 150 attendees each.

The next one is coming up on July 17th.

We'd be happy to share the registration information with all of you if you'd like.

We do push that out to our landlord email list, about 19,000 landlords and property managers.

And we put it up on our website and the city's website.

So we get the word out and registration fills up right away.

We're looking at whether we try and squeeze some more in there.

It's very popular right now.

We also do landlord trainings at our SDCI home fairs.

We usually do those two times a year.

We're sort of continuously updating our Renting in Seattle website, and again, half of that content is written to the landlord audience.

We did an update to our renter's handbook.

That's primarily provided to tenants when they move in, and it's supposed to explain Seattle's regulations.

EASY TO UNDERSTAND WAY.

IT'S ALSO TRANSLATED INTO 13 LANGUAGES.

LANDLORDS USE THAT RESOURCE ALSO.

AND ALSO BECAUSE LANDLORDS PROVIDE THAT TO THEIR TENANTS, WE FORMED A PARTNERSHIP WITH RENTAL HOUSING ASSOCIATION TO DISTRIBUTE THAT, MAKE IT EASY FOR LANDLORDS TO GET AT THE COST OF JUST MAILING IT TO THEM BY RHA.

SO IT'S A PARTNERSHIP WE REALLY APPRECIATE.

Other things we're working on right now for 2024, we want to get an online landlord training up.

We had one up during the pandemic.

It's a little outdated and talks to some pandemic-related issues, so we're going to rerecord a new training that's on demand for landlords.

And then we're working on some targeted training for very small landlords, people that have ADUs or renting rooms in their owner-occupied house.

That's kind of a growing area of interest, and the rules are a little different.

There's a little more flexibility for them, so we want to get some good targeted information for them up on our website.

So what I'm gonna do for the rest of the presentation is basically go through a lot of enforcement challenges and things that could be done to make it easier to administer and force the program.

And a lot of them touch on IT issues, you know, the software that SDCI and FAS have available to them.

So I'll try and go through this quickly.

It gets pretty thick in the weeds, but I think the most important thing is to hear Jeff, you know, talking about what SDSI is doing to respond to the recommendations.

So what this slide talks about is what I alluded to earlier.

There are some properties that have to be registered rental properties, short-term rental properties, like Airbnb rentals that have to be registered with both SDCI and FAS.

And specifically short-term rental properties that are not used as a primary residence by the owner, you have to register it with both departments.

So the issue we identified, there were gaps in the processes to ensure that both, you know, that property, short-term rental properties were being appropriately registered with both FAS and SDCI.

And there are a bunch of examples, and I won't give you every one, but one big one was FAS has this data on short-term rentals that they can't share through their system with SDCI, that if they could share this, it'd make SDI's enforcement job a lot easier.

And again, there are other examples of problems caused by this type in the report.

And if you go to the next slide, so the next two slides, again, these are pretty long, but they're basically saying these are things that you can do, you know, controls things manual and related to the IT system that could be done to make it easier to enforce and keep on top of the rental registration.

Okay.

And Jeff.

So in response to those things we have done, so we're talking about the problems with our two systems talking to each other.

That is a fairly systematic problem.

In the meantime, what we have done is we're just sharing spreadsheets with each other of registered properties.

lining up their spreadsheet and our spreadsheet and finding out where there might be some compliance challenges.

There's not a lot, but we're seeing a few.

And then just starting the discussion with them, meeting with them, starting to talk about what a bigger IT-related solution would be.

So I do want to touch on that because this is true for this and some of the other IT recommendations that are going to come up here.

you know, we can do small fixes on kind of a, you know, as discovered basis, you know, changing reports, changing how we communicate with customers, but the larger structural fixes, like having two Accela modules talk to each other, that's some fairly heavy IT work.

It's not the sort of stuff we can do within our department.

So highly specialized, prioritized and in demand, right?

There's a lot of departments on this Accela system, all looking for fixes.

So we're in, appropriately in competition with them for what's the highest priority for this limited specialized resource.

So that's kind of where we're at as we talk about some of these and we say, that's on our plan, but we're not there yet.

It's because we're going through that prioritization and budgeting process to get those in place.

Again, what I'm going to do just very quickly is talk about these are some enforcement challenges, particularly related for real registration renewal and, you know, saying, hey, I don't want to be registered in the system anymore.

And there are two principal causes of this problem.

First, the Seattle Municipal Code currently assigns responsibility for registering rental properties to new owners of the property, and they have to do it within 60 days of the closing of the property sale.

But what's in practice, new owners rarely do this, so they don't, and SDCI, New owners rarely communicate to SDCI when it becomes an owner-occupied property and when it needs to be registered with SDCI.

So there's this gap.

And the second issue concerns the IT system, again, that Jeff mentioned uses for rental registrations.

And this system, the way it's set up now, like multiple parties can register or renew a rental registration, and it allows users to delete their contact information.

And WHEN THAT HAPPENS, IT'S REALLY DIFFICULT FOR THEM TO GET IN TOUCH WITH, WELL, WHO'S THE OWNER OF THE PROPERTY?

SO JUST THE WAY THE SYSTEM IS SET UP, IT JUST MAKES IT REALLY DIFFICULT TO SEE, WELL, WHO'S IN CHARGE OF THIS?

WHO SHOULD WE CONTACT, ASK QUESTIONS ABOUT THE REGISTRATION?

SO RECOMMENDATION FIVE, WHICH I THINK IS ON SLIDE 21, JEP, JUST SAYS, HEY, It'd be great if SDCI could spend some time trying to better define the roles and responsibilities for providing the status of rental registration for properties.

And I'll turn it over to Jeff to talk about what SDCI has done to address that recommendation.

All right, so I'm actually gonna turn this over to Edwin.

So Edwin supervises our admin team and our call center, who are the people that those customer service-focused folks, which are usually in direct communication with landlords.

So Edwin, you wanna talk a little bit about what we've been doing to work in this space?

Great, thank you, Jeff.

So there definitely are things that we can control, and it's really important to us that we utilize existing resources to better serve our customers.

So what does that look like?

We can utilize our email list server with approximately 19,000 owner and manager contacts and send out reminder emails like, please keep your records up to date.

Rio data cleanup efforts include catching up on overdue renewal reminders.

And these are things that prompt automatic response from our customers for assistance.

And we can provide that assistance.

Other things that we do and things to further the assistance that we can provide is we've moved from an old antiquated Rio inquiry submittal that looked like an email where people just typed into an open text box whatever questions they had to now a new software called Zendesk customer management tool.

This allows for better data reporting.

It allows for quicker response by our team, typically within 24 hours, to resolve issues and also answer questions from property owners, managers, and tenants.

And I'm proud to say that we helped contribute to the overall SDCI customer satisfaction score of 95%.

Another way that we can provide assistance is we've updated our Rio helpline from what used to happen was calls would come into our complaints line and they would have to get triaged through all the other things that code compliance handles now there's a direct helpline for our customers to call and.

and obtain that immediate assistance from our staff.

And that assistance includes answering questions or walking them through the technology.

Additionally, for people who are technologically adverse, we have deployed staff down in STCI lobby for in-person assistance.

And again, we have employees there ready with a laptop to come down and help people so that their business needs are met when they leave the building.

So we want to continue this work with IT, as Jeff mentioned, and we still need policy review work to be had.

Continuing on, and I won't belabor this, yes, the IT system that FAS has poses some challenges in data gathering and their ability to manage and do enforcement, you know, duplicate registrations, multiple contact entries, THE WEB INTERFACE IS DIFFICULT IF YOU'RE A LANDLORD OR PROPERTY OWNER TO GO ON THERE.

IT'S HARD TO NAVIGATE AND LOCATE YOUR RECORDS.

IT'S A LABOR-INTENSIVE PROCESS THAT SDCI HAS NOW TO VERIFY RIO REGISTRATION COMPLIANCE, AND THEY HAVE A PRETTY LARGE BACKLOG OF WORK THEY HAVE TO DO ON THAT, YOU KNOW, AND THEY ONLY HAVE SO MANY STAFF.

SO, AGAIN, IF YOU COULD GO TO THE NEXT SLIDE, JEFF.

AGAIN, THIS RECOMMENDATION IT JUST MADE you know, geared towards ensuring that their system obtains the correct contact information for rental properties and just simplify the registration renewal and termination process.

Jeff, I think you have something to add to this.

Yeah, I'll turn this over to Edwin in a minute because Edwin also is tracking our IT fixes for us, but I do think maybe we'll go back a couple slides here.

On that sort of data challenge, I really want to highlight something Edwin's team did, which is the Rio data cleanup.

We've made...

huge strides, kind of contemporaneous with the auditor's report and since then.

And back to Council Member Morales' question about our enforcement process, we always start with a reminder letter.

You know, it's polite, but it also says you need to do this.

That letter is our most effective tool.

That finds our bad data.

The people that are no longer rentals that forgot to call us and tell us they aren't, that's the letter that you, they may have ignored the couple emails they get before that, but when they get that letter, they call us, they update the records with the admin team.

So Edwin's team did a great job of getting us caught up completely on the backlog of reminder letters over the last year, and so, We're in better shape data.

Our data is not perfect.

It probably never will be because there's tens of thousands of records in there, but just appreciation for that work.

Thank you.

So on the IT one.

Yeah, so we're always looking at a continuous improvement lens when it comes to our work, and I think something that I'm really excited about and passionate about is looking at continuous improvement through a human-centered design lens.

And so what that means is we actually...

ask the team to go out and survey our customers, but also to interview them and see where our gaps are in the system, where the technology could be better, and gather recommendations from our customers on how to improve the services that we provide them.

And in addition, because we also have employees who are working in these systems, we had the same team meet with the employees, job shadow them, interview them and see how they could provide better service to our customers.

So there's an ongoing effort with continuous improvement.

I think it'll happen for a while, but we are really looking to listen to all the folks involved in these processes and try to really make change that'll impact them in a positive way.

And then just on this longer-term IT, it's the same issues I raised before.

We have some structural stuff we know is there.

Our system is 10 years old.

It was the first module built in Accela.

The city knows a lot more about how to configure Accela, a lot more about usability.

So again, for the bigger structural improvements to the RIO system, we go through the budget and the IT prioritization process, and sort of what's most important for these cities' resources gets funded, It hasn't been our turn yet, but we're very hopeful it'll be our turn soon.

Okay, moving on.

This is about SDCI's Race and Social Justice Roadmap that it developed for the Rental Registration Inspection Ordinance Program.

And to their credit, they got on this in 2013 as part of the city's Race and Social Justice Initiative.

developed this roadmap that was based on the Seattle Office for Civil Rights Racial Equity Toolkit.

They updated it in 2015. And all we're saying is, you know, gee, it's been a while since 2015. It might be a good idea for you.

It would be a good idea for you to update it.

So if you just go to the next slide, Jeff, that's what we recommend.

Why don't you update this roadmap?

And I think Jeff can talk about what they've done toward that effort.

Yeah, I think I mostly repeat what you just said, which is we did spend a lot of time thinking about race and social justice back in 2012, 2013, when Rio was getting created.

We came back again a couple years into it in 2015 to see if we were achieving what we were hoping to achieve.

and we made some adjustments at that point.

I think it's a really good point that it's time to take a fresh look at this.

So we got the auditor's findings in late December.

We haven't had a chance to dig into this yet, but we will be doing an update of the toolkit for the Rio program.

Okay, next slide.

We're almost done.

We're almost done.

Two more recommendations to go, but they're easy.

So during our audit, we found that the fee structure SDCI was using to help fund its rental registration program, given the current changing or the changes in the Seattle rental market, didn't seem to be set up to ensure financial sustainability.

The revenues earned by the fees, and you can look at this slide, rely, you know, there's a higher charge on the property But as we're seeing, fewer small buildings, fewer properties, or properties that have a lot of units in them, If you just do the math, which it shows you on this, you know, there's going to be a decrease in the revenue for SDCI.

And I should note that since we did our audit, SDCI has worked on some things about this fee structure.

So, Jeff, if you want to talk about that.

But the next slide is just the recommendation itself that says, hey, you should review your fee structure.

So yeah, at the same time, the auditors were working on their analysis.

We were in the process of updating our fees for effective 2024. We do a fee model that makes projections, figure out where our fees should be to cover our operating expenses.

And that is we're fee supported, but we collect enough revenue to support our work, but nothing more.

We don't raise any money for the city.

So, since we just completed that work, effective 2024, we're not planning to come back and do fees until next year.

We're on a two-year registration cycle, so we revisit our fees every two years to make sure they're sustainable.

So, again, I think we're on a much more sustainable path already, based on the auditor's finding.

When we do that new fee study in 2025, we'll take the items that they highlighted into consideration.

Last recommendation, and this touches on a similar theme.

We're just saying, gee, these software problems or issues really do hinder the effectiveness of the administration enforcement of the program.

So this one is just kind of, you know, executive, we recommend that you develop a strategy to figure out how to get sufficient resources to update this software.

And I'll just turn it over to Jeff.

And again, that touches on a theme you've heard from us is that at least the larger, more systematic fixes take time and many people want that in-demand work right now.

So in the meantime, we've got good documentation of where there are IT needs for Rio.

We're doing continuous improvement where we can.

And then we work with the mayor's office and CBO and Seattle IT on that prioritization and budget process.

That's it.

I'm happy to address any questions you may have for us at this point.

And, Jeff, why don't you go to the next slide.

There's them, SDCI, the two folks you have at the table.

And I just want to thank Chair Moore and the members of the committee for hosting us and asking us to come up here.

We really appreciate it.

Thank you very much for the presentation.

Are there any questions?

Doesn't look like it.

Okay.

I'll just follow up with saying I'd be interested in learning more about the new fee structure.

and what that all looks like.

Yeah, we'd be happy to follow up with some information for you on what we have now and sort of how it aligns with the auditor's recommendations.

Okay.

Yes, well, thank you very much for the presentation.

Again, also thank you for...

Oh, I'm sorry, Council President.

Well, I was also looking at the report itself.

And according to the report, 74% of the providers said Seattle's rules are too burdensome to follow or difficult to implement.

That's on page 26. 56% said it was very hard.

And 22% said it was hard to comply with Seattle's rental rules.

And then 41% purchased rental properties outside of Seattle.

And only 1% purchased another property within Seattle after having sold their property.

And I'm going back to what you, there was a slide on page, I don't know, let's see, nine that's talking about 6,800, Yeah, 6,800 rental registered properties were sold.

And so I am, again, concerned about this.

And I really appreciate all of the work that you're doing, SDCI, to improve the system.

But I'm going back to recommendation one, which seems to be responsive to the figures that I just read that's talking about policy changes or doing, and that falls on So I really appreciate that, and I think that we have our work cut out for us.

Okay, anything follow up to that?

No?

Okay, so yeah, I think clearly there's some policy decisions that need to be made based on what we've seen from the survey results and the reasons given.

And I'm certainly interested in looking at those policy decisions and discussing them.

further in committee.

As to the report, thank you very much for all the work that you've done, and it does seem like SDCI is taking the recommendation seriously and being proactive in responding to them, and that's why we have the auditor.

We want them to identify ways that, you know, the bells and whistles can be improved and the systems improved, and then to have departments be responsive, and that seems to be going well in this case.

So thank you both.

for the work that you've done on this issue and for presenting here today.

Thank you.

Thank you.

All right.

If there's anything further for the committee?

All right.

Well, it is now 12.02, and this concludes the June 12th meeting of the Housing and Human Services.

The next meeting is scheduled for June 26th.

We are adjourned.

Thank you.

Thank you.