Memo

Date: September 26, 2025

To: Councilmember Debora Juarez, Chair, Housing & Human Services Committee

From: Maiko Winkler-Chin, Director, Office of Housing

Subject: Housing Investment Plan (OH-001S-A)

As requested by City Council Statement of Legislative Intent (SLI) OH-001S-A, the Seattle Office of Housing (OH) is providing this memo to describe housing production targets for the primary fund sources and programs administered by OH.

The SLI requested: "the Office of Housing (OH) produce a Seattle Housing Investment Plan that takes a comprehensive look at all affordable housing investments by the City, updates the production targets, and reviews the underlying funding models for the main sources of funding used to develop affordable housing for the years 2025-2030."

The SLI requests clear targets for Rental Production and Preservation and Homeownership and Sustainability by number of units and household Area Median Income (AMI) level to be served. It is also requested to track annual progress toward these targets in the OH Annual Investment Report, including information about unit size and geographic location.

This memo begins with a summary of the current affordable housing operating and funding environment, describing some of the major uncertainties that make accurate housing projections difficult to achieve. The final section reports projected affordable housing investments, production goals, and outcomes.

Executive Summary

OH invests public funds to develop, operate, and preserve apartments affordable between 0-60% AMI, and permanent affordable homes up to 80% AMI. OH investments support homes to remain affordable for over 50 years. With historic local investments from the Seattle Housing Levy, Payroll Expense Tax, and Mandatory Housing Affordability, OH anticipates creating 19% of the housing needed at 0-30% AMI between 2024 and 2030. OH anticipates creating 25% of the housing needed at 30-80% AMI between 2024 and 2030. Even as Seattle has increased investments, it is not enough to tackle all the housing needs in our city, particularly at the lowest income levels, below 50% AMI. OH is generally on track to achieve the Levy goals, based on performance reported in 2024.

OH also oversees incentives and land use tools that support development of new income restricted apartments and homes, ranging 40%-90% AMI, for varying terms of affordability. Mandatory Housing Affordability performance units are regulated for 75 years, while Multifamily Tax Exemption (MFTE) units are regulated for 12 or 24 years, with a voluntary opt-out available to housing owners at any time. MFTE alone is expected to meet nearly 100% of the housing needed at 50-80% AMI between 2024 and 2030, and all OH investments and programs taken together exceed the target for housing needed at 50-80% AMI by nearly 1,800 units or 80%.

After accounting for all expected production from OH investments and MILU programs, Seattle still needs over 14,000 homes at or below 50% AMI. Higher levels of public subsidy both capital and operating are required to develop and operate housing at or below 50% AMI. Over the next several years, OH will continue to examine ways that our work can shift to better meet the housing needs of our community.

Background and Overview

Seattle Expects to Invest Over $2 Billion in Affordable Housing, 2024-2030

The City of Seattle has demonstrated its commitment to affordable housing by increasing local investments significantly over the last five years, with a historic Seattle Housing Levy, passed by voters in 2023 to collect $970 million over seven years, 2024-2030. The Payroll Expense Tax matches the Levy with approximately $140 million annually. Mandatory Housing Affordability revenue fluctuates with real estate development and has contributed over $350 million to the Office of Housing budget since the program began in 2018.

This response provides information for the full period of the Seattle Housing Levy, which is 2024-2030. This time period was chosen because all the existing production models were originally created for this 7-year period. This allows us to match the Levy goals with the existing documentation for the Housing Levy, and to avoid mistakes and confusion that may be caused by creating different time horizons for OH housing goals.

Current Portfolio

Investing in permanent affordable housing is one of the most critical actions our City performs to increase opportunities for people to live in Seattle, promote health and well-being, and prevent and address homelessness and residential displacement. The Office of Housing produces and preserves affordable housing through various funding strategies.

With the support of the foundational Seattle Housing Levy, and other fund sources like Mandatory Housing Affordability and Payroll Expense Tax, OH currently monitors capital investments in over 19,000 affordable apartments and homes throughout the city. Paired with capital investments, OH monitors Operating, Maintenance, and Services contracts for over 4,500 supportive and affordable apartments. For the market incentives and land use programs, OH monitors regulatory agreements for roughly 7,000 income restricted apartments and homes.

New production of OH-funded rental housing has increased over the last several years, with a sizeable jump in 2022 when a combination of MHA, 2016 Levy, PET, and COVID-related Seattle Rescue Plan investments were opening as new housing. Chart 1 displays apartments by income level by the year they were placed in service and began welcoming residents to move in.

Chart 1: Office of Housing New Rental Housing, 2015-2024

Reinvestment, Preservation, and Stabilization Needs

The affordable housing sector continues to face ongoing operational and financial challenges that are caused by a variety of challenges, such as increasing operating costs, increased competition amidst several years of high housing production, growing differences between renter incomes and restricted rents, and increased costs and capital needs in the portfolio of older properties. In response to these significant needs, public funders of affordable housing are reconsidering traditional funding strategies to find ways to best support the affordable housing sector. For several decades, it has been the shared focus of all public housing funders to build new housing, focusing 90% of funds on new production, and 10% on preservation. These assumptions were also in place for the 2023 Seattle Housing Levy modeling. There is discussion about changing the current emphasis on new production to focus more on preservation of existing housing. While no decisions have been formalized, some early discussions indicate that other public funders may be interested in shifting investments toward a 50%/50% split between new production and preservation. One major public funder is considering a change as early as the 2026 fall funding round, which could impact the funding behavior of others. If Seattle decided to shift funding priorities in line with other public funders, this would likely only implicate a smaller portion of the PET fund source (approximately 20% of total PET housing funds), due to current obligations and requirements of other Seattle sources.

Leverage of other Public and Private Investment

In addition to local Seattle fund sources already described, OH receives federal and other funds that contribute to affordable housing development. Seattle housing investments also rely on funding from other partners to build and operate as many homes as possible including Low Income Housing Tax Credits, State Housing Trust Fund, and other local and federal dollars. It is common for each dollar of OH investment to be matched by two or three dollars of investment from other sources.

King County public funders of affordable housing coordinate closely to maximize local resources and capitalize on readiness of projects for well-timed bond allocations. This coordination increased further in 2024 with a more predictable and transparent process that requires local funds to be committed to projects first, with readiness a primary factor in prioritizing bond allocations, which often comprise a majority of funding for housing developments.

Federal Uncertainty

As we share more about OH planned housing investments, 2024-2030, we face unprecedented challenges with federal funding that we typically rely upon to support city housing investments. While we are reporting projected housing outcomes with known local fund sources, the environment could change dramatically if federal funding is reduced or eliminated for current and future projects. It may be necessary, for example, for the city to reprogram local funds to backfill federal cuts particularly for existing homelessness and housing operations and services that must remain fully funded to continue assisting people to maintain their current housing and shelter. There are many unknowns about the availability of new funds for supportive housing operations and services, and in the absence of federal support, new supportive housing development will slow or stop. Major changes to the federal funding environment would radically change the projections for future housing development that are reported here.

Ecosystem of Housing Developers

Housing is funded and built by many different public and private entities in our region, outside of the city's influence. There are private investors and entities building different types of housing, the Seattle Housing Authority is a major housing developer and operator, and the new Seattle Social Housing Developer will soon have a dedicated fund source to bring housing online. King County and the State have also invested in housing within Seattle's city limits without major city investments. OH works collaboratively with other housing funders and developers and will continue to engage with the Seattle Social Housing Developer about their future housing development plans.

It would be very difficult for OH to predict the future housing production for these external actors who face an array of opportunities and challenges as they make decisions about new residential development and reinvestment in existing housing.

Seattle has Significant Housing Needs

The Growth Management Act (GMA) requires counties and cities to plan for and provide sufficient zoned development capacity to accommodate projected housing need by income level. The state provided the model for counties to segment their countywide growth target by income category, and counties allocated housing need projections to cities.

The 25-year housing need projection allocated by the King County Growth Management Planning Council (GMPC) to Seattle is 112,000 net new housing units, consistent with the City's housing target in the Countywide Planning Policies (CPPs). For this SLI, OH staff calculated annual targets from the CPP targets, and applied those to this 7-year period, 2024-2030. Seattle needs 31,360 new homes between 2024 and 2030, and Chart 2 below displays the different levels of need by income level.

OH invests capital funding to build new apartments regulated at or below 60% AMI and new homes regulated up to 80% AMI. Market Incentives and Land Use (MILU) programs include Multifamily Tax Exemption (MFTE), Incentive Zoning (IZ), Mandatory Housing Authority (MHA), and other types of agreements. These programs produce new apartments and homes regulated between 40% AMI and 90% AMI.

Chart 2: Estimated Housing Need and OH Programs, 2024-2030

To achieve the GMPC housing targets, the city implements the Comprehensive Plan, zoning and code reforms, infrastructure investments, permitting and regulatory reforms, land use tools and market incentives, housing policies, and capital and operating investments in affordable housing. This memo will focus primarily on market incentives, land use agreements, and capital investments in affordable housing.

Seattle needs more housing for people with incomes at 30% AMI than any other income category, with over 12,200 homes needed for the period 2024-2030. Housing at this level requires public subsidy to build and operate long term and OH modeling strives to balance investments in extremely low-income housing (0-30% AMI) with investments in low-income housing (30-60% AMI). Seattle also needs over 7,500 homes for people with incomes between 30-80% AMI. Chart 3 displays how current planned OH investments will work toward addressing the housing needs for households up to 80% AMI, while Chart 4 displays how MILU programs will work toward addressing the housing needs for households between 40% AMI and 90% AMI.

Chart 3: Total Production with OH Investments to Address 0-80% AMI Housing Needs, 2024-2030

Chart 4: Total Production with MILU to Address 40-90% AMI Housing Needs, 2024-2030

Charts 5 and 6 below show the total housing needed in gray (according to the CPPs), by AMI or program type. Dark blue bars represent what OH Rental Housing investments will achieve, with a green bar for OH Homeownership investments. The light blue bar represents MHA performance units, and the large orange bar represents an estimate of MFTE production.

MFTE operates with different regulatory requirements than OH capital investments and MHA performance units. The orange MFTE projections in Charts 4 and 6 display projected production for income restricted MFTE units. Income and rent limits in MFTE units could change at any time, as MFTE is a voluntary program. It is likely that MFTE income restrictions will be in place for either 12 years or 24 years, given current MFTE rules and historic data.

Chart 5: Production, by AMI, with OH Investments to Address 0-80% AMI Housing Needs, 2024-2030

Chart 6: Production, by AMI, with OH Investments and MILU Production to Address 0-100% AMI Housing Needs, 2024-2030

King County Housing Data Tracking

The King County Affordable Housing Committee maintains the Regional Affordable Housing Dashboard which provides a high level view of housing needs and progress toward affordable housing goals in and across different jurisdictions throughout the county. This data dashboard is updated regularly with data from the US Census Bureau, the US Department of Housing and Urban Development, local public funders of affordable housing, public housing authorities, the Puget Sound Regional Council, and other King County datasets. The Regional Affordable Housing Dashboard was last updated on November 25, 2024. Updates were limited to data points from Census Bureau surveys (e.g., American Community Survey), the King County Evictions Database, and the King County Income-restricted Housing Database due to data availability.

King County is currently designing a series of dashboards that will replace this older dashboard to measure progress toward housing needs and for comprehensive plan implementation, including a focus on countywide housing affordability and income-restricted housing production.

Summary of Seattle Office of Housing Investments, 2024-2030

Background on Modeling for Housing Levy and Payroll Expense Tax

As part of the 2023 Seattle Housing Levy reauthorization effort and public engagement process, the Office of Housing developed an investment plan through several iterations of modeling that culminated in the final 2023 Seattle Housing Levy spending plan, which was included in the Levy ordinance and approved by the voters of Seattle in 2023. The Office of Housing also completed modeling for Payroll Expense Tax (PET) and Mandatory Housing Affordability (MHA) to be considered alongside the Housing Levy proposal so decisionmakers and the public could make an informed decision about increasing the city's housing investments.

To respond to this SLI, OH staff have updated both the Seattle Housing Levy and PET/MHA models to better reflect the current cost environment for developing and operating housing. OH made numerous updates to modeling assumptions, including increased construction costs, increased interest rates, lower tax credit pricing, and lower expectations for federal capital dollars. The original Housing Levy projections for the unit and project mix remained constant, and the unit mix remained constant for the PET/MHA model. With the increased costs of development, it was necessary for OH to assume an additional $327 million of supplemental PET over the levy period to achieve the original goals established by the 2023 Seattle Housing Levy. As a result, there is less PET/MHA-specific rental production than what was modeled during the Housing Levy public process. With the remaining PET projected for the period, OH performed updated modeling of production goals with the same adjusted assumptions.

Importantly, this modeling exercise provides one possible scenario of what types of units might be built and what income levels might be proposed over a 7-year period. As soon as one modeling scenario is completed and presented, it is out of date. It is not expected that these production models will be perfectly replicated in real projects. There are too many factors associated with other funding sources, unique site characteristics, priorities for individual developers, and the housing market. We have already seen in 2024 that the projects built do not perfectly mirror what we originally estimated with 2023 modeling. Nonetheless, this type of modeling is useful for forecasting and planning what is possible with existing and future fund sources, which is its primary purpose here.

7-Year Funding Projections (2024-2030)

Table 1 provides a high-level summary of the primary OH fund sources across the 7-year levy period, 2024-2030 as well as the Housing Levy production goals and estimated outcomes for each major program category. The Housing Levy program allocations, projections, and goals were established during the extensive public engagement process to develop the Levy and codified in Council Bill 120584 that established the Housing Levy, Council Resolution 32093 that accompanied the Levy ordinance, and Council Bill 120804 which updated the Housing Levy Administrative and Financial Plan and Housing Funding Policies.

Table 1: Seattle Office of Housing Funding Projections, 2024-2030

Program Levy Funds

7-Year Allocation

($M) PET Funds

7-Year Projection

($M) MHA Payments

7-Year Projection

($M) Total City Funds

7-Year Projection

($M) 2024-2030

Projections

(Units / Households)

Rental Production 631.17 444.43 137.9 1,213.51 3,678

Rental Preservation 76.1 72.39 N/A 148.48 880

Operating, Maintenance, and Services (OMS) 122.3 331.43 N/A 453.73 7,591

Homeownership Development 49.04 42.85 6.35 98.25 467

Homeowner Stabilization 1.65 N/A N/A 1.65 90

Note: N/A indicates fund source not used for corresponding program activity.

Seattle Office of Housing Investments and Goals by Program, 2024-2030

Rental Production and Preservation, 2024-2030

Projection: Produce 3,678 and Preserve 880 affordable homes

The Rental Production and Preservation Program funds acquisition, construction, and rehabilitation of multifamily rental properties to provide housing with income and rent restrictions for low-income households, including families with children, older adults, people with disabilities, individuals and families who have experienced homelessness, and people working for low wages.

Table 2 summarizes the Rental Housing funding awards made in 2024, compared with expected progress and the overall 7-year total. Overall, Rental Housing investments are in line with spending expectations. Chart 7 and Table 3 display the awards made in 2024 and expected through 2030, by AMI. Chart 8 and Table 4 display the awards made in 2024 and expected through 2030, by bedroom size.

Table 2: Seattle Rental Housing Funds Committed and Progress, 2024

Fund Source Actual Funds Committed

($M) Projected Through 2024

($M) 2024-2030 Projection

($M) Actual Progress 2024-2030 Goal Percent to Goal

2023 Housing Levy 93.15 101.04 707.27 1,224 4,558 26.9%

Payroll Expense Tax 46.2 73.83 516.82

Mandatory Housing Affordability 17.0 19.70 137.90

Total 156.35 194.57 1,362.0

Chart 7: Projected Seattle Rental Housing Outcomes by AMI, 2024-2030

Table 3: Seattle Rental Housing, Modeled by AMI and Fund Source, 2024-2030

AMI Levels and Category Levy with PET, New Production Levy with PET, Pres. MHA with PET, New Production PET, Pres.

0-30% AMI, PSH - Projected 1,050

0-30% AMI, non-PSH - Projected 877 198 373 49

30-50% AMI - Projected 562 277 248 98

50-60% AMI - Projected 391 158 176 98

PROJECTED TOTAL 2,881 635 797 245

0-30% AMI, PSH - Actual 324

0-30% AMI, non-PSH - Actual 159 85 48

30-50% AMI - Actual 132 83 104

50-60% AMI - Actual 104 185

ACTUAL TOTAL 719 168 337

Chart 8: Projected Seattle Rental Housing Outcomes by Unit Type, 2024-2030

Table 4: Seattle Rental Housing, Modeled by Unit Type and Fund Source, 2024-2030

AMI Levels and Category Levy with PET, New Production Levy with PET, Pres. MHA with PET, New Production PET, Pres.

Studios - Projected 1,431 286 184 111

1BR - Projected 805 288 350 111

2BR - Projected 416 61 170 24

3+BR - Projected 229 93

PROJECTED TOTAL 2,881 635 797 246

Studios - Actual 421 112

1BR - Actual 110 130 140

2BR - Actual 115 31 50

3+BR - Actual 73 7 35

ACTUAL TOTAL 719 168 337

Homeownership Development and Homeowner Assistance, 2024-2030

Projection: Create 467 homes and first-time homebuyers and Assist 90 low-income homeowners

The Homeownership Development and Assistance program assists low-income homebuyers to purchase a home in Seattle and low-income Seattle homeowners to maintain stable housing. Loans are also made to homeownership housing development organizations that will sell homes to homebuyers with incomes at or below 80% AMI, and that will have restrictions on resale prices and may be sold only to eligible buyers for 50 years or longer. Low-income homeowners can also receive assistance in the form of grants and loans for home repair and weatherization, as well as with one-time mortgage loans to prevent foreclosure.

Table 5 summarizes the Homeownership funding awards made in 2024, compared with expected progress and the overall 7-year total. Overall, Homeownership investments are slightly behind schedule, but with upcoming announcements, will be in line with spending expectations. Chart 9 and Table 6 display the awards made in 2024 and expected through 2030, by AMI. Chart 10 and Table 7 display the awards made in 2024 and expected through 2030, by bedroom size.

Table 5: Seattle Homeownership Funds Committed and Progress

Fund Source Actual Funds Committed

($M) Projected to Date

($M) 2024-2030 Projection

($M) Progress to Date 2024-2030 Goal Percent to Goal

2023 Housing Levy 3.43 7.24 50.68 41 557 7.4%

Payroll Expense Tax - 6.12 42.75

Mandatory Housing Affordability - 0.91 6.35

Total 3.43 14.27 99.9

Chart 9: Projected Seattle Homeownership Outcomes by AMI, 2024-2030

Table 6: Seattle Homeownership, Modeled by AMI and Fund Source, 2024-2030

AMI Level and Category Levy, New Production Levy, Homeowner Stabilization PET, New Production MHA, New Production

80% AMI - Projected 277 90 178 33

80% AMI - Actual 25 16

Chart 10: Projected Seattle Homeownership Outcomes by Unit Type, 2024-2030

Table 7: Seattle Homeownership, Modeled by Unit Type and Fund Source, 2024-2030

AMI Levels and Category Levy, New Production PET, New Production MHA, New Production

Studios - Projected 6 4

1BR - Projected 72 50 7

2BR - Projected 73 51 8

3BR - Projected 80 56 8

4BR - Projected 25 17 11

PROJECTED TOTAL 256 178 33

Studios - Actual

1BR - Actual 5

2BR - Actual 9

3BR - Actual 7

4BR - Actual

ACTUAL TOTAL 21

NOTE: Down Payment Assistance and Homeowner Stabilization activities are not included in this chart and table because they were not modeled with bedroom sizes.

Operating, Maintenance, and Services, 2024-2030

Projection: Support operations for 7,591 affordable homes

The Operating, Maintenance, and Services (OMS) Program funds supportive housing worker wage stabilization and building operations and maintenance in City funded, low-income rental housing, supplementing rental income in buildings that serve households with incomes at or below 30% AMI. Wage stabilization and operating funding contracts are issued annually, but commitments are expected to continue for up to 20 years, subject to appropriations and annual reviews.

Table 8 summarizes the OMS funding awards made in 2024, compared with expected progress and the overall 7-year total. Overall, OMS investments are tracking with spending expectations.

Table 8: Seattle OMS Funds Committed and Progress, 2024

Fund Source Actual Funds Committed

($M) Projected Through 2024

($M) 2024-2030 Projection

($M) Actual Progress 2024-2030 Goal Percent to Goal

2023 Housing Levy 4.86 17.74 122.3 4,373 7,591 57.6%

Payroll Expense Tax 23.82 47.35 331.43

Total 27.06 65.09 453.73

Market Incentives and Land Use Projections, 2024-2030

Market Incentives and Land Use (MILU) projections account for a wide range of developer agreements to include income and rent restricted apartments in otherwise market-rate buildings. These regulatory requirements include property tax exemptions, land use requirements, or conditions for alternative development standards. Examples of MILU agreements include those for Multifamily Tax Exemption (MFTE), Incentive Zoning (IZ), Mandatory Housing Authority (MHA), religious lands, Master Planned Communities Yesler Terrace, Property Use and Development Agreements (PUDA) and reduced minimum parking.

These MILU agreements vary widely and are not generally comparable to one another or to OH investments because of typology, income restrictions, and duration of the affordability periods. For simplicity of reporting, OH is displaying all MILU housing projections together in Chart 11, as well as Charts 4 and 6.

MFTE stands apart from other investments and programs represented in these graphics. It is likely that MFTE income restrictions will be in place for either 12 years or 24 years, given current MFTE rules and historic data. This is a much shorter affordability period than OH investments (50 years) and MHA performance (75 years).

Chart 11: Projected MILU Outcomes by AMI, 2024-2030

The production projections for units with market incentives and land use (MILU) affordability restrictions consider historical production along with some tempering given the current climate for multifamily apartment development in Seattle. Industry experts do not expect a recovery until at least 2026, with some projections extending the downturn until at least 2028. The slowdown is largely due to high interest rates, rising construction costs, and a temporary market oversupply following a pandemic-era boom. Compared to Q2 2024, the Q2 2025 building permit applications indicate 79 percent fewer multifamily apartments and, similarly, building permit issuances indicate 65 percent fewer multifamily apartments.

Actual production numbers are used for year 2024, while years 2025 through 2028 assume development projects with units equivalent to one-half of what is currently in the permit pipeline will secure financing and complete construction by 2028, and years 2029-2030 assume same average annual production levels as seen in the 10-year period from 2014-2023. Distribution of MFTE units by AMI is based on historic production by unit type, but at AMI levels proposed by CB 121055 for MFTE Program 7. Distribution by AMI for units restricted by other types of MILU agreements mirrors historic production from the 10-year period, 2014-2023.

Appendix

2024 Funding Commitments and Progress

Table 9 provides a high-level summary of the funding awards made in 2024, including the amount of funds committed, by fund source, and the number of units funded with those awards. This demonstrates progress toward Housing Levy goals for each major program category.

Table 9: Seattle Office of Housing Funds Committed and Progress, 2024

Program Levy Funds Committed

($M) PET Funds Committed

($M) MHA Payments Committed

($M) Total City Funds Committed

($M) Actual Progress (Units / Households) Percent to Goal

Rental Production 68.11 37.49 17.0 122.6 1,056 28.7%

Rental Preservation 25.04 8.71 N/A 33.75 168 19.1%

Operating, Maintenance, and Services (OMS) 4.86 22.2 N/A 27.06 4,373 57.6%

Homeownership Development 3.27 - - 3.27 25 5.4%

Homeowner Stabilization 0.16 N/A N/A 0.16 16 17.8%

Note: N/A indicates fund source not used for corresponding program activity.