They Want To Fix Up Their Home; Seattle Demands They Pay An Extra $11,000

After saving for years, Andre and Erika Cherry were finally able to buy their first home together in Seattle. They knew their purchase—a century-old house in their neighborhood—was a fixer-upper, but the Cherrys had enough set aside to turn the creaking structure with its “bouncing” floorboards into a comfortable, modern home. What they hadn’t counted on was the city of Seattle forcing them to pay roughly $11,000 into an ironically named Mandatory Housing Affordability fund just to start their home renovation.

The Cherrys’ story is just one example of how policies claiming to make housing more affordable make it harder and more costly for people of modest means to buy a home. Moreover, such policies often fail to move the needle on housing costs in urban areas where demand and prices are skyrocketing. But the government doesn’t have unlimited power to extract such fees on property owners, and the Cherrys are prepared to fight if the city doesn’t drop its burdensome demand.

Home renovation has become an American point of pride and cultural rite. Flip through channels on basic cable and you will probably be able to pick between several shows depicting homeowners, interior designers, and realtors scouting old homes and then setting about making them modern and livable. The Cherrys had modest dreams for the home they purchased.

Their small, two-bedroom single family home in the Highland Park neighborhood was built in 1916. Seattle didn’t even have a zoning code back then. At some point, a previous owner had built put an unpermitted addition. And while there was a second floor, it was not livable. The Cherrys’ plans weren’t revolutionary, they simply wanted to transform their two-bedroom home into . . . a two-bedroom home that complied with building codes. This included paring back the addition so that it no longer jutted into the alley behind the home.

When the Cherrys submitted their building permit application to the city, they anticipated that the renovations would cost them $60,000. But rather than simply ensuring that the proposal met the city’s building code standards, the Seattle Department of Construction and Inspections determined that the renovations should actually be considered “new construction” and should be subject to the Mandatory Housing Affordability ordinance (MHA). Highland Park was only subjected to these requirements after the Cherrys had purchased their home. If their plans had been submitted just a month earlier, they probably would not have had any problems.

City bureaucrats determined that they needed to either further expand the home to include additional “affordable” units or pay $11,000 into the MHA fund. Without paying to provide housing units for other people or paying into the fund, the Cherrys won’t be able to get the permits they need to start renovation. For more than a year, the city has refused to grant their application.

Because of the scope of the necessary renovations, the Cherrys decided to keep renting an apartment to live in until they were done. But the long wait for the required permit drained their savings, and they had to move into the house despite its present condition.

It’s no secret that demand for housing is outstripping supply in Seattle, given a population growing in size and wealth. The Seattle Times recently noted that even in the pandemic, which hit the area early and hard, has not slowed rising home prices. In fact, prices for homes under $450,000 were rising faster than more expensive homes. But Seattle’s housing laws are a large part of this problematic imbalance.

A few months ago, I wrote about how Seattle’s thicket of regulations contributes to its homelessness problem. Bill Maurer, the Managing Attorney in the Institute for Justice (IJ) Seattle office, put it well when he said, “Housing does not become affordable because the government decrees it—housing is affordable when there is plenty of it. Mandating units and imposing fees make construction less likely.”

For now, the city is defending the fee. A spokesperson for the city told the Seattle Times: “We have not yet issued the permit and are open to reconsidering if the owners have new information they can provide demonstrating that more of the existing home will be preserved.”

The Supreme Court has not looked kindly on governments that use the permitting process to extract money for unrelated purposes. In a 1987 decision, Justice Antonin Scalia said that the U.S. Constitution prohibits such “an out-and-out plan of extortion.” The Cherrys aren’t developers putting up new townhouses or condos; they are homeowners looking to make improvements to an aging and out of code home—something the city should encourage, not, in essence, fine through the imposition of this costly demand.

The Cherrys are prepared to sue to protect their constitutional rights. But if the city truly wants to encourage the creation of affordable housing, it should clear the way for the Cherry family to move forward so this they can create such housing for themselves and improve at least one home within the city. Seattle should reconsider its poorly constructed housing affordability law, and other cities grappling with the same problem should see the Emerald City as a warning of what happens when good intentions lead to bad laws.