Seattle failed to collect $3.4 million for affordable housing in 2012

An audit found that the City of Seattle left $3.4 million in affordable housing behind from a residential high-rise project.

The Seattle Times first reported that in 2012, the city neglected to collect the payment from the 700-unit condo project Insignia, which gained extra height by participating in the city’s residential incentive zoning program.

The City Auditor’s office launched an investigation at the request of City Councilor Mike O’Brien. According to their report, they found not only the missing contribution, but late payments, data discrepancies and errors, insufficient processes, land use code contradictions, and inadequate fees.

In November 2016, after the audit found the missing payment, the city collected the money with interest for a contribution totaling $3.76 million.

O’Brien said in a statement that he first requested scrutiny on the program after hotel worker union UNITE HERE Local 8 tipped him to potential missed incentive zoning opportunities for hotel developments, specifically nodding to the city’s largest hotel project, the 1,200-room Hyatt under construction in the Denny Triangle.

He said the findings “demonstrate the complexities of the Incentive Zoning program.”

“Now that we’ve identified the clear problems, it’s time to correct them,” he said.

O’Brien’s office says that the Seattle Department of Construction and Inspections and the Office of Housing will submit workplans to correct the errors, including policy updates to prevent errors, increased reporting requirements, sharing a list of projects regularly, and potential changes to the land use code.

Both departments, along with the City Auditor, will meet with the Seattle Council’s Planning, Land Use, and Zoning committee on Tuesday morning as the committee reviews the audit.

In its current form, city’s Incentive Zoning programs exchange extra height or other building space for affordable housing in some cases, and other public benefits, like open space, in others.

Unlike with the Housing Affordability and Livability Agenda (HALA)-related mandatory housing affordability (MHA) upzones, participation in the Incentive Zoning program is voluntary.

Residential incentive zoning will be streamlined into MHA—but non-residential incentive zoning still applies where relevant. Commercial properties in many Downtown zones, for example, will still be required to pay into a childcare fund to hit that extra height, upzone or no.

As the city works to roll the programs together, it’s good timing to have extra eyeballs on the process.

• Seattle neglected to collect $3.4M payment for affordable housing as two skyscrapers were built [Seattle Times]
• Construction of Pacific Northwest’s largest hotel can begin: city ruling [Seattle Times]
• Implementation of Mandatory Housing Affordability (MHA) in Downtown/SLU [City of Seattle]