Seattle revisits plan to spur housing construction by slashing fees

Hoping to spur apartment construction, Seattle City Council members will soon consider a plan to slash fees developers of new housing pay.

The proposal from Councilmember Dionne Foster, slated for an initial hearing Friday, would temporarily offer developers a 60% to 80% break on Mandatory Housing Affordability fees the city charges on new development to fund affordable housing.

Foster said she hopes the legislation could spur new market-rate development without entirely sacrificing the affordable housing fees those projects generate.

“If we don't have those projects getting built, obviously we don't get to benefit from the revenue from those projects,” Foster said.

The effort comes at a key moment for housing development in Seattle. Facing high interest rates, rising construction costs and other headwinds, developers in Seattle and across much of the country have hit the brakes on new apartment construction. An influx of new buildings and a slowdown in population growth have also kept rents relatively flat in Seattle in recent years, making apartment projects less enticing for builders and investors. That sluggish market leaves policymakers looking for ways to boost construction to deliver housing, jobs and city tax revenue.

Meanwhile, the city continues to grapple with a severe shortage of deeply affordable housing. For every 100 low-income Seattle-area households, there are just 43 available affordable homes.

Developers say the city’s fee, along with other challenges, can make projects infeasible. Cutting the fees, they argue, is one of the few actions local governments can take to help the situation.

“Housing production has fallen dramatically at exactly the moment we need more homes,” Ben Maritz, CEO of the housing developer Great Expectations, said in a statement. “There are real tradeoffs here, and we absolutely need resources to support all types of housing in Seattle — both market rate and affordable housing.”

Others worry about opening the door to weakening a signature city program or spurring gentrification. Negotiations for a similar fee “holiday” fell apart this summer after pushback from affordable housing groups who rely on the fees to build subsidized housing.

Foster’s proposal will once again test the industry’s appetite for the idea.

Under the proposal, developers who have already submitted building permit applications — whose projects may be languishing in the pipeline as they wait for economic conditions to change — would get an 80% reduction on MHA fees if they start construction within two years.

For developments that are early in the process, builders could get a 60% fee cut if they submit their building permit application by 2028 and if those projects include two-bedroom units. Most new development in areas considered at high risk of displacement, including the Chinatown International District, the Central District and multiple areas in South Seattle, would not qualify.

'Short-term approach'

MHA fees arose from Seattle’s mid-2010s boom, as an influx of high-paying jobs and a shortage of housing drove the city’s rampant transformation. After heated debate, the city landed on a plan to offer developers upzones to encourage denser housing construction while also requiring them to either include affordable units on site or pay MHA fees.

The program initially performed well, bringing in millions of dollars as construction continued apace. Developers have paid more than $350 million in fees since the city finalized the upzones in 2017 and 2019. On-site affordable units and fees together helped fund more than 5,000 affordable homes, some still under construction.

But the fees have slowed as development activity cratered. The fees peaked in 2022 at $77 million and have since dropped to $25 million in 2024 and $47 million in 2025, with the latest uptick driven by a small number of large projects. An ongoing decline in new construction would continue to drive MHA revenue down.

Supporters representing a coalition of developers estimate cutting the fees for two years could spur at least 30 projects and bring in about $20 million in MHA revenue for affordable housing.

Council members may also explore applying MHA-like fees in areas today dominated by single-family homes but where denser development is now allowed, according to a separate resolution Foster introduced.

It’s still unclear how affordable housing builders who rely on MHA funds may react to cutting the fees. The Housing Development Consortium, a prominent group of affordable housing groups that participated in earlier negotiations over the idea, has not yet taken a position, director of government relations and policy Jesse Simpson said. The group is “just beginning a member engagement process” to determine its position.

Habitat for Humanity Seattle — King and Kittitas Counties, which uses MHA funds to build affordable homeownership projects, plans to work with council members “to help improve this proposal into something that helps bring more housing online while also protecting much-needed affordable housing funding,” Chief Advocacy Officer Ryan Donohue said.

Others are already opposed.

Encouraging new market-rate construction without charging full affordable housing fees could incentivize developers to tear down older apartment buildings, where state law now caps rent hikes to 10%, and replace them with new construction, which is exempted from the cap for 12 years, said Michele Thomas, director of policy and advocacy at the Washington Housing Alliance, which advocates for affordable housing and tenant protections.

“It will simply give a discount to developers while threatening the future of the (MHA) program,” Thomas said. “This doesn't solve Trump's policies. This doesn't solve interest rates. It doesn't solve the cost of building supplies — doesn't solve that at all.”

Foster said her proposal “is really a short-term approach” to spur construction without eliminating MHA fees altogether. Mayor Katie Wilson has convened a task force that will consider longer-term changes to the program and other efforts.

Wilson did not take a position on Foster’s proposal this week, saying she respected Foster’s decision and would focus on the task force and “lining up our next set of key actions and policies.”