The compromise bill to fund affordable housing and homelessness programs is a thermometer for how cities regulate rapid economic growth.
Amidst signs that read “Tax Amazon” and chants of “housing is a human right” the Seattle City Council voted unanimously Monday to impose a controversial tax on the city’s largest companies to fund more affordable housing and fight homelessness. The bill has become a thermometer for how cities interact with mega-corporations, after Amazon halted construction of a new office building pending the outcome of the vote.
“High-cost cities all over the country are looking toward Seattle,” Councilmember Lisa Herbold said before the final vote.
The tax passed was a compromise, expected to raise about $47 million to address a citywide housing crisis, down from $75 million in the initial bill.
After the scaled-back version was approved, Amazon announced that it would resume construction in Seattle, the home of its first headquarters. But not without issuing a statement that could just as well serve as a warning to any city considering hosting Amazon’s second headquarters: “We remain very apprehensive about the future created by the council’s hostile approach and rhetoric toward larger businesses, which forces us to question our growth here,” said Vice President Drew Herdener.
Nearly 40 elected city officials from all corners of the U.S., including from metros bracing for Amazon HQ2 like Boston, Chicago, Denver, Los Angeles, Miami, New York City, and Washington, D.C., signed an open letter on Monday urging Seattle City Council to stay the course and criticizing Amazon’s tactics during the head tax debate.
“This is particularly concerning to us given Amazon’s approach to the competition for HQ2, in which the company has promoted a bidding war of jurisdictions competing with each other to offer greater incentive packages,” the letter read. “If Amazon were serious about its support for strong affordable housing solutions, it would fully back this tax proposal and chip in to help address Seattle’s homelessness crisis. By threatening Seattle over this tax, Amazon is sending a message to all of our cities: We play by our own rules.”
The tax will charge $275 per employee to build or preserve nearly 900 units of affordable housing and provide wraparound services for the homeless. With 45,000 workers at its downtown Seattle campus, the city’s largest employer is expected to account for about a third of the $47 million that will be collected annually for the next five years.
Dangling the specter of slowing the Amazon growth machine is sure to strike fear into the hearts of the city’s economic boosters, who vigorously opposed any tax. The Downtown Seattle Association warned “a tax on jobs at any level is bad economic policy.”
But the notion that there can be too much of a good thing held sway in a city that knows the pains of economic growth all too well. The council’s unanimous decision included business-friendly members and an expected signature from pro-business Mayor Jenny Durkan, who benefitted from a $350,000 Amazon donation to a PAC behind her campaign. The unanimous vote is strong evidence of broad-based political will for a city to respond decisively when booming economic growth creates consequences, especially in a place where the tax structure is out of whack.
“We are trying to right-side up our upside down tax system,” said Councilmember Teresa Mosqueda.
That tax system is frequently referred to as the most regressive in the country because Washington’s constitution prohibits an income tax. By extension, Seattle ends up as the most regressive big city in the U.S. Simply put, the poor pay a much higher percentage of their income in taxes than the rich. And with voters already fed up with hikes in sales and property taxes, local government is left with few tools in the toolbox to raise more revenue.
The council argues that it needs more revenue because of a crisis. In 2015, the city and surrounding King County declared a civil state of emergency on homelessness. Since then, greater Seattle has risen to host the third-largest homeless population in the U.S.—nearly 12,000 people, half of them sleeping in tents or cars. The median house price hovers above $800,000 with the Seattle area having led the nation in percent increases for 18 months straight. Nearly half of all households are rent burdened and Seattle-based real estate company Zillow has noted a correlation between rising rents and rising homelessness.
Last week, details from a McKinsey report prepared last year pro-bono for the Chamber of Commerce finally saw the light of day. It claimed $400 million is needed annually to solve homelessness in greater Seattle, making today’s $47 million pledge from the Seattle City Council just a “down payment,” as Mosqueda called it, albeit a “significant” one.
Opposition, however, was fierce. In addition to Amazon threatening to pull the plug on yet another skyscraper, 131 other businesses signed an open letter against the head tax. The four co-sponsors of the original bill were angrily shouted down at a town hall by homeowners fed up with rising spending and rising homelessness. Rank and file union construction workers confronted socialist council member Kshama Sawant at a rally outside the Amazon Spheres and turned their backs on a fellow construction worker who spoke out in favor of the tax because he can’t afford to live in the city he’s building.
But support for the tax, which a grassroots movement of housing activists has been calling for since last year and a city-appointed progressive revenue task force recommended, also came from unexpected corners.
Councilmember Mike O’Brien said he has fielded inquiries nationwide from cities anxious to learn from the Seattle experience. His message? “If 50,000 high-paying jobs are coming to your city, you need to start creating housing for everybody, including the low-income folks that are going to get pushed out of housing,” he said. “You need the funding to do that and that’s not free. And the company bringing those jobs should be a part of it.”
In Seattle, the city is starting to get that money the hard way—though O’Brien ruefully admitted the city is way behind, to the tune of 14,000 housing units—and time will tell if the bitter political rancor that accompanied the head tax debate will poison the well.
Amazon and the fervent high-tech ecosystem in Seattle isn’t going to disappear overnight. At worst, companies may shift jobs to the suburbs. Microsoft is already headquartered in Redmond and companies like Google and even Amazon have offices in nearby Kirkland and Bellevue.
And some tech workers like Wale Ogundipe aren’t interested in simulating the growth trajectory of the Bay Area.
“It's the minimum that we can do to make Seattle a city for everyone, an affordable city,” said Ogundipe, a software engineer who took time off work to attend the City Hall vote and speak up in favor of the tax. “We have a great opportunity to go a different direction from San Francisco, from New York City in terms of the trend of displacement, of access to work in terms of transit.
“Ultimately when we look at the situation with these corporations, they need us. They need our labor,” he said. “Tech workers are in a singular position to have some say."