Upzoning with Strings Attached: Evidence from Seattle's Affordable Housing Mandate

Abstract

This paper analyzes the effects of a major municipal residential land use reform on new home construction and developer behavior. We examine Seattle’s Mandatory Housing Affordability (MHA) program, which relaxed zoning regulations while also encouraging affordable housing construction in 33 neighborhoods in 2017 and 2019. The reforms allowed for more dense new development (‘upzoning’), but they also required developers to either reserve some units of each project as below market rate rentals or pay into a citywide affordable housing fund. Using a difference-in-differences estimation comparing areas the reforms affected versus those not affected, we show new construction differentially fell in the upzoned, affordability-mandated census blocks. Our quasi-experimental border design finds strong evidence of developers strategically siting projects away from MHA-zoned plots – despite their upzoning – and instead to nearby blocks and parcels not subject to the program’s affordability requirements. The differential reduction from MHA to non-MHA zones could be as large as 70% of average permitting activity at the border. Lowrise multifamily and mixed-use development. Our findings speak to the mixed results of allowing for more density while simultaneously mandating affordable housing for the same project.

Keywords: land use regulations, zoning