Proposal would slash Seattle development fees up to 80% — if builders hurry up and break ground

Faced with a growing map of stalled projects and empty lots, the Seattle City Council has a plan to temporarily slash affordable housing fees on large residential buildings while setting the groundwork on new requirements to push much needed below-market housing into newly upzoned single-family neighborhoods.

Councilmember Dionne Foster, chair of the Housing, Arts, and Civil Rights committee, is proposing the legislative package to revive stalled apartment production while expanding hopes for affordable home development across the city.

The “Housing Accelerator” bill set to be presented Friday aims to spur construction amid declining permit filings by amending Seattle’s Mandatory Housing Affordability program. It would mean massively cheaper city fees for developers — but only if they break ground and pass a foundation inspection by a strict deadline.

Under the proposed bill, the city would reduce in-lieu payments that developers pay to a municipal affordable housing fund instead of building rent-capped units on-site by 80% for already-vested permits awaiting approval.

The bill could also spur a temporary spike in development with larger units needed by families. Developers who file new permit applications before January 1, 2028, would receive a 60% discount, provided at least 25% of the residences contain two or more bedrooms.

Builders cannot use discounts in areas with high displacement risk, including the Chinatown-International District, the Central District, and Rainier Beach, “unless the application is for development of a site for which a deed has not transferred title since January 1, 2006”.

To keep the fee discount, developers must document “substantial progress toward construction of the project’s foundation” within two years for vested projects or three years for new applications. Projects that miss the construction milestone would pay the full “contribution differential” within 60 days, or the city will withhold the certificate of occupancy needed to open the building.

Meanwhile, a companion resolution from Foster calls for new rules for Neighborhood Residential zones, where middle housing such as rowhouses, duplexes, and cottages is now permitted.

The proposed resolution would establish support for developer obligations “at a level to not significantly deter development or investment” and keep the rate unchanged without inflation adjustments for five years. The resolution also calls for the city to analyze “progressively higher requirements for less dense development, such as detached single family homes” and evaluate dedicating a portion of future program revenue to permanently affordable homeownership.

The proposed break on MHA fees could thaw a development landscape across Capitol Hill and the Central District that has been frozen by challenges around interest rates, inflation and construction costs, and mouldering rents.

The bill’s displacement buffers could concentrate any resulting thaw in areas like Capitol Hill and First Hill that have already absorbed a massive amount of the city’s MHA development compared to the rest of the city.

As for the lost revenue, the proposal does not directly replace the discounted funds, relying instead on unlocking payments from stalled projects that currently generate zero revenue, while opening the way for new affordable housing fees on market-rate development across newly upzoned single-family neighborhoods.

CHS reported here on the 2019 finalization of the MHA program that included major rezoning and taller building heights in the city’s densest neighborhoods including Capitol Hill and the Central District connected with the new affordable unit and fee requirements.

Most developers opt to pay the fees instead of incorporating required affordable units and the program has generated millions of dollars to fund city support for low income housing development.

Seattle’s Mandatory Housing Affordability in-lieu payments have fluctuated with construction cycles, generating between $24.6 million and $77.4 million annually since citywide rollout, with a total of $378.6 million recorded through 2025.

The extra cash has not been enough, however, to overcome interest rates and inflation. Industry analysis shows Seattle delivers roughly 1,500 to 2,000 income-restricted affordable units per year. Under the One Seattle Plan and state targets, Seattle needs 112,000 new homes by 2044, with roughly 70,000 homes for households earning 80% of AMI or below. That requires creating 3,500 low-to-moderate-income affordable homes annually, roughly double the city’s current delivery pace.

Seattle’s efforts to fully update its comprehensive plan, meanwhile, have been stalled by a long appeals battle.

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