Cary Moon Wants to Crack Down on Real-Estate Profiteers. Will That Help?

Experts are split on whether non-resident buyers are hurting Seattle’s affordability.

When mayoral candidate Cary Moon launched her campaign in April, she, like most candidates for local public office, put affordable housing at the top of her list of priorities. One way she wanted to control housing costs, she told The Stranger, was with a tax on “non-resident” real-estate speculation—in other words, a way to curb “profiteers” who invest in real estate as a lucrative commodity rather than as a form of shelter. She pointed to Vancouver, B.C., where foreign, specifically Chinese, capital appears to have driven up the housing market so wildly that city leaders launched a 15 percent “foreign buyers’ tax” in August 2016 to help deter the mayhem.

However, Moon told the paper, she didn’t agree with the term “foreign buyers.” “Corporate and non-resident owners is the actual term,” she said. “I think people like to use ‘foreign’ to imply something different than it is. It’s people profiteering instead of living in the spaces.” Yet Moon’s careful semantics did not protect her from charges of xenophobia, specifically the allegation that she blamed housing prices on Chinese buyers.

In August, City Councilmember Lisa Herbold asked City Attorney Pete Holmes and King County Assessor John Wilson if a tax similar to Vancouver’s on foreign investors or on vacant properties would be feasible here. Both said no, Wilson more aggressively; even to gather country-of-origin information on buyers would be outright discriminatory. “I would not support any policy response that could lead to racial bias,” he told the Councilmember.

Jenny Durkan’s campaign seized on Wilson’s report, producing several public statements suggesting Moon’s proposal was anti-immigrant, even Trumplike. “Creating government databases based on national origin and imposing taxes on foreign investors is illegal, contrary to our progressive values, and wrong,” said Durkan in a press release, and repeated as much in various media interviews. A group of Chinese-American leaders also decried Moon’s ideas as ones that could “deepen troubling and long-standing false stereotypes of Asian and Chinese people here in Seattle” without helping the housing crisis. Durkan noted during a debate that an article Moon wrote with Charles Mudede for The Stranger mentioned Chinese investors about a dozen times.

In response, the Moon campaign released its own statement. “It’s disappointing to see our opponent defending profiteers and Wall Street interests who are inflating Seattle’s housing market for their own gain,” it asserts, calling the allegations of anti-Chinese sentiment “misleading and disingenuous.” “We need a solution to protect our housing stock as homes for people who live and work here, particularly communities of color who are already being pushed out.”

For a brief moment the issue seemed almost moot—politically toxic, and perhaps legally impossible, anyway. But you wouldn’t know it from the mayoral candidates’ campaign materials.

Moon still retains the idea on her housing platform, and recently reiterated to Seattle Weekly that “when I say non-residents, I mean corporations or investors buying property not to live in. I don’t mean people who are not American.” The term “corporations” here, she explains, refers more to the practice of “using [housing] as a commodity, as if you’re buying Amazon stock” and less to the buyer’s demographic. Still, she intends to find out how many units are being purchased by shell companies and private-equity firms, for example, as opposed to individuals. Those entities could, naturally, comprise foreign or “non-resident” capital.

Interestingly enough, Durkan has now also adopted some of the above ideas. In late September her campaign released a housing plan that included “taxing speculation around short-term flips, second homes, or vacant properties.” This is slightly narrower—Durkan doesn’t use Moon’s promise to tax “corporate” owners, and she doesn’t propose a tax on “non-resident” owners—but undeniably similar.

Meanwhile, major questions remain as to whether Seattle is in fact going the way of Vancouver. Some researchers, economists, and developers think the whole thing is a lot of hot air, not “global hot money,” as Moon and Mudede insist. Yet it would be hard to blame voters for being concerned. The median home price in Seattle has more than doubled in the past five years; its year-over-year rate of increase is more than twice the national average.

When Dan Bertolet, a senior researcher at Sightline Institute who specializes in housing and urbanism, dug into the issue this summer, he took an informal poll via conversations with “people who aren’t immersed in my world,” he says. And they tended to agree that a foreign-buyers tax like Vancouver’s sounded reasonable. “I don’t want rich people from other countries buying up our housing,” they’d say.

The housing crisis has become so visceral, so emotional here, Bertolet says, the notion is compelling. “There’s so much worry about housing in this city right now.” The idea that Wall Street and foreign investors could be part of the problem? “It resonates.”

According to Bertolet, there is little to no evidence to suggest that Seattle’s housing market is anything like Vancouver’s. In brief, he argues, Seattle has a far more legit beef with Amazon than with global investors. That’s because, though it may not feel like it to many, local incomes are rising right along with home prices. According to the U.S. Census, the Seattle median income hit $80,000 in 2015, jumping $10,000 in one year alone—far more than any other major U.S. city. Lots of people are moving here, and lots of people are moving here for jobs at giant tech companies.

In Vancouver, by contrast, “the money driving that wealth is coming from outside,” Bertolet says. “That decouples the economy from local jobs and makes it difficult for people who don’t have money pouring in from somewhere else” to buy a home.

“We have real-estate prices of that of San Francisco or Honolulu, at Halifax incomes,” adds Andy Yan, a B.C.-based urban-planning expert who’s done extensive research on the housing bubble and its causes and impacts in Vancouver. “It just doesn’t seem to make sense.” (Some of it is based on Vancouver’s long history of inviting foreign investment in the city—an economic plan that, arguably, backfired.)

Bertolet also argues that if investors truly were buying properties in Seattle as places to park cash instead of as places for people to live, we’d see a higher vacancy rate. The latest rental data suggests Seattle’s vacancy rate is low, under five percent.

There’s more to it, but in short, Bertolet is unconvinced that Moon’s fears of “non-resident profiteers” and corporate home ownership’s impact on Seattle’s housing market are founded. “ ‘Corporate speculation’—I don’t really know what that means,” he says. “As long as someone’s living in [a unit], it doesn’t really matter who owns it.” It’s not corporate owners who control the rent, he argues; “The market controls the rent.” Landlords, no matter who, “can’t raise the rents unless there’s people here willing to pay for it” and they “charge what the market will bear, just like anybody else.”

Bertolet concludes, as does Wilson, that an imbalance of supply and demand is the basic culprit here. “It’s all about scarcity,” Bertolet says. “None of this stuff happens unless there’s housing scarcity.”

Yet if you ask Moon or Yan, we don’t know nearly enough to stop asking questions. Bertolet’s data “is very specific and shallow,” Moon argues. “I don’t think his research has really looked at the right data yet.” And even without the necessary data, she believes that speculation is certainly part of the problem. “Our rate of housing-price increase is two times the rate of any other city,” she says. “That is not normal! … Housing markets are supposed to be local … local buyers, local sellers, local bankers, local builders”—yet right now in Seattle, “There’s something different happening. The housing market has never behaved like this before.”

She wants to know how many homes are not being purchased as a primary residence; how many are being purchased and not occupied (in addition to census data, data on electricity use could shed light there); how many are being purchased and flipped within some certain period of time; and how many are purchased with cash—which is “not necessarily illegal or bad,” but is a signal that “people with wealth … are just using it as an investment.”

She’s also concerned about homes purchased through Real Estate Investment Trusts (REITs), a form of Wall Street speculation that buys rental properties and returns the money to investors rather than local owners and thus, she believes, siphons money from a local economy. And REIT-owned buildings, she says, while maybe they don’t create a hot market, follow it closely, and those landlords are less likely to cut their tenants a break. “They are ruthless about keeping rents at the highest possible level, where mom-and-pop landlords might not be. They might cut you some slack, because they like you, because you’ve been there 10 years, or because they know your mom. Real-estate investors don’t do that.” Instead, she argues, it’s “What is the highest level we can get at every single building, every single month?”

Touting the mantra of supply and demand to explain things is far too simplistic, according to Yan, the urban-housing expert, especially if we are thinking about who gets the privilege to be housed. He notes that Vancouver’s crisis remains, even though the number of new units built in Vancouver in the past few years has actually exceeded the population growth.

“What kind of demand do you want to meet?” he asks: a privileged, 20-something tech worker or a family of four who work in the service industry? “There is historic dogma with the housing system, that if we just somehow produce more supply … it will filter through the system [so that] those who are at the bottom rung of society can get their housing as wealthier folks move on up,” he says. “As much as any other ‘trickle-down’ effect to the economy, it’s not really working.” Despite rising incomes, according to census data, half of Seattle’s households still make less than $50,000, and more than half of those make less than $25,000.

Yan’s research focuses almost exclusively on Vancouver and British Columbia so far, but he’s spent many years studying housing markets. And while he concedes that “all cities are different” and “you can’t do a copy-paste of what’s happening in Vancouver to Seattle,” at the same time, “What’s happening in Vancouver, I think this is a cautionary tale … We are quickly moving from a housing market that reflects economic dynamics to a housing market that’s going to define economic dynamics,” a shift that is “highly worrisome.”

Moon’s campaign has put the issue of real-estate speculation front and center; Durkan’s campaign also now plugs aspects of the idea. As long as Seattle’s housing market continues to explode, it’s possible this issue won’t go away, regardless of who’s elected mayor.

And Moon, Bertolet, and Yan can all agree on one thing: We do need more data. “I think we have to get the data; I am the first to say that,” Moon insists. Once we better understand the scope of the problem, she says—if it is indeed a problem—then we can better figure out ways to lessen its impact. “Data isn’t destiny,” Yan says. “It starts the dialogue.”