(The Center Square) – Seattle will raise construction and permitting fees by 18% next year to plug budget gaps and avoid staffing cuts, a move that some city leaders and housing experts warn could slow development.
City budget writers selected the fee hike to close an estimated $8 million shortfall at the Seattle Department of Construction and Inspection, which relies on building permit fees for 55% of its funding. SDCO officials laid out three options: increase fees, reduce staffing, or tap the general fund – already strained by a near $200 million budget deficit.
The fee hike comes as SDCI’s financial reserves are being depleted faster than anticipated.
“Larger projects have gone away, so we are now left to recover fees from a smaller set of projects that have less value,” Ben Noble, city council central staff leader, said during a Nov. 17 budget committee meeting.
Noble explained that SDCI builds up reserves during “good times” that are relied on during slower phases of construction in Seattle.
“These cost centers are running in the red – we are spending more on the staff than we are taking in fees right now,” Noble said. “We are doing this very purposefully … to keep our human capital. We have a bunch of city folks who are very well trained in this work and if we let them all go during slow times, when the better times come, we have to go find them again and retrain them.”
Ultimately, the city council approved the fee increase by a 6-3 vote on Nov. 21. The three who voted against the increase – Sara Nelson, Maritza Rivera, and Mark Solomon – raised concerns of its impact on housing development in Seattle.
“This unnecessarily increases the cost of housing, it transfers the cost that is a city cost onto people that are currently struggling with the cost of housing right now,” Nelson said. She added that there are other ways the city council could have balanced the budget without transferring costs to builders.
Seattle City Councilmember and Budget Chair Dan Strauss countered that the council had three choices before them to fill the budget gap, and chose an increase in permitting fees.
Since the fee increase was initially proposed, Rivera was a staunch opponent of the ordinance, noting the lack of construction in the city, including townhomes. For a typical four-pack townhouse project, the increased fees would be around $2,000 to $4,000.
The Center Square previously reported that permits for new townhomes in Seattle fell between 2019-2024 by roughly 87%, with estimates that the city will lose $775 million in construction-related tax revenue over the next 20 years.
Sean Flynn, executive director at the Rental Housing Association of Washington, said the fee increase is another indication that local government is telling the housing market that it can only produce expensive housing that can help buyers absorb the costs.
“At a time when everyone is saying they want affordability, all they’re doing is adding not only costs to the builders but also to the operators and that cost shuffles down to either the homeowner or the tenant,” Flynn said to The Center Square in a phone interview. “The city and housing providers and builders are not on the same page. They keep asking us to produce more and rent things for less and they’re not helping us.”
