Charles Royer has a thoughtful essay on the future of Pioneer Square, which is worth reading. It contains this aside about obstacles to development:
But there’s a catch called Incentive Zoning. To get 60 percent of the increased height, the developer has to include within the project a certain number of housing units that are affordable to a person making 80 percent of area median income. And to get the remaining 40 percent of the increased height the developer has to contribute to open space, green streets, or other specific amenities.
Many developers say these requirements, on top of the additional difficulties of building in Pioneer Square, probably mean no market-rate housing will be built.
Of course, developers would say that about what amounts to a tax on their business. There’s a certain logic to using developers to achieve some other public goods in the built environment. Finding the right balance between achieving those goods and maintaining incentives to build is a genuinely difficult problem, especially because there are few honest brokers to assess the impacts of each regulation.
On the other hand, infill development is very much in the public interest. It’s crazy to place a tax on something desirable while so many undesirable things (carbon emissions, congestion) go untaxed. It would be far more efficient to actually fund the other public objectives through a different revenue source. Tax increment financing, although it has its drawbacks, will potentially be enabled by a bill in Olympia and would be superior to simply taxing development.
That’s not to say that the City should immediately repeal the requirements*, because the alternate revenue sources don’t yet exist. But in the long term, it would be a healthy thing for the city.
* Although one could argue that supply of affordable housing is not an issue in Pioneer Square.