Cary Moon and Jenny Durkan spar over speculation tax

One issue central to affordable housing is shaking up the Seattle mayor’s race: taxes on real estate that one candidate says can help alleviate Seattle’s affordable housing crisis.

Or specifically, as mayoral candidate Cary Moon puts it in her plans for the city: “Implement targeted taxes or other mechanisms to deter corporate and non-resident real estate speculation to strengthen neighborhoods.”

The topic—which is wonky even among housing advocates—has come to a head after the Seattle Times published a “terse exchange” between City Councilor Lisa Herbold and King County Assessor John Wilson.

Herbold had asked if there was a way to create a database of “speculative investors,” especially purchases made under “LLCs or shell companies,” that is “neutral about the national origin of the investor.” Wilson responded, alleging she was trying to create a database of investors based on national origin. Herbold later told the Times that Wilson had “misunderstood” her request.

Herbold had previously reached out to the city attorney’s office, who told her that both taxing overseas buyers and taxing vacant homes would be illegal, the Times reported.

Since cracking down on speculative investors is a cornerstone of Moon’s campaign, the Times reached out to both mayoral candidates, Moon and Jenny Durkan, for comment. Then things started to spiral out of control.

Moon attempted to clarify to the Times that she would first “analyze speculation activities—not actors—in our escalating real-estate market,” then “propose legally viable taxes to curb the profiteering exacerbating our housing affordability crisis.”

She continued, “I applaud Councilmember Herbold’s initiative to better understand speculation activities, share Assessor Wilson’s concerns about efforts to identify investors by national origin, and believe starting this work with a focus on the identity of purchasers puts us on the wrong track.”

Durkan, by contrast, came out swinging. Speaking to the Times, a spokesperson compared the research into a speculation tax to Donald Trump’s immigration bans based on national origin, saying that the idea for a “non-resident” tax “started as an anti-Chinese buyer tax.” She pointed to Seattle’s legacy of anti-Asian racism, including the Japanese internment and Chinese Exclusion laws, and said “we cannot go there—especially in the age of Trump.”

Vancouver, New York, Miami, and the concern about non-resident owners

To fully understand this issue and how these talking points around Moon’s policy positions evolved, one has to zoom out a little to look at what’s happening in other cities—especially Vancouver.

Last year, Vancouver implemented what is commonly referred to as a “foreign buyers tax,” charging home buyers who are not Canadian citizens or permanent residents an additional 15 percent tax in an attempt to cool down home prices for Vancouver residents and alleviate housing supply and affordability concerns.

Much of the conversation around the Vancouver tax and how it could impact nearby Seattle has revolved around Chinese investors buying property in North America. Headlines from the past year screamed, “Vancouver tax pushes Chinese to $1 million Seattle homes” (Bloomberg), “Seattle becomes number 1 U.S. market for Chinese homebuyers” (Seattle Times), and “For Chinese homebuyers, Seattle is the new Vancouver” (Wall Street Journal)—even “Are Chinese buyers about to accelerate Seattle’s market?” here at Curbed Seattle.

Regardless, the jury is still out on the tax’s effect on Vancouver’s home values; they’ve started to bounce back after an initial dip.

Meanwhile, in Miami and Manhattan, after cash purchases by largely anonymous buyers became rampant, the Treasury Department announced rules requiring title companies to disclose true buyers of residences in those cities. While both cities had been especially hot markets for high-dollar purchases by international investors, those laws did not target international buyers specifically.

What Moon’s tax policy would do

Without advocating for a specific tax plan, Moon has referenced the initial drop in Vancouver home prices as a sign that Seattle needs a similar solution. But she’s been careful not to refer to non-resident taxes as a “foreign buyers tax” or even reference Chinese investors, save for one piece in a series on affordable housing co-written with The Stranger’s Charles Mudede earlier this year. (Mudede takes a much bolder stance when it comes to naming foreign money as an issue.)

“Corporate and non-resident owners is the actual term,” Moon corrected The Stranger’s Eli Sanders, who had referred to a “foreign buyers’ tax,” shortly after announcing her candidacy. “I think people like to use ‘foreign’ to imply something different than it is. It’s people profiteering instead of living in the spaces.”

Responding to a Curbed Seattle request, Moon campaign spokesperson Heather Weiner said that “non-resident,” in the case of Moon’s policy, “means not living or based in Seattle. It applies to [real estate investment trusts] and shell companies regardless of who they are or where they are based.”

“People who own an extra home for rental income are not the problem,” Weiner continued. “It’s about investment funds and shell [corporations].”

Moon has also advocated for a vacant property tax, which she described in the Sanders interview as “if you buy property but don’t use it, don’t rent it out to anybody, then a tax on that.”

In another interview with Capitol Hill Seattle, Moon clarified even further about what she wants to crack down on: “We need to understand how many homes are being bought by shell companies, LLCs, corporations, anything that’s not a human person buying a house to live in,” she said. Homes that “don’t check the box saying, ‘This is a primary residence.’”

Heated rhetoric from both campaigns

While Moon was not part of the initial exchange between Herbold and Wilson, the candidates’ responses to the Times article snowballed into a big campaign day for both Durkan and Moon.

“It’s disappointing to see [Durkan] defending profiteers and Wall Street interests who are inflating Seattle’s housing market for their own gain,” Moon’s campaign said in a statement responding to the Times piece. They added, “Calling efforts to address the affordability crisis and escalating rents ‘anti-Chinese’ and ‘Trumpian’ is misleading and disingenuous.”

Moon’s statement added that “defending the status quo means more working people, people of color, LGBTQ people, young families, and seniors will be pushed out of our city... we must stay open and welcoming to all, including immigrants and refugees from around the world.”

Clarifying, they said that Moon will call for “collection and analysis” of information on speculation, which would include “the number of homes bought by corporations, cash buyers, shell companies, and private equity firms, and the number of homes not purchased as a primary residence,” emphasising “number.”

After Moon’s statement was covered in a follow-up Times piece, the Durkan campaign turned around and, late Tuesday, released yet another statement.

“Creating government databases based on national origin and imposing taxes on foreign investors is illegal, contrary to our progressive values, and wrong. It is also not a real solution,” said the statement from Durkan’s campaign. “It's unfortunate that Cary Moon is doubling down on her plans, which officials across Seattle are rejecting because of concerns that it's discriminatory and illegal."

Curbed Seattle reached out to the Moon campaign: Moon had never called for a government database based on national origin, right?

“The government database based on national origin is a figment of the Durkan campaign’s imagination,” said Weiner over email. “There’s nothing in anything Moon’s ever said or written that even mentions this.”

We responded to the Durkan campaign asking if they’re actually alleging that Moon is advocating for "creating government databases based on national origin.” We will update when we hear back.

• Proposed Seattle taxes targeting foreign buyers, investment properties take fire [Seattle Times]
• Vancouver slaps 15% tax on foreign house buyers in effort to cool market [The Guardian]
• New Plans to Unmask Secret Buyers Rattle Real Estate Power Players [Curbed]
• Hot Money and Seattle’s Growing Housing Crisis: Part One [The Stranger]
• Cary Moon Is Running for Mayor of Seattle: An Interview With the Brand-Newest Murray Challenger [The Stranger]
• Debate over investment homes heats up Seattle mayoral race [Seattle Times]