Cities Look to Uber, Lyft to Support Affordable Housing

September 20, 2019

Some cities are eyeing ways to tap the ride-share economy to help fund affordable housing. Seattle lawmakers, for example, have proposed a 51-cent tax on each Uber and Lyft ride and using a portion of the funds for affordable housing and transportation projects. The proposed tax, which is awaiting approval by the City Council, would go into effect next July, says Seattle Mayor Jenny Durkan.

The city predicts that by the end of 2025, it could generate more than $100 million in new revenue from the ride-share tax. Along with other funding, about $56 million would go toward improvements to the city’s streetcar system, and more than $52 million would go toward building more than 500 housing units near transit for low-income workers. An additional $18 million would go toward creating an Independent Driver Resolution Center to provide an independent arbitration and appeals process for drivers. “Make no mistake about it: [Ride-shares] provide a valuable service for a lot of people, but it also places burdens on the city,” Durkan said about the growing congestion.

Uber and Lyft have spoken out against the tax proposal, arguing it will drive up costs for riders. “Drivers will also lose, as their earnings decrease with fewer overall rides,” Lauren Alexander, a Lyft spokeswoman, said in a statement. Durkan has acknowledged the proposed tax would increase passenger fares but says she does not believe it would reduce the number of rides people take.

About 24 million riders used Uber or Lyft in Seattle last year. The city already charges 24 cents per trip to cover licensing for transportation network company drivers to support taxi wheelchair accessibility. “The new tax would effectively triple that to a total of 75 cents per ride,” The Seattle Times reports. “The city may reduce the 24-cent fee but leave the total charge at 75 cents, directing a larger share to the new programs.”

Other cities have also used taxes on various services or items to support affordable housing. For example, Denver raised a local marijuana tax from 3.5% to 5.5% in 2018 to go toward doubling the number of affordable housing units created by the city’s housing fund over the next five years. Mayor Michael Hancock had estimated at the time that the tax hike would preserve or create more than 6,000 housing units.