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Seattle Expects Few Affordable Housing Units in Downtown and South Lake Union with Upzone

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Taller buildings are heading for Seattle’s South Lake Union and downtown areas, as the Seattle City Council passed on Monday a unanimous upzone, allowing developers to build even higher. But the additional height comes with one primary stipulation, more affordable housing units. Developers will either have to create a certain number of affordable housing units or pay into the city’s affordable housing fund to ultimately help the city move toward its goal of 20,000 affordable homes.

“Downtown and South Lake Union are two of our fastest-growing neighborhoods in our city, and we need to take advantage of that growth by ensuring developers that aren’t required to build affordable housing to opt-in to this mandatory program,” said Councilmember Rob Johnson, who sponsored the bill, in a statement.

The Council said the idea of the SLU and Downtown Mandatory Affordability legislation is to legally require developers to contribute to affordable housing in some way. Under the rezone, developers would have to provide about 2.1 to 5 percent of affordable units for residential developers, however builders can choose to pay into the fund between $5.50 and $13.25 per square foot instead. For commercial developments, the upzone calls for roughly 5 to 10.6 percent affordable housing, which comes out to between $8 and $17.50 per square foot, paid into the housing fund. Johnson also said the Council decided to grant additional height if a building includes more than 10 three-bedroom units.

According to HALA guidelines for Downtown and SLU, “performance percentages (affordable housing units) are calculated for residential development as a percentage of total units and for commercial development as a percentage of gross floor area that would be required to be devoted to affordable housing (measured by the rentable area of units). Payment amounts would be measured in dollars per gross square foot of residential and commercial development, excluding portions of buildings that are underground as well as commercial area exempted from floor area ratio (FAR) calculations such as certain ground floor retail.”

“By adopting the Mandatory Housing Affordability (MHA) program in these neighborhoods, we will be able to deliver 2,100 affordable homes over the next ten years, a critical component needed to meet our goal of 20,000 affordable homes,” said Johnson. “For reference, the 2016 voter-approved Housing Levy will create and preserve a roughly equivalent amount of affordable housing (approximately 2,150 affordable apartments),” he added.

While Johnson points out the MHA will deliver 2,100 affordable homes over the next 10 years in these neighborhoods, the bill summary notes there’s little chance any affordable housing will actually be located in Downtown or South Lake Union.

The summary of the bill states, “In Downtown and South Lake Union, it is anticipated very few residential highrise projects will use the performance option (including affordable housing units). However, smaller projects might result in a mix of payment and performance. Commercial projects are also unlikely to perform on-site, particularly if there is no residential component to their project.”

Instead, it is anticipated that developers will opt out of building affordable housing units and instead pay into the city fund instead. “Overall, MHA in Downtown and SLU is expected to produce about 45 percent of the citywide MHA revenue from the payment option and a very small part of the performance units,” according to the bill.

With this upzone contributing about 45 percent of the citywide revenue for the program, if every developer opted to paying into the fund, the city estimates a total revenue of $190 million over the next 10 years, with $130 million coming from commercial development and $60 million from residential development.

The bill points out that “if the $190 million revenue estimate were used exclusively to develop units affordable to households making 60 percent of area median income or less using only 4 percent low housing income tax credits and tax exempt bonds as leverage, it is estimated it would produce about 2,100 units of affordable housing.”

“The MHA program is incredibly complex and, like all programs, constrained by legal and economic considerations,” Johnson said. “We’ll have an opportunity to review how the program and affordable housing production has progressed in 2018. It’s essential we craft a successful program that meets our affordable and market-rate housing goals, that is consistent with our long-term land use objectives, is legally defensible, and complements our full range strategies to address our housing affordability crisis,” he added.