By Meghan Hall
The Puget Sound’s explosive growth has many positives, but it is also not without consequences. Like many other developing cities, Seattle itself is grappling with rapidly rising housing costs, gentrifying neighborhoods and its local populace’s rising risk of displacement. While there is still a long way to go, Community Roots Housing and co-general partner Pinnacle Partners are working to make a dent in the housing imbalance with their latest project: Heartwood. The 126-unit project in Seattle’s First Hill neighborhood is expected to break ground early in 2022.
Heartwood will replace a current surface parking lot at 1323 E. Union St. In all, the project will rise eight stories and will include 113 studio units and 13 one-bedrooms. The units will range in size from 400 to 500 square feet. Units will be furnished and will highlight the building’s cross-laminated timber structure.
“…We have invested ourselves personally into the project, and we are very excited, very passionate about the project because it meets several of our criteria,” explained Jeff Feinstein, managing partner at Pinnacle. “Pinnacle Partners, we believe, has been a leader in opportunity zone investing with impact. And so we’ve sought to apply the opportunity zone legislation wherever possible in a way that delivers, principally, workforce and affordable housing.”
Community Roots Housing (CRH) is a nonprofit affordable housing developer who first got its start in Capitol HIll in the 1970s. Since then, the organization has grown its portfolio from 11 buildings with 172 apartments to more than 1,600 apartments today. CRH strives not just to build accessible and equitable housing, but “vibrant and engaged” communities, according to its website.
For Pinnacle, however, the project marks the first time that the company has worked as a co-general partner on a project. Previously, Pinnacle had acted as a limited partner on a number of projects, but was drawn to Heartwood.
“For the first time, [CHR] embarked on the pursuit of private capital to underwrite and equitize this project,” said Feinstein. “We wanted to partner with them to see if we could prove something in this particular space: That is, that private capital could be attracted to what is effectively a workforce housing and affordable project.”
The project team also includes commercial construction firm Swinerton, Atelier Jones as architect, and Timberlab.
Also notable is the project’s use of cross-laminated timber (CLT). CLT is a mass timber product used in the creation of the building’s structure. Its benefits include cost effectiveness, resiliency, and sustainability, among others. Thanks to its CLT structure, the project team was able to add an additional floor to the development that would have been otherwise impossible under current zoning. Once built, it will be one of the tallest CLT buildings to-date, according to the project team.
The apartment community will serve those who make between 60 to 100 percent of area median income (AMI). In Seattle, that begins at $48,600 per year for a single-person household and $55,550 per year for a two-person household, according to the City’s Office of Housing.
In the long-run, however, affordability is likely to remain an issue as wages fail to keep pace with rising costs. While the pivotality of the issue is shared by many, including major business owners, said Feinstein, the market overall is still failing to keep pace.
The region’s booming economy–thanks to tech and e-commerce–are attracting new residents to the region, especially Gen Z and millennial workers, according to a recent report released by Marcus & Millichap. These demographics, between the ages of about 20 and 34, are expected to grow at five times the national rate over the next year, greatly exacerbating the need for rental housing.
Additionally, the median home prices in the region have risen 27 percent year-over-year, keeping renters in place longer as younger adults struggle to afford homeownership. With these demand drivers in place, multifamily vacancy has fallen to 4.6 percent, while rents have continued to climb. Marcus & Millichap predicts that effective rents have increased 6.5 percent year-over-year to $1,860 per month
“We have done a lot of analysis on this subject…We look at a number of things, and all things are complicated by COVID-19,” stated Feinstein. “We concluded and we still believe that there is a great need for affordable housing. We might even consider it a crisis for middle-income housing alternatives in the urban center.”