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Seattle Seeks Big Planning Changes to Tackle Development Boom

Savills, Seattle, Puget Sound, technology

By Neil Gonzales

Amid a development explosion that Seattle has not experienced in recent history, city leaders are seeking sweeping changes on how to address and oversee growth that has pushed rents and home prices ever higher.

A big part of the effort is finding ways to make sure the city stays affordable for its current and future residents and avoid the skyrocketing costs seen in other hot real estate markets in the country, such as San Francisco, Los Angeles and Denver.

“We are well aware of [what is happening in] our peer cities,” Seattle City Councilmember Mike O’Brien said. “We’re attracting a lot of the same businesses.”

My vision is a city where people who work in Seattle can afford to live here

After months of deliberation, the city-commissioned Housing Affordability and Livability Agenda (HALA) advisory committee on July 13 delivered a list of 65 recommendations for meeting Mayor Ed Murray’s vision of building at least 50,000 new homes in Seattle—including 20,000 affordable units—over the next 10 years. The recommendations follow the mayor’s decision in June to revamp the city’s planning department to improve how Seattle manages its rapid growth.

“As Seattle expands and experiences rapid economic growth, more people are chasing a limited supply of housing. We are facing our worst housing affordability crisis in decades,” Murray said in a news release. “My vision is a city where people who work in Seattle can afford to live here.”

Among the key proposals by the 28-member advisory committee made up of community leaders, developers, housing experts, homeowners and renters is having a mandatory inclusionary housing requirement that developers reserve 5 to 7 percent of units in every new multifamily building to be affordable for residents earning up to 60 percent of King County’s area median income. Developers could also choose to contribute to a city fund for constructing affordable units elsewhere in town.

While other cities nationwide already have such a policy, O’Brien said, “this is new to Seattle and will significantly address housing affordability. To date, affordable housing largely is paid by tax subsidies.”

Another recommended approach that O’Brien cited as critical is establishing a commercial linkage fee on new commercial development phased in over three years to fund additional affordable housing for the lowest-income families. This fee would range from $5 to $14 per square foot based on the size and location of a commercial project.

HALA’s other top recommendations include:

  • Reinstating the Growth Fund: This program was established in 1985 but discontinued in 2002. It used property-tax revenue tied to new construction toward the production of affordable housing.
  • Renewing and doubling the Seattle housing levy: In 2009, the city’s voters approved for the fifth time a property-tax levy dedicated to low-income housing. The current $145 million levy runs through 2016.
  • Prioritizing the use of public property for affordable-housing projects: The city and other public entities own significant surplus and underutilized land that could be considered for affordable housing, open space or other needs.

The city is expected to study the advisory committee’s recommendations over at least the next two years, possibly moving on some sooner rather than later, such as the mandatory inclusionary housing requirement and commercial linkage fee.

But critics such as low-income housing activist John Fox contend that the recommendations as a whole would ultimately lead to gentrification and more loss of affordable housing than what could be created in the HALA report because of demolition, speculative sale and rent increases set off by upzoning.

Fox, coordinator of the low-income and homeless advocacy Seattle Displacement Coalition, criticized the report as lacking concrete measures such as those involving tenant rights to prevent gentrification in the face of booming development.

He also complained that the advisory committee ignored community activists’ call for the city to issue at least $500 million in long-term bonds as a new revenue source to build low-income housing.

“There is almost nothing of our recommendations” in the report, he said. “All that is deeply troubling to us.”

Moreover, Fox and others have taken issue with a HALA proposal that would allow denser, compact development such as duplexes and triplexes in single-family zones as a way to help curb rising housing costs.

“The mayor does a grave mistake to call for upzoning single-family zones,” Fox said. “That’s a great threat to the livability and character of our neighborhoods.”

But O’Brien believes allowing for some increased density in single-family areas would provide “good opportunities for affordable housing without dramatically changing the local feel,” he said.

As for the concern over gentrification, the councilman said the city is working on policies to combat that potential consequence. One possible strategy to deter displacement is having a city-backed program that helps preserve community cultural anchors such as churches, neighborhood centers and local restaurants, he said.

Meanwhile, the city’s planning division will undergo a reorganization that will integrate strategic functions from across various departments into a single entity. This new office will manage Seattle’s construction surge and job growth while coordinating public investments in transportation, parks and housing, the mayor said in a news release.

The office will also serve as a single point of contact for residents who have concerns or comments about the city’s planning and investments. Current planners and employees with expertise in a range of subjects will staff the office.

As the city pursues its housing and planning visions, construction activity in and around Seattle—fueled in large part by a surging technology industry—is seeing no letup. The under-construction pipeline for the Puget Sound office sector, for instance, saw an increase—to 8.2 million square feet—with 58 percent of the space preleased, according to a 2015 first quarter report by real estate services firm Colliers International.

At the same time, the Colliers report said, the region recorded 395,622 square feet of positive net absorption—which drove the office vacancy rate down by 40 basis points to 9.8 percent.

Class A office rent in downtown Seattle reached $36.87 per square foot annually—a year-over-year increase of 9.2 percent, Colliers also said.

According to a first quarter report by real estate services firm Marcus & Millichap, the average effective multifamily rent in the Seattle area is projected to climb 6 percent to $1,336 per month this year as a tight vacancy rate and new luxury apartments drive rates higher.

According to real estate Web site Zillow, the median home price in Seattle jumped nearly 11 percent over the past year to $504,000 and is projected to continue to rise by 7.7 percent in 2016.