Vulcan’s $30.9 million acquisition at 23rd and Jackson is seen as a bellwether for development and increased gentrification set to continue its march across the Central District. It may, indeed, be a significant representative — but that doesn’t mean the development will be purely market-driven. The real estate giant plans to use a tax break to help create affordable housing in the new development that replaces the Promenade 23 shopping center. But a plan to create what could be even more significant requirements for affordable housing in Seattle developments isn’t yet part of the plan at 23rd and Jackson.

Instead, Vulcan is proposing to use Seattle’s affordable housing incentive program, the Multifamily Tax Exemption, to make 20% of its units affordable. That would include some true family housing (two and three bedroom units), but that could change.

In a statement, the developer described the affordable element of its planned development to CHS:

Vulcan’s proposed development project at 23rd & Jackson will contain 566 units that will contribute to the mayor’s goal for 30,000 new market rate and 20,000 new affordable housing units in the next 10 years. We have planned the development under existing zoning and are electing to participate in the MFTE program. Under our current design we will produce approximately 113 affordable units including 49 units affordable to households earning 65% of Area Median Income ($41,145 for single person, $58,695 for family of 4).

A new ordinance proposed by Mayor Ed Murray would require all projects in certain areas of the city like Vulcan’s to either include “five to eight percent of units as affordable for residents earning up to 60 percent of the Area Median Income (AMI) for 50 years” — or pay the city to build affordable housing elsewhere.

“Funds received through the in-lieu payment option will be used to produce or preserve affordable housing, primarily for renter households with incomes equal to or less than 60% AMI,” an announcement of the plan reads. Upzoning along 23rd Ave designed to accompany the mayor’s Housing Affordability and Livability Agenda committee-backed plan is also in motion.

But Vulcan tells CHS it is proceeding at 23rd and Jackson under the framework of the MFTE. “The mayor’s mandatory housing affordability program has not yet been implemented and with the uncertainty of when it will be put into effect we have elected to move forward with our project under current zoning and using the only other affordable housing tool available to us in the form of the MFTE program,” a statement sent to CHS reads.

Meanwhile, the Vulcan development team is gearing up for the project’s first design review session, scheduled for May 10th — though some community members are trying to get the location for the meeting changed to be closer to the 23rd and Jackson neighborhood. Here’s what Vulcan told us about its plans for the two five-story structures with 570 apartment units, 40,000 square feet of commercial space, and underground parking for 580 vehicles:

Our current design reflects input from Central Area stakeholders and follows recommendations set forth in the 23rd Avenue Action Plan and Urban Design Framework. In addition we have conducted extensive outreach within the community, holding more than 40 outreach meetings and a public open house where 120 community members in attendance were invited to give input to our project team.

Evelyn Thomas Alan, founder of the Black Community Impact Alliance, has been in regular communication with Vulcan about the future of 23rd and Jackson. She said that while MFTE does provide affordable housing for middle class workers, the income range does not go low enough to provide affordable housing to a significant numbers of African Americans.

“We need to have affordable housing that would be more at the low income range of the AMI—anywhere from 60% and below would really work to help keep a lot of the black residents here,” she said.

The MFTE gives developers of new and rehabilitated properties a property tax break for up to 12 years in exchange for setting aside a certain percentage of units as “affordable,” with rents—including the cost of utilities—restricted at various income levels, depending on the unit type.

“The logic is that if the property is good for apartment development, it should be good enough for affordable housing development,” said Mike Kent, who has the MFTE program at the Seattle Office of Housing.

Vulcan real estate hasn’t clarified what exact unit type mix they’re envisioning for the planned mixed-use, multi-family 570-unit development at 23rd and Jackson, though, making 20% of their units affordable would require a certain number of family-sized apartments in the project. Vulcan Real Estate investment strategy director Lori Mason Curran told CHS that the company is “still in the early stages” of determining the unit mix of the project.

Since it launched in 1998, MFTE has produced over 4,000 affordable units. Capitol Hill is currently home to 30 residential developments utilizing MFTE. Some of those affordability caps have already expired in properties that have run their 12 year limit, but there are roughly 2,200 more new affordable units in the pipeline.

Under MFTE, “small efficiency dwelling units” (units as small as 220 square-feet) are reserved for those making 40% of the area median income, with studios at 65%, one bedrooms at 75%, two bedrooms at 80%, and three bedrooms at 90%. That translates to $628 in monthly rent for SEDUs, $1,020 for studios, $1,344 for one bedrooms, $1,614 for two bedrooms, and $2,097 for three bedrooms.

Most property owners that utilize the MFTE extend the tax break up to the 12 year limit, though it is not required. “Typically, we’ve not seen a property opt out before the natural termination of its tax exemption.”

The program has come under scrutiny in the past. A 2012 audit ordered by the City Council revealed that some developers weren’t setting aside the mandated number of affordable units as rent restricted and that property owners weren’t properly vetting the incomes of tenants in rent-restricted units.

The audit made a list of recommendations to improve the city’s compliance oversight measures, the majority of which have been implemented, according to Todd Burley, spokesperson for the Office of Housing, such as the hiring of more staff to conduct reviews of tenant eligibility paperwork.

However, the majority of MFTE units are studios and one bedroom apartments, while “family sized housing” like two bedrooms and three bedrooms only make up a fraction of the total units produced over the program’s lifetime. Roughly 700 two bedrooms are currently active or have expired, and a mere 90 three bedrooms have been produced.

“There aren’t a lot of those (family sized units) on the market—period,” said Kent. A 2011 report by the Seattle Planning Commission highlighted this supply and demand shortfall of affordable, family-sized housing in the Seattle rental market.

Most of Seattle is zoned for single family homes, which restricts the development of a variety of housing in desirable parts of the city. Some vocal homeowners made it loud and clear last year they want it to stay that way.

Changes to the MFTE program last summer tried to address the shortage of family sized units by allowing developers to set aside only 20% of unit as affordable instead of 25% if they include two bedroom or three bedroom apartments in their buildings.

In addition, the City Council allowed properties in all multi-family zones to utilize MFTE (previously only properties in urban villages and centers could qualify for MFTE). Amendments also re-classified efficiency dwelling units as SEDUs and give those units a lower income restriction requirement.

Some developers have said the reclassification has discouraged participation in the MFTE program. An Office of Housing spokesperson said that it was too early to tell, given that the changes were made in November.

UPDATE: Here is info on the double-session design review:

2309 S Jackson St

Design Review Early Design Guidance application proposing two 5-story structures containing 570 dwelling units and 40,000 sq. ft. of commercial space at ground level. Parking for 580 vehicles to be provided below grade. Existing structures to be demolished.

View Design Proposal  (14 MB)