More condominiums than you think are coming to Capitol Hill. And it turns out one key element widely reported as a throttle on condo development may not be the safeguard against building conversion that it was thought to be.
The Neighborhood Collection — a marketing campaign for a set of three new Seattle buildings including two on Capitol Hill originally developed and designed as rental housing — says its new buildings provide “a highly engaging lifestyle” where “residents will enjoy an array of amenities for gathering, unwinding and turnkey living.” The projects are currently lining up prospective buyers for “the studio, urban one bedroom and one bedroom flats and lofts” offered “from the $400,000s to more than $800,000.”
But that wasn’t the original plan.
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“I am assuming this is all legal inside the zoning laws but honestly haven’t done the research. It feels like “bait and switch” considering during the meetings they marketed it to the neighborhood as an apartment complex that would help reducing the strain on housing,” one of the neighbors who alerted CHS to the change at 12th and John writes. “Instead they changed it to condos starting at 400K that will continue to drive up the cost of living and affordability.”
The Edison on the southwest corner of 12th and John replaced an old dilapidated house that became a major squatter problem in the neighborhood as it awaited demolition by developer Hardy Development Company to make way for what at the time was planned as a 51-unit microhousing project.
The project was even able to streamline the city’s inspection process and cut out some costly reviews by agreeing to a “Condominium Sale Prohibition Covenant,” a promise not to convert the building to condos for five years. The covenants, well-known to developers but perhaps less known to those outside real estate, allow developers to avoid a costly additional layer of inspections that goes along with new condo construction.
Records showed that as of earlier this year, Capitol Hill hasn’t seen a conversion since 2009.
That has changed with the Edison. And the developers aren’t breaking the rules.
It turns out, with a new sortie of inspections and tests by authorities like water penetration testing and engineering tests, the covenants aren’t the wall against conversion they sound like. It’s not clear how many other under construction apartment buildings around Capitol Hill could also be converting. And it is also unclear how difficult it might be for a developer to lift the covenant restrictions for an already occupied building. We have questions out to the Seattle Department of Construction and Inspections to learn more.
In the Neighborhood Collection, the other Capitol Hill component of the trio of projects included can be found at 11th and Aloha. CHS can find no record of any sales restrictions on The Atrium project but when it began the public design process in 2014, the development was described as “an apartment building containing approximately 34 apartment units centered around a shared courtyard.” Like the 12th Ave project, developer Robert Hardy is also behind the Atrium. He bought the properties in March 2014 for $1.7 million before flipping the land and the approved development project to two Bellevue-based real estate investors for $4.1 million, according to King County records.
The Pride Group NW, a part of The Neighborhood Collection, is a CHS advertiser.
The Neighborhood Collection buildings — the third is a similar project in Wallingford — join what is becoming a small rush of condo development — and, apparently, conversion — around Capitol Hill. In July, CHS broke the ice with a report on what then looked likely to be the first new condominium project on Capitol Hill in a decade being lined up for Bellevue Ave E. More are joining the list. In August, CHS reported on the change in ownership and plans for the neighborhood’s first multifamily Passive House development at 13th and Pike. That building is now ready to head to market as the super green Solis condominium building.
Will more conversions follow? Before the global economic meltdown, they were commonplace in Seattle’s already boiling real estate market. In 2007, 1,626 Seattle apartments were converted into condos in 79 different buildings. The global slowdown put a major chill on that. In 2009, only 19 units were converted in two buildings.
It won’t necessarily be a condominium land rush just yet. Condo projects still face a major financial hurdle in the Washington Condominium Act that basically guarantees a developer will face litigation over every project. Legislation to ease the act died in Olympia last winter under opposition including Capitol Hill’s Sen. Jamie Pedersen.
But the market seems primed and ready to change. The price of condominiums has surged alongside the costs of every housing type in the Seattle area. The average price of a condo in Seattle is over $535,000, up 12% from the year previous, according to the Northwest Multiple Listing Service. During the same period, condo prices leapt more than 20% in King County.
With many of the largest new developments of rental apartment housing actually driving prices higher for tenants, many renters are probably more than ever drawn to the idea of owning versus continuing to be subject to Seattle’s challenging rents. But the price of ownership is also high. In recent years, the arrival of a new condo project in Seattle has included large amounts of real estate industry buzz about the “rare” opportunities and developers were proud to stand for photo opportunities in front of people camping out in long lines for a chance to buy the unusual units. Were the lines long enough this week as the Neighborhood Collection began signing up buyers at its E Madison sales office in Capitol Hill’s color-troubled Broadcast Apartments building? Watch for a next wave of conversions to find out.