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If Seattle is going to build its way out of affordability crisis, why aren’t there more Capitol Hill design reviews?

If Seattle is to “build its way of out” its affordability crisis, the market seems to be indicating that Capitol Hill, for now at least, has done enough. Design review, the most public component in Seattle’s development process, has slowed to a trickle in the East District covering Capitol Hill and parts of the Central District. There is only a single project on the East review board’s calendar this month; last year there were six. After a small pulse of activity in January, looking ahead, the calendar doesn’t appear much more robust. In 2017, there were more than 30 reviews scheduled for major projects in the area.

The simplest explanation could be that we’re simply built out. Liz Dunn, the Capitol Hill-based developer behind Chophouse Row, said she wasn’t sure what might be behind a slowdown, except that all the sites just might finally be built.

There are other indicators that also point to a construction slowdown. The number of active cranes dropped over the past six months. We still have more than any other city in the US, but this is the first time the number has gone down in years.

Seattle has built more than 300 new apartment buildings since 2010, many of them in this area. Recently, some analysis suggests rents have stabilized, and even dropped in parts of the city, a possible indicator that supply has finally caught up with demand.

And the supply is going to keep going up in the neighborhood in the near term. The development at Capitol Hill Station, the Bonney-Watson project, a building on what used to be Piecora’s, new development at 23rd and Union and more at 23rd and Jackson, mean there will be hundreds of new units available in the next couple years.

Only time will tell if this is a blip or the start of a trend, but people who study development issues across the city and on Capitol Hill point to a number of possible reasons.

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John Feit, an architect and chair of the Pike Pine Urban Neighborhood Council, agreed that availability is a factor. All but one or two of the large sites in the neighborhood are either built or in active development, meaning there’s few places for developers to easily put up the larger projects we’ve seen over the past few years.

Brad Augustine, developer with the Capitol Hill-based Madrona Real Estate Group, suggests it might just be that we’re at the end of a business cycle. Real Estate, like the economy in general, is cyclical, Augustine said, and the current expansion is getting a bit long in the tooth.

“It just feels like it’s probably a good time, as a developer, to get your horse in the barn and get ready for a storm,” he said.

Development projects, he noted, take a long time to build. In Seattle, from the time a builder has the property in hand and starts the process until they get a building permit and can start shoveling dirt can take two years and cost $1 million.

He was quick to note that he was quite supportive of the design review process which eats up most of the time. Though he does wish there was a way to expedite non-controversial projects.

After permitting, construction will take another 18-24 months. So, a project starting now might not actually open its doors for four years. And the state of the economy in four years is anybody’s guess.

Augustine said that larger factors could also be at play. The changes to tax law could have large companies repatriating vast sums of money, which could affect inflation and, in turn, interest rates. Small moves in either of those numbers could end up having a large impact on the cost of a project, he said.

Augustine said he’s still very bullish on Seattle, and Capitol Hill is a “sweet spot” for multi-family buildings. Even so, the time might not right to bet on what things will be like in four years.

“Why would anybody take that much risk?” he said.

Augustine and Feit both pointed to construction costs as another factor. With all of the current construction, contractors and subcontractors are booked, and it’s difficult to find qualified workers. Augustine noted that projects that a few years ago might have cost $145 per square foot to build could now cost $185 per square foot.

Feit noted that contractors can sometimes lock in multi-year contracts, so those costs can sometimes remain higher even after the overall market has cooled a bit.

Another factor could be the coming affordable housing regulations. Those rules, part of the “Grand Bargain” forged by former mayor Ed Murray and the Housing Affordability and Livability Agenda task force, are currently under litigation, which raises uncertainty. Developers hate uncertainty.

Roger Valdez of Seattle for Growth suggested that some builders may have been rushing their projects through the process in order to beat the implementation of those new regulations. Now, he thinks some may be waiting to see what the final rules will look like. Until a developer knows what the rules will be, it’s difficult to know what projects will be profitable.

Until more certainty returns, Valdez said, there may be a bit of a slowdown, but he suspects it will be temporary.

“I would not read into it that we are about to go into a downturn,” he said. “This is not a cliff, more a dip in the road.”

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33 thoughts on “If Seattle is going to build its way out of affordability crisis, why aren’t there more Capitol Hill design reviews?

  1. Okay, I’m not an economist but regarding: “Recently, some analysis suggests rents have stabilized, and even dropped in parts of the city, a possible indicator that supply has finally caught up with demand.”

    I get that on some high level supply/demand issue, that sentence sounds reasonable, and perhaps it is by strict economic definition. However the demand for AFFORDABLE housing has not been met. Rents stabilizing at levels that are at minimum burdensome for the cost conscious and unattainable for those with less financial resources is not a stable situation for anyone but the economic elite.

    If this is all Capitol Hill is, it’s not good enough.

    • Rents have got to stabilize at least before dropping right? I’ve not got a degree in this, but from what I understand, which may be incorrect, apartment housing rent drops in real terms over the lifetime of a building, since newer, trendier buildings are going up elsewhere.
      Affordable housing is old housing, but they’re not exactly building any more old housing these days, which is what makes it all the more important that we continue to build.

    • “apartment housing rent drops in real terms over the lifetime of a building, since newer, trendier buildings are going up elsewhere.”

      I don’t think that is true. I think in this market developers are only interested in building high-end apartments, and my experience is that high-end apartments tend to stay high-end over time.

      If we are even remotely going to “build our way to affordability” developers need to put up a lot more affordable apartments than high-end ones, and that is simple not happening (and probably won’t happen, in my opinion the market we have is to their advantage and they don’t want to upset the apple cart by building too many moderate and low-income apartments).

  2. What about the rest of the city? Why do people cling to this notion that affordable housing will necessarily be in evidence on Capitol Hill? Would people expect NYC to solve their affordability issues by building in the Upper East Side? Would San Francisco build affordable housing on Nob Hill? We still have this underlying assumption that everyone’s “entitled” to live in the most-expensive, most-desirable areas of the city. Real life doesn’t work that way. And Seattle is a city with lots of places to build more affordable housing, and build affordable housing more *affordably*, that aren’t tapped out– or already 10-pounds-of-shit-in-a-5-pound-bag.

    • Jim, your assertion that affordable housing is “shit” is incredibly disrespectful to the neighborhoods where it is built and incredibly disrespectful to the low-income families who have no choice but to live in it. Our President might get away with referring to low-income people of color in such demeaning terms, but you don’t. Let’s build housing for people of all backgrounds and of all income levels throughout our city. If you don’t approve, feel free to move to one of our region’s many gated communities.

    • Don’t mind Jim. For some unknown reason, he always has to be contrary. If you say it’s partly sunny he’ll correct you stating it’s partly cloudy. I don’t think me meant disrespect in his post.

    • Jason, you totally missed the point. (As did you, Timmy, but in your snarky case I suspect it’s intentional). “10 pounds of shit in a 5 pound bag” is just an EXPRESSION. It’s not a commentary on the quality of the housing, or the people who live in it, either. (I’m taking as a given the housing being built is perfectly nice). It refers to trying to squeeze way more into a bag than the bag is designed to hold. Now certainly there is more room to squeeze even MORE housing into Capitol Hill, but there’s also lots of space in the rest of the city, where land isn’t as expensive. Where there are decent transit links already in existence, and where additional affordable housing could be built less expensively. We have transit hubs and Urban Village designations all over the city. What kind of sense does it make to build more affordable housing where the land acquisition cost is the HIGHEST, so more of your budget goes towards just buying the land– as opposed to the additional units people actually live in? It’s not the best bang for your buck, to house the most people, to situate the units in the most expensive parts of the city. It results in fewer units being built.

    • Perhaps I was incorrect in defending you, Jim. So based on your reply comment you are an elitist and believe we should have enclaves for the wealthy and poor people belong elsewhere. Noted

      We should be a city with neighborhoods that are inclusive, attainable and welcoming of all incomes and not dictated by how much wealth you have.

    • No one missed your point, Jim, but it would have been just as clear if you had said “10 pounds of sugar.” Instead you deliberately chose an inflammatory metaphor that you knew would give offense – and then disingenously criticized those who (rightly) called you out on it. That’s exactly how Trump and his “anti-PC” enablers roll.

    • Jim, I understand that you want to put the people you likened to “shit” in areas that are already low-income, worse served by transit, and are otherwise less desirable. (Some people call these “bad neighborhoods”; others use profanity when doing so.)

      Fortunately, we know from years of trying that designating neighborhoods as targets for low-income housing creates ghettos, with attendant higher rates of crime and inequality.

      We also have neighbors who justly and smartly point out when policies that are meant to sound fiscally prudent (e.g., saving money by buying cheaper land) have the unintended consequence of selecting a particular cultural mix for a neighborhood. I’m grateful that multiple people are calling you out for your various isms, Jim.

    • No, you understand nothing, Jason, but feel free to put words into my mouth anyway. There are plenty of perfectly nice areas in the city that aren’t “shit” (see, I can put words in your mouth too). Get off the bubble of Capitol Hill once in awhile and see. By all means, we should blow the disproportionate part of the budget on the land so we have less money for the units built. Then other underbuilt/underserved areas can just stay that way. That’s the effect of what you’re advocating. That’s not elitism? OK, sure. Terrific, it’s the kind of money wasting our City Council is known for anyway. Enjoy even more gridlock. I guess we get the government we deserve.

    • You are correct Jim. Don’t know why you are getting so much blow-back on the obvious concept that you can most likely build more affordable housing in places which are, well, more affordable. We have spent billions and billions on light rail, lets leverage that. Why can’t affordable housing be anywhere along the entire light rail line?

      Aside – It is bizarre that seemingly many people believe that renters should have option (maybe even the right) of living in a neighborhood of their choice, but if you are some middle class schmuck and would like to buy a home to raise a family (house, townhouse, flat, anything) you are on your own… f’-you and move to Black Diamond or whatever and enjoy your commute. Maybe I’m reading the sentiment wrong, but that what it seems like.

      We as a society should primarily be focused on protecting the vulnerable – elderly and people with disabilities, whom very infrequently seem to come up in conversations on the subject. It seems that the discussion is more once you are in a neighborhood you have some right to reside there to the end of days regardless of the ever changing nature of the neighborhood vs your personal situation.

      All over this country people move to where they can afford the rent or afford to buy a home. I would think that a good portion of us would prefer a different neighborhood, town or city.

      Yes, build more affordable house, but please try to get the best bang for the buck and get most units built for our money.

    • Jim, you haven’t apologized for your dehumanizing comments, which shows us that you see poor people as a logistical inconvenience and as an excessively high budget item, not as human beings. That’s very unfortunate. Keep exercising your Constitutional right to disrespect people whom you don’t want in our neighborhood. The rest of us will continue to deny you the political power to effect your exclusionary desires.

    • No, Jason, I haven’t apologized for dehumanizing anyone, because *I* didn’t dehumanize them, YOU did. I used a common colloquial expression to describe overcrowded and overbuilt *construction*. You assigned it to people in the new buildings, oblivious to the resultant gridlock and overcrowding that everyone in the neighborhood then has to endure. If you want to apologize for slighting the people, go right ahead.

    • @Jason, Jim’s use of that expression was not about people… it was about trying to build more buildings in a place that is already bursting at the seams (another expression, will you will find a way to be outraged at that one too?) with buildings. It is already the most densely populated part of Seattle and land cost are extremely expensive. A rational assessment would be to spend the finite funds we have in a place that would build more units.

      I could be outraged at what I perceive is tendency to think the worst of Jim’s words and of him… but I’m not… more of a simple shrug and meh.

    • I think that “the market” will determine where affordable housing is built. Under HALA, developers will not include affordable units in their buildings in more desirable neighborhoods, like Capitol Hill, because they make alot more money with market rate units. Instead, they will pay into the housing fund, which will be used to build affordable buildings in less desirable neighborhoods, where land costs are less expensive.

      The net result will be that HALA will not deliver affordable housing in more desirable neighborhoods. A friend of mine recently said that HALA should instead be called “HaHa”.

    • One thing that really upsets me is that, because developers have run out of old/decrepit/vacant properties to build on in our neighborhood, they have started to buy up really nice, older bungalows in good condition, at least two adjacent properties, and putting up their ugly, cheap-looking townhomes. A prime example is the 400 block on 10th Ave E (east side), where two such homes have been demolished, and their two immediate neighbors to the north are slated for same. It’s a shame, but I can’t blame the former owners of such homes, as developers are offering obscene amounts of money for their property.

      But they’re not going to get my little home, dammit! (I’ve made other arrangements).

    • Most of Capitol Hill, like most of Seattle, is zoned for single-family homes built generations ago, when households were larger than they are today. That’s why we need to rezone our neighborhoods, including Capitol Hill, to allow for more homes to be built to accommodate people of all income levels. Our neighborhood is not full. There is substantial room to grow. Once we eliminate bottlenecks such as free or excessively-cheap street parking, add rapid mass transit, and allow for denser home construction, we’ll be able to accommodate thousands more residents by mid-century. Instead of complaining about fitting 10 pounds of sugar into a 5-pound bag, let’s build ourselves a bigger bag.

    • Correct. In generations past you SHARED housing to make it affordable. Now you complain that you’re entitled to it and tax you neighbors to pay for it. Because you’re so special, you shouldn’t have to adjust your lifestyle or move, let alone make decisions without gov’t intervention.
      We’re racing faster to the bottom than we ever have.

    • Agreed, Lisa. By reducing government regulations that today limit the density of housing on a lot, we can better use our land for persons of all income levels. Thank you for your support of limited government.

    • Jason… I don’t think she’s agreeing with you… trying to twist around Lisa’s words like she’s on your side is a pretty childish thing to do…

  3. I go to the east design review regularly and it seems like projects have shifted east and south a bit AND more projects are featuring affordable housing, especially at 23rd & Jackson, 23rd/24th & Union. If I had to wager, I’d bet that the SE Design Review Board is super busy with projects sprouting up around I-90/Rainier. Cap Hill might not be a bellweather for slowing construction but rather that big projects have been through Design Review and of course neither SU or SAAS need to use that process. Look for projects on 12th between SU and the ID, up Jackson and down Rainier in the next few years.

    • I don’t believe the DRBs have a quota for how many projects they take. Also the SE DRB and the East DRB are 2 different boards.

    • Alonzo, they don’t set quotas but they typically see 2 projects at a hearing. I understand that the SE board and the east board are different (the line is Jackson w/ SE board seeing the south side of the street and east seeing the north side, hence the big Vulcan project at the Promenade site was w the SE board) My point was that while there seem to be fewer projects at the east board for Cap Hill proper, there are plenty in the Central Area and more down the pipeline, as the Seattle Curtain property will be developed amongst others along 12th Avenue.

  4. Hopefully the future is building density next to the ST3 stations out toward Northgate and beyond. That might be affordable.

  5. Brad Augustine cited most of the reasons for the lack of new apartment development on the Hill. But here’s one he missed; HIGH real estate taxes.
    Developers are shifting to condos and townhouses. That’s because apartments simply don’t pencil anymore. In fact, I won’t be surprised to see some apartment buildings being converted to condos or Airbnb hotels.

    • Capitol Hill has no new condo developments in progress. They’ve all gone up in other neighborhoods that have more favorable zoning.

      I’d love to see condo conversions resume on the Capitol Hill so people can more easily buy instead of rent, if they can and choose to. Unfortunately, this will compress the rental market and potentially drive up rents for the rest due to lower inventory of rentals.

  6. Id love to live in New York on Park Avenue overlooking Central Park or the 16th arrondissement of Paris ..but guess what? I cant AFFORD it.

    Should I demand that someone build or rent me an apartment that I can afford just because I want to live there?

    Give me a break I’m a liberal but I live in reality

    • LOL! The market decides, and only the market. That and nothing else can be called “reality”! Ha! You forgot to put the “neo” in front of your “liberal.”

  7. LOL. People living there don’t want others to move here. Got mine, get your somewhere else. But build me some train and nice parks, and let me complain about change.

    It’s as selfish and simple as that.

    • So why is wanting to keep what you already have any more selfish than wanting everyone else to move over (or out) to squeeze you in