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What a scuttled eight-story development north of Cal Anderson might say about what comes next for new housing in the city — and for Seattle renters

A Seattle developer in the middle of a series of transactions being pieced together to form a major jigsaw-shaped apartment project just north of Cal Anderson Park says soaring interest rates have scuttled plans for the development and sent San Francisco-based developers Carmel Partners packing despite dropping millions on property acquisition for the project.

Ben Maritz of the Great Expectations development firm tells CHS his company still holds five parcels on the block between 10th and 11th north of E Denny across from the popular park and will restart the development process with a new plan. He expects it to take at least three years to get back to this point in the process given Seattle’s permitting and approval environment.

“I am glad I can keep my office, however,” Maritz said about one of the former single family-style homes he has put to use as a Great Expectations headquarters.

Earlier this month, the outspoken Maritz announced the scuttled deal on social media. “Two and a half years ago, during CHOP, I worked with a group of neighbors near Cal Anderson to assemble their houses and went in contract to sell them to a big developer,” he wrote. “Yesterday, the developer walked away from the deal leaving me with what I think is the best development site in Seattle.”

CHS reported last March on the plans for the project from Carmel Partners and Seattle-based Neiman Taber Architects to piece together a puzzle of $1 million-plus parcels to make space for a new eight-story, nearly 300-unit apartment complex on the block of E Denny between 10th and 11th Ave just north of Cal Anderson and across the street from the hundreds of new apartment units and new mixed-use development above Capitol Hill Station.

At the time, the development appeared lined up to be part of a burst of housing activity in the area with multiple eight-story and seven-story projects coming together up and down 11th Ave.

But the financial outlook has quickly clouded with high inflation jacking up everyday costs and interest rates continuing to be ratcheted higher in hopes of calming the surge.

“It’s always hard to build housing in Seattle,” Maritz said. “With interest rates up, it makes anything way more challenging.”

Meanwhile, major developers like Carmel may be cutting their losses. Maritz said the developer is walking away still holding two Capitol Hill properties after spending around $3.5 million plus another $1.5 million on permitting and approval for the scuttled development.

For many of the deals, with the contracts out of the public eye, it will be unclear what is happening other than long delays or the paperwork suddenly coming to a halt. Maritz, who is also developing affordable housing at 23rd and Cherry in the “Afrofuturist” Acer House project, says the situation around the 10th/11th Ave project is a signal the city needs to act if it wants to keep up its recent higher pace of housing development.

“You can’t start new projects now in Seattle,” Maritz said. There are only three options as he sees it — one is unlikely, one is terrible for a city already in an affordability crisis, and the third, well, it’s hard to do.

Interest rates aren’t going to come back down. Maritz said that leaves the second factor — rents would need to rise to pay for new development.

The third, you might not be surprised to hear a developer say, should be the city acting as quickly as it can to “reduce costs and complexities of building.” Some steps in the right direction could include stripping back design review for affordable projects.

Maritz also says he is a big supporter of I-135 to create a new public social housing developer in Seattle to acquire and build affordable housing. Maritz said one under-discussed aspect of creating a Seattle Social Housing Developer is the entity’s superpower to overcome elevated interest rates using public bonds with lower rates.

But I-135, if it passes, can’t swoop in and save the city from the shakeout that could come in 2023’s economic environment. Right now, Maritz says only the second factor of rising rents seems likely. Sorry, Seattle renters.

 

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17 Comments
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Eli
Eli
1 year ago

It’s noteworthy that the article (and implicit discussion) is the question of whether replacing ownership housing with rental housing is even a good thing for the neighborhood.

SFOO
SFOO
1 year ago
Reply to  Eli

I agree with you, but let’s be fair, almost none of those houses are single-family owner-occupied anymore.

d.c.
d.c.
1 year ago
Reply to  Eli

I’m not sure what you mean – the article does or doesn’t take a position on the question? It’s a worthwhile question, for sure, but you think that by not answering it one way, it tacitly espouses the other way? Surely it’s OK for a news article to report facts and circumstances without expressing an opinion about them?

Matt
Matt
1 year ago
Reply to  Eli

The question is whether our ~100 year history of pushing single family home ownership as a buy-in for capitalism was a good thing. I-135 provides a hybrid ownership-rental model that would likely be more stable and equitable, I would love to see Seattle try that experiment for a while.

SFOO
SFOO
1 year ago
Reply to  Matt

How is I-135 a hybrid ownership model? There’s no possibility of eventual ownership of the units by the tenant. We should look at Singapore’s public housing development system for a hybrid model that provably works and builds wealth among the lower-income tiers of society.

Matt
Matt
1 year ago
Reply to  SFOO

I’m curious to read more about the Singapore model, but I-135 provides housing owned by the city of Seattle and its residents available to it’s middle and lower income residents. It provides a stable backstop of housing for those whom are often deemed “essential workers” and will serve as both a stopgap against homelessness, as well as a stepping stone out of it…

Matt
Matt
1 year ago
Reply to  SFOO

Hmm… I’ll continue reading, but I’ve been digging through a lot of discouraging sounding articles like this:https://www.reuters.com/markets/asia/singapore-sees-rise-million-dollar-public-housing-2022-08-31/

Matt
Matt
1 year ago
Reply to  SFOO

Okay, you really didn’t do much research did you?!?

“Singapore is not affordable—destroying much of the point of the public model. As Emily Hamilton writes for the Market Urbanism blog, mass homeownership there has created the same results as in the U.S. People purchase homes expecting them to increase in value, creating political incentives to constrain home supply. This means home resales can reap 6- or 7-figure windfalls onto owners, but locks out others who cannot access this housing and must live in slumlike conditions. She writes that Singapore home prices relative to median income are about the same as Salt Lake City—which does not have an extreme housing crisis, but is not considered a cheap market, either. Ng adds that only 6% of HDB housing is actually affordable to those at the lowest income levels—something of a reverse of the typical public housing situation.”

https://catalyst.independent.org/2021/09/17/singapore-housing-model/

Glenn
Glenn
1 year ago
Reply to  Matt

Hmmm, I think that 100 year history of encouraging home ownership has been very effective in creating and maintaining a middle class in this country. Granted it has not always been smooth sailing and various populations have had their access limited or denied, but the period your referring to includes the greatest growth of American middle class populations in it’s history. Surely you can admit that the modified Capitalist system in place during that period, which included encouraging home ownership as a means to wealth creation, brought many people more swiftly into the middle class than would have been possible otherwise.

Matt
Matt
1 year ago
Reply to  Glenn

It brought some people wealth and to middle class (and don’t forget for a long while it, was exclusively available to only a subset of the population). Most measures of our current “middle class” class are not promising, and the availability of home ownership for wealth building has done very little to close racial wealth gaps. Also, I seem to recall a lot of people being underwater in the recession, particularly BIPOC households that were specifically targeted for subprime loans… so I don’t think it’s working that great and would love to have another option for the city that just focuses on keeping housing affordable rather than trying to monetize it.

dan
dan
1 year ago

If Seattle wants more housing, they’re going to have to lower the cost of construction or be ok with higher rents, or with the City running their housing. Yet Seattle has voted for much higher construction costs (see the exorbitant MHA fees for example) and for rent increase restrictions, which means Seattle will need to let their government build and operate housing, which I think has almost always been a disaster. Yet initiatives like I-135 dont even mention how to fund this half billion dollar idea, only to study it, and they still cant identify where funding for that would come from. Seattle’s rent-control happy renters better be ready for a 20% sales tax or facing a big income tax to pay for it.

Allan
Allan
1 year ago
Reply to  dan

Dan, as I understand the ‘no funding discussed’ was on purpose. As usual, The Seattle Times got it wrong in their ‘Vote No’ position printed in the voter’s pamphlet. The I-135 would” create the “Seattle Social Housing Developer”. If I-135 proponents had included a method of funding, and the measure passed, it would likely be challenged and found uconstitutional. This happened on at least one of Tim Eyman’s initiatives – it was struck down because he tried to do more than one thing. The no funding mentioned in I-135 is by design, and shows smart forethought IMO.

dan
dan
1 year ago
Reply to  Allan

Not true. Lots of initiatives have their funding carefully spelled out. Usually a property tax levy or “temporary” sales tax increase.

Matt
Matt
1 year ago
Reply to  dan

Public housing development authorities cannot tax, it would have likely had to have been a separate initiative. I-135 is to for the city to charter a new public development authority like the one that governs Pike Place Market and keeps it as a asset for our city and it’s small businesses rather than developing it into a giant attraction. This would do something similar but for low and middle income housing, including a representative governing board, unlike the existing low income housing developers.

Urbanist
Urbanist
1 year ago

Interest rates are high and the economic outlook in Seattle is cloudy. This project being moth-balled has nothing to do with design review cutting into the 20% profit margin demanded by the shareholders in national development firms that have been mining gold on the hill while leaving a trail of high-priced studios and mediocrity.

dan
dan
1 year ago
Reply to  Urbanist

Where do you get that 20% number? Even if true, that’s a fair profit for risk from interest rates, earthquakes, rent fluctuations, fires, vandalism, rent controls, winter eviction moratoriums, not being able to use criminal history in background checks, the job market, Sawant, rent increase limits and controls, costs of evictions, and a whole lot more in Seattle.

Ballardite
Ballardite
1 year ago
Reply to  Urbanist

Spot on