Seattle’s Land Use Code Isn’t Working

Low-Rise Appeal: Closing Arguments

We’ve submitted our closing arguments for the appeal of the Department of Planning and Development (DPD) and Councilmember Sally Clark’s efforts to reduce housing capacity in the city’s low-rise zones. We think these arguments are solid and illustrative of the work DPD failed to do in assessing environmental impact.

I.          INTRODUCTION

The City’s Determination of Nonsignificance (“DNS”) was issued in error. The DNS was not based on information sufficient to evaluate the actual impacts of the amendments. There are impacts caused by the legislation that the City failed to evaluate.  Even the impacts that the City did evaluate actually have more than a moderate impact on the environment.  Under the State Environmental Policy Act (“SEPA”), the faulty analysis and unmitigated impacts mandate that the DNS be reversed, and the matter remanded to the Department of Planning and Development (“DPD”) to conduct additional analysis, including potential preparation of an Environmental Impact Statement (“EIS”).

II.        CLOSING ARGUMENT

A.      SEPA requires thorough review based on information that is reasonably sufficient to evaluate the impacts of the proposed LR Code Amendments.   

Here, DPD conducted the SEPA threshold determination process for a package of legislative amendments called the Lowrise Multifamily Zoning Code Adjustments (the “Legislation” or “LR Code Amendments”).  DPD’s threshold determination process resulted in a DNS, rather than a DS requiring preparation of a full Environmental Impact Statement.  Under RCW 43.21C.031, an EIS is required for actions having a probable significant adverse environmental impact.  That means that an EIS is required whenever more than a moderate effect on the quality of the environment is a reasonable probability.  Boehm v. City of Vancouver, 111 Wn. App. 711, 717- 718, 47 P.3d 137 (2002).  In contrast, issuance of DNS is allowed only when there are no adverse significant environmental impacts.

To be sustained, DPD’s DNS is required to be based upon information sufficient to evaluate the impact of the proposed Legislation.  Boehm, at 718; SMC 25.05.335.  That means that the record supporting DPD’s DNS must “demonstrate that environmental factors were considered in a manner sufficient to amount to prima facie compliance with the procedural requirements of SEPA.”  Sisley v. San Juan County, 89 Wn.2d 78, 85, 569 P.2 712 (1977) (citations omitted).  Mere assertions, “unanswered questions,” and a “paucity” of supporting information will not satisfy DPD’s obligation.  Sisley, at 85-86.  DPD possesses the authority to conduct, and, in fact, is required to conduct further studies and to obtain sufficient information to conduct its environmental review, so long as the cost of obtaining the information is not exorbitant.  SMC 25.05.335, 25.05.080.

The State Department of Ecology publishes a SEPA Handbook[1] to provide guidance and tips regarding how to conduct SEPA review.  Section 4.1 of the Handbook, includes guidance for nonprojects like the Legislation at issue here, including:

If the nonproject action is a comprehensive plan or similar proposal that will govern future project development, the probable impacts need to be considered of the future development that would be allowed. For example, environmental analysis of a zone designation should analyze the likely impacts of the development allowed within that zone. The more specific the analysis at this point, the less environmental review needed when a project permit application is submitted.

The City’s Environmental Policies and Procedures also describe how DPD was required to evaluate impacts.  Among the matters that DPD was required to take into account, were (a) the fact that the same proposal may have a significant adverse impact in one location but not in another location; (b) that the absolute quantitative effects of a proposal are also important, and may result in a significant adverse impact regardless of the nature of the existing environment; (c) that several marginal impacts when considered together may result in a significant adverse impact; and (d) that the action might establish a precedent for future actions with significant effects.   SMC 25.05.330.  Indeed, the directives of SEPA to provide “full disclosure” and “consideration of environmental values” require “actual” consideration of environmental factors “before” a DNS can be issued.  Sisley, 89 Wn.2d at 86-87 (citations omitted).

In assessing the significance of an impact, DPD “shall not limit its consideration of a proposal’s impacts only to those aspects within its jurisdiction, including local or state boundaries.”  SMC 25.05.060.D.2; see also, SAVE v. City of Bothell, 89 Wn.2d 862, 869, 576 P.2d 401 (1978) (holding that the City of Bothell was required to evaluate the impacts of a proposal on adjoining jurisdictions, particularly as to traffic and the pressure to alter land uses).   Similarly, DPD was required to analyze both “direct and indirect impacts,” such as the effects resulting from growth caused by a proposal, as well as the likelihood that the present proposal will serve as a precedent for future actions.  SMC 25.05.060.D.4.  DPD also was required to consider that even a proposal designed to improve the environment in one aspect, may also have significant adverse environmental impacts as to another aspect.  SMC 25.05.330.E.

The City of Seattle has an express and detailed “cumulative effects policy” explaining that a proposal “which by itself does not create undue impacts on the environment may create undue impacts when combined with the cumulative effects of prior or simultaneous developments; further, it may directly induce other developments, due to a causal relationship, which will adversely affect the environment.”  SMC 25.05.670.  DPD’s analysis of cumulative effects was required to “include a reasonable assessment of” matters such as the present and planned capacity of public facilities including streets, and public services such as transit.  Id. 

An agency’s decision to issue a DNS is accorded substantial weight. RCW 43.21C.090.  However, substantive decisions made in the SEPA threshold determination are reviewed under the “clearly erroneous” standard.   Norway Hill Pres. & Prot. Ass’n v. King County Council, 87 Wn.2d 267, 275, 552 P.2d 674 (1976).  A decision is clearly erroneous when the Hearing Examiner is left with the definite and firm conviction that a mistake has been committed. Norway Hill, at 274 (citation omitted).  Where the DNS is shown to be clearly erroneous, that deference is overcome.

Here, as detailed below, DPD’s decision to issue a DNS was clearly erroneous.

B.        DPD failed to assess impacts associated with the loss of development capacity, including failing to even determine the amount of development capacity to be lost.

The City concedes that, in 2010, it conducted a “thorough” SEPA review of the major rewrite to the multi-family code, and that it conducted a different level of SEPA review of the now proposed LR Code Amendments.  Testimony of Geoffrey Wentlandt.  The “thorough” SEPA review conducted for the 2010 amendments included a detailed assessment of the development capacity proposed for the LR1, LR2, and LR3 zones under those amendments, including a comparison to prior capacity analyzed in a 1989 Environmental Impact Statement, addressing the 1989 Multifamily Code amendments.  Ex. 23 (2010 Environmental Checklist, pp. 12 – 13).  The development capacity numbers were summarized as follows:

	2010 Capacity	1989 Capacity
LR 1 Zone	5,839 dwelling units	4,730 dwelling units
LR 2 Zone	12,005 dwelling units	10,256 dwelling units
LR 3 Zone	21,059 dwelling units	20,341 dwelling units

 

 

 

 

No such analysis is contained in the 2014 SEPA materials for the LR Code Update.  However, pursuant to the statements of Bill Mills, the information contained in the City’s August 2014 Development Capacity Report (Ex. 18) helped inform the City’s SEPA 2014 analysis.  But, the August 2014 Development Capacity Report is not referenced or incorporated into the City’s SEPA documents for the LR Code Amendments, and the City’s DNS was issued before the report was published.  In addition, the projected development capacity numbers shown in Appendix 3 to the 2014 Development Capacity Report (Ex. 18, p. 16) do not include the reduction in development capacity that is associated with the proposed LR Code Amendments.[2]  Testimony of Geoffrey Wentlandt.

DPD’s DNS identifies an anticipated 20% maximum reduction in floor area for new apartments to be built in the LR 2 and LR 3 zones, and a reduction in intensity of use on LR 1 zoned sites due to the reduction of allowable townhomes/rowhouses from 4 to 3 units per commonly platted 5,000 square foot parcel.  Ex. 29, p. 4.  But DPD refused to calculate or tally the likely reduction in number of housing units across the LR1, LR2, and LR3 zones, and did not include a specific reduction in allowed housing units in its environmental review, and even refused to calculate that number after-the-fact during the hearing on this matter.  Testimony of Geoffrey Wentlandt.  DPD also refused to admit that the 20% reduction in floor area for new apartments would result in a decrease in dwelling unit output, suggesting that it was even possible for the number of dwelling units to increase, assuming that units were built at a lower square footage/unit.  Testimony of Geoffrey Wentlandt.  Not surprisingly, then, the DPD SEPA materials are devoid of any quantitative or even qualitative discussion or analysis disclosing the potential impacts on development capacity in the Lowrise zones.

It was not difficult, exorbitantly expensive, or impossible to obtain this information and, therefore, the City’s SEPA analysis should have included it.  But using the City’s numbers alone, the impacts of the LR Code Amendments can only be summarized as follows:

	Capacity with LR Code Amendments	2014 Capacity	2010 Capacity	1989 Capacity
LR 1 Zone	Uncalculated; potential loss of one unit for every standard 5,000 sf site	4,791 du*	5,839 du	4,730 du
LR 2 Zone	Uncalculated, maximum loss of 20% of floor area	8,547 du	12,005 du	10,256 du
LR 3 Zone	Uncalculated, maximum loss of 20% of floor area	14,397 du	21,059 du	20,341 du

* Dwelling unit = “du”

That the City could have calculated the decrease in development capacity is shown by a review of the evidence.  PSRC and the City’s own Development Capacity report project housing and population growth of 70,000 new households and 120,000 new residents in the City of Seattle out of almost 300,000 regionally.  Ex. 14, Ex. 15, p. 2.  Development in the LR 1 zones is typically townhomes or rowhouses.  Testimony of VanWyck; Testimony of Neiman.  Development in the LR2 and LR3 zones is typically apartments, but townhomes are allowed.  Testimony of Neiman.

The City’s DNS admits that the typical LR 1 townhome development will be reduced from 4 to 3 units should the LR Code Amendments be adopted.  Ex. 7, the Weyand diagrams and tables, demonstrate why the LR 1 zone reduction in unit count will occur.  The testimony of Mr. Neiman confirmed that under current Code, a developer of a typical 5,000 square foot lot in the LR 1 zone can subdivide the parcel into two 2,500 square foot lots, then use the Code’s density limit of one unit/1,600 square feet and the density rounding factor that allows any fraction above 0.5 to equal another full unit to result in a development output of 4 units, rather than 3 on that 5,000 square foot lot.  This is also described in the DPD Director’s Report, Ex. 18, pp. 32 – 34.  Mr. Neiman testified, and the Director’s Report (Ex. 18, p.65) explains, that the LR Code Amendment would alter the rounding factor to 0.85.  Using background source data from a title company, Mr. VanWyck succeeded in preparing three Excel spreadsheets demonstrating that across the LR 1 zone, this change in rounding factor would result in the following loss of new townhome units:

• Including all LR 1 zoned parcels, greater than 2,400 square feet, but excluding parcels developed or held as a condominium, public park, or school, the change in rounding factor from 0.5 to 0.85 results in a loss of 1,643 potential new units.  Ex. 2, first page (headings), and last page, far right column.
• Including all LR 1 zoned parcels, greater than 2,400 square feet, but excluding parcels developed or held as a condominium, public park, or school, and excluding parcels containing buildings built after the year 2000, the change in rounding factor from 0.5 to 0.85 results in a loss of 1,482 new units.  Ex. 3, first page (headings), and last page, far right column.
• Including all LR 1 zoned parcels, greater than 2,400 square feet, but excluding parcels developed or held as a condominium, public park, or school, and excluding parcels containing buildings built after the year 1990, the change in rounding factor from 0.5 to 0.85 results in a loss of 1,369 new units.  Ex. 4, first page (headings), and last page, far right column.

Mr. VanWyck’s three Excel spreadsheets also demonstrate that if townhomes were the assumed and preferred development type for the LR 2 and LR 3 zones and were the only form of development that occurred on LR 2 and LR 3 sites, then, with the same assumptions as above, the loss of new units for the LR 2 zone will range from 1,659 to 2,050 lost units, and the loss of new units across the LR 3 zone will range from 1,918 to 2,290 lost units.  Ex. 2, Ex. 4.  Thus, assuming only rowhouse and townhome development across all of the LR1, LR2, and LR3 zoned lands, the proposed Legislation would result in a loss of new housing units ranging from 4,946 to 5,983 lost units.  Ex. 2, Ex. 3, and Ex. 4; Testimony of VanWyck.

Apartments are the typical type of use developed in the LR 2 and LR 3 zones.  Testimony of Neiman.  As shown in the Weyand diagrams and tables (Ex. 7), and testified to by Mr. Neiman, a typical LR 2 and LR 3 apartment project would lose one floor of space due primarily to the effect of the LR Code Amendment elimination of the FAR exemption for portions of a story that extend no more than 4 feet above grade.  Ex. 7, LR 2 and LR 3 Apartments diagrams (showing loss of basement), and LR2 and LR3 Zoning Change Impact tables (showing loss of entire 2,735 square foot P1 level for LR 2, and loss of entire 2,990 square foot P1 level for LR 3 project).

Notably, eliminating the existing FAR exemption for a partially below grade floor is not likely to lead to developers creating entirely below grade floors (which if completely below grade would not count as FAR), because a fully below grade floor is expensive to construct, and cannot be used or rented as living space because of the lack of necessary ingress and egress and light.  Testimony of Neiman.  Under the current code, these partially below grade floors include living units.  Testimony of Neiman; Ex. 6.  The loss of floor area associated with the LR Code Amendment was projected for the typical project in the LR 2 site as a loss of 25% of the units (a drop from 20 units to 15 units), and in the LR 3 zone, a loss of 25% of the units (a drop from 24 to 18 units).  Ex. 7, LR2 and LR3 Zoning Change Impact tables.  In addition, on some LR 3 zoned sites, the combination of the loss of FAR exemption for a partially below grade story and the additional proposed LR Code Amendment to count as chargeable FAR the area of exterior corridors, breezeways, and stairways, results in a loss of 40% of floor area that could be used for dwelling units.  Testimony of Neiman.

It is true that the loss of development capacity applied to apartment construction in the LR2 and LR3 zones is associated with a loss of floor area, and that unit count would not be directly regulated by the proposed Legislation.  But, as explained by Mr. Neiman, developers have markets they develop a product to serve.  A developer who knows that apartments with an average unit size of 475 square feet will successfully rent in a particular location is not likely to reduce the average unit size by 25% to accommodate the lost FAR (e.g., to reduce units to an average unit size of 356 square feet), just to retain unit count.  Testimony of Neiman.

What the City’s SEPA analysis should have been focused on is the loss of development capacity described in the evidence presented by Smart Growth.  For example, using the VanWyck spreadsheets, the capacity of the LR 1 zone is reduced by between 1369 to 1643 dwelling units.  If that number is subtracted from the 2010 Capacity numbers, the LR 1 zone has capacity for only 4,196 to 4,470 new dwelling units.  When substracted from the 2014 Capacity numbers, following adoption of the new LR Code Amendment package, the LR 1 zone has capacity for only 3,148 to 3,422 new dwelling units.  A drop of development capacity from the 2010 Capacity number of 5,839 new units to just 3,148 new dwelling units equals a 46% loss of development capacity in the LR1 zones.

The City’s DNS inaccurately portrays the reduction of development capacity associated with the LR Code Amendments as resulting only in reductions of impacts as to height/bulk/scale, intensity of use, and transportation impacts on neighboring lands.  Ex. 29.  DPD failed to calculate or analyze the impact on supply and housing affordability other than making the bald assertion the impacts would be minor.  Yet, as described above, the Legislation will result in a loss of development capacity of up to 40% on some LR 3 zoned lands, a potential 46% loss in new units in the LR 1 zones, and will result in the loss of thousands of new dwelling units across all of the LR zoned lands.  Elimination of development capacity at this level constitutes a profound environmental impact, since the people who are coming to Seattle in future years will have fewer choices about where to live.

DPD could easily have computed the potential impacts, but failed to do so, despite the obligation under SEPA to obtain sufficient information to conduct its SEPA review.  Without these numbers, the City’s SEPA analysis was unable to calculate the impacts on future development, or the impacts on other jurisdictions, let alone the cumulative impacts associated with the separate micro-housing legislation, and the pending 2035 Comprehensive Plan update, based on an-as-yet-unexplained lower development capacity number, than the 2010 capacity number prepared as part of the City’s earlier “thorough” SEPA review.  The DPD should have conducted equally thorough SEPA review on the LR Code Amendments.  Because they did not, the DPD DNS should be remanded to staff for additional analysis.

 

C.        The City failed to analyze the potential impacts of pressure to more intensely develop single-family zoned lands.

The DPD Director’s Report and Recommendation on the LR Code Amendments (Ex. 18, p. 2) concedes that “[r]eceiving growth in lowrise-zoned areas allows single-family zones to remain single-family neighborhoods.”  As described is Section B, above, DPD’s SEPA analysis failed to quantify the loss of development capacity across the Lowrise zones.  The evidence at the hearing plainly demonstrates that there will be a loss in the development capacity of the City’s lowrise zones, meaning that if the LR Code Amendments are enacted, the City’s lowrise zones will be receiving less growth.  Despite conceding that receiving growth in lowrise zones protects protects single-family zoned neighborhoods from pressure to develop more intensely, and despite the evidence that shows that capacity for growth will be reduced by adoption of the LR Code Amendments, DPD utterly failed to analyze the potential for increased development pressure on the City’s single-family zoned lands.

Smart Growth Seattle agrees that the City of Seattle has the discretionary authority to downzone or otherwise control growth to reduce development capacity.  But that discretion does not excuse DPD from conducting SEPA review necessary to inform the City Council of the probable impacts of a downzone.   Here, the necessary SEPA review was not conducted, and the DNS should be reversed and remanded to DPD for additional analysis.

 

D.        The City failed to analyze the potential impacts of pressure to more intensely develop lands in adjoining cities, together with the transportation impact and transit impacts, the LR Code Amendments will likely cause throughout the region.

In recent testimony before the Seattle City Council, the City’s Department of Planning and Development staff said that 120,000 people will be moving into the City of Seattle in the next two decades, creating a demand for at least 70,000 new units of housing.  Testimony of Valdez; Ex. 14, Ex. 15.  As described above, the proposed Legislation undermines the City’s ability to meet that demand, by reducing the potential development capacity.

Nearby jurisdictions, including the City of Des Moines are friendlier to lowrise-style multi-family development than the City of Seattle.  Testimony of Valdez.  While some potential City of Seattle residents who could not afford a new townhome built in a LR 1 zone in the City of Seattle might migrate to a different type of housing, such as a lowrise, midrise or highrise apartment, most would not; instead, according to the only testimony provided by a residential real estate broker, those buyers would look for the same type of townhome housing outside the City limits.  Testimony of VanWyck.

Traffic congestion is substantial in the region, and into and out of Seattle.  Testimony of Lincoln; Testimony of Shaw; Ex. 10.  When faced with freeway congestion, some drivers will divert onto City streets in Seattle and adjoining jurisdictions.  Testimony of Lincoln; Testimony of Shaw.  In the opinion of Smart Growth Seattle’s transportation engineer, these impacts are significant.  Testimony of Lincoln.

DPD’s only traffic analysis was as to City of Seattle streets, and that analysis was purely qualitative, simply assuming a minor reduction in impacts to the transportation network, because there would be fewer units built in the City and, therefore, fewer people creating traffic impacts.  Ex. 29.  Even in this limited regard, DPD’s analysis is flawed because it assumes that the persons who would have moved into those units just disappear — that they would simply never arrive or move into the region at all.  DPD’s assertion at the hearing that all possible transportation impacts would be alleviated by transit, is not well taken.  No such analysis was included in the Environmental Checklist or DNS (Ex. 19, Ex. 29), the un-rebutted evidence demonstrates cuts in bus service (Ex. 11), and the funding source for the full remainder of possible Sound Transit light rail construction is unknown (Testimony of Shaw) and, therefore, speculative.

Indeed, as shown by Smart Growth Seattle’s evidence, preparation of even a general analysis of regional transportation impacts is readily accomplished.  Using the assumption that 7,000 new dwelling units will be lost from the City’s Development Capacity across the lowrise zones, Smart Growth established the percentage of those trips that would commute into and out of the City from the north, south, east and west, during the multiple hours of commuting time each day.  Testimony of Lincoln; Ex. 9.  Those thousands of trips include trips which will be added to – not taken away from – the City of Seattle’s road system, as well as the road systems of adjoining jurisdictions.  Testimony of Lincoln.  If the total loss in development capacity across all the Lowrise-zoned lands is less than 7,000 dwelling units, then the traffic impacts would be lessened; if the loss in development capacity is greater, then the impacts will be increased.  During its SEPA analysis of the LR Code Amendments, DPD should have calculated the direct impact on development capacity and the indirect impacts on traffic, transportation and transit.  DPD’s failure to do so, mandates reversal and remand for additional analysis.

Finally, the City again included absolutely no analysis – quantitative or qualitative – of either the induced development impacts and pressure or the transportation impact on the roadways of nearby jurisdictions, like Shoreline, Burien, Des Moines, Tukwila.  Under SAVE v. City of Bothell, 89 Wn.2d 862 (1978), the City of Seattle is not allowed to ignore impacts of its actions on other Cities.

For all of these reasons, the DPD DNS must be reversed and remanded and additional SEPA review conducted.

E.         The City erred when determining the LR Code Amendments would have only a minor impact on housing affordability.

The DNS erroneously concludes that the LR Code Amendments would have only a minor impact on housing affordability.  Ex. 29.  Basic economic principles support that the greater the supply of housing, the lower the cost.  Testimony of Valdez; Testimony of Wentlandt.  More specifically, as to apartments, when there are higher vacancy rates, there are lower rent changes.  Ex. 16 (especially, slide titled:  “Apartment rent and vacancy relationship: Seattle”); see also Ex. 17.

As described in Section B, above, the LR Code Amendment proposal would reduce townhome development from 4 to 3 units on typical 5,000 square foot site.  In addition, each of the three townhomes would become larger structures.  Ex. 7 (especially LR 1 Zoning Change Impact table, noting square footage increase from 1,737 sf under current code, to 2,315 sf under proposed code); Testimony of Neiman.  Larger townhomes are priced higher than smaller townhomes.  Testimony of Neiman.  Thus, the LR Code Amendments will both reduce the future supply of townhomes, thereby increasing their price, and will increase the price of the townhomes that are constructed due to their larger size.   As described in Section B, above, the LR Code Amendments will also reduce unit count in the LR 2 and LR 3 zones.

Assuring adequate housing supply includes assuring a choice of housing type and range of prices.  As described in the testimony of Roger Valdez, Smart Growth Seattle works with, and on behalf of, developers seeking to provide market rate housing.  If adopted, the City’s LR Code Amendments will result in a “major” impact on housing affordability.  Testimony of Valdez.

The City’s assertion of minor impact on affordability is not supported by the evidence.  The impact is significant and requires remand for additional analysis.

F.         The City erred when failing to analyze the cumulative impacts of the LR Code Amendments and other pending proposals.

DPD’s SEPA review materials are devoid of any analysis of the cumulative impact of the LR Code Amendments, together with pending microhousing amendments.  Nor is there a proper analysis of whether the LR Code Amendments actually fix the problems they were purportedly designed to fix, meaning that there may be yet more amendments coming.

For example, among the alleged problems that the LR Code Amendments are supposedly intended to cure, is the perception of increased height and building stories.  As described in Section B, above, it is the case that the proposed LR Code Amendments will eliminate a FAR exemption for partially below-grade floors which will result in the loss of one story from the typical apartment project in the LR 2 and LR 3 zones.  See, also,  Ex. 6, Ex. 7.  However, as described in the testimony of Mr. Neiman and shown on Ex. 6,[3] the loss of the basement level due to the LR Code Amendments will likely result in the transfer of mechanical equipment to the roof, meaning that rather than a sloped roof design, the roof would be flat, and accompanying the flat roof would be protective parapets which are allowed to extend above the height limit for the structure, resulting in a structure that has virtually identical height, bulk, and scale impacts to the original building, except with 20 percent fewer units.  Since the current LR Code Amendment package was apparently triggered by the “unexpected outcomes” of the 2010 major code update (Ex. 18, p. 3), Smart Growth is concerned that DPD’s analysis does not contemplate the likelihood that these height, bulk, and scale impacts will later be deemed “unexpected outcomes” inducing yet further amendments.

At the same time that the City is evaluating the LR Code Amendments, the City also is reviewing other code provisions affecting microhousing projects, which are often located within the LR3 zones.  Testimony of Wentlandt; and see Ex. 18, p. 7.  Indeed, the City’s Planning Commission believes that the separate code amendments calling for design review of microhousing projects will “help alleviate some design issues that have exacerbated” citizen concerns about development in the Lowrise zones.  Ex. 18, p. 7.

DPD asserted that the sites analyzed in the Directors Report (Ex. 18) as examples of problems created by the 2010 multi-family code update were typical and demonstrative of issues with the Lowrise zoning provisions themselves.  Testimony of Wentlandt.  However, as described by Mr. Valdez, 10 of the 12 example projects were the subject of significant neighborhood controversy, and the sample projects include multiple microhousing projects.  Rebuttal Testimony of Valdez.  Thus, the City developed its problem statement, and determined its solution to the alleged problem via analysis of sample projects that were both controversial with adjoining neighbors, and that were microhousing, but the DPD’s SEPA analysis fails to acknowledge that fact, or acknowledge that the separate microhousing regulations are likely to separately alleviate the “problems” alleged by adjacent neighbors.

The DNS prepared by DPD was simply not based on information sufficient to evaluate the actual impacts of the amendments.  In addition, nothing in the City’s SEPA review for the Lowrise Multifamily Zoning Code Adjustments identifies or evaluates the potential cumulative impacts on all of the issues listed above or analyzes the impacts of making uncoordinated multiple code changes.

III.       CONCLUSION

The DPD SEPA analysis for the LR Code Amendments failed to identify, actually consider, and fully analyze, let alone propose mitigation for, the adverse significant environmental impacts listed above.  The DNS should be reversed and the City directed to prepare an environmental impact statement on these impacts.  In the alternative, the DNS should be reversed and remanded to DPD for additional analysis and imposition of mitigation conditions necessary to mitigate the adverse impacts associated with the Lowrise Multifamily Zoning Code Adjustments.

 

DATED this 7^th day of October, 2014.

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Microhousing: Legal Options on DPD Shutdown

The City of Seattle’s Department of Planning and Development (DPD) doesn’t seem to be listening to the development community these days. But they do listen to angry neighbors (see our appeal and the legislation they produced over regulating micros which was passed by the Seattle City Council). They also seem to listen to judges. So we prepared a legal argument as to why DPD should change it’s course on the microhousing projects currently vested and in the pipeline. Short version: they run the risk of having a big settlement to pay, from tax payer dollars, to right the wrong they are doing. We hope it doesn’t come to that, but here’s our letter. 

October 1, 2014

VIA EMAIL and U.S. MAIL

Mayor Ed Murray
PO Box 94749
Seattle, WA 98124-4749

Re: Unjustified Harm Caused by DPD’s New Microhousing Permit Conditions

Dear Mayor Murray:

On September 21, 2014 the Department of Planning and Development (“DPD”) notified microhousing permit applicants that it is now refusing to issue building permits that are ready to issue, or further process building permit applications, in response to the Superior Court decision in Harvard Dist. Neighbors LLC v. 741 Harvard Ave. E. LLC.   DPD’s notice impacts at least 26 vested projects identified in Exhibit A to this letter.

DPD informed the 26 project applicants that permit issuance is now conditioned upon the applicant conforming to new requirements that are inconsistent with the City’s longstanding interpretation of its code.  Now, in order to receive a permit, the City is requiring the applicants to do one of the following: (1) submit the project to SEPA and design review; (2) re-engineer the project to either remove the sink from the sleeping room or create communal showers; or (3) wait – for an unknown amount of time – until the Court of Appeals issues a final decision in the appeal of Harvard Dist. Neighbors LLC v. 741 Harvard Ave. E. LLC.   The new conditions are an unconscionable and arbitrary shift in City policy that is not required by the Superior Court decision or the Seattle Municipal Code (“Code”), that is contrary to law, causes unnecessary damage to privately-financed affordable housing projects, and exposes the City to substantial liability for damages under multiple causes of action from multiple plaintiffs.

Nothing in the recent fact and project-specific Superior Court decision justifies DPD’s decision to arbitrarily withhold permits.  The Superior Court decision explicitly limits the decision to the specific project at 741 Harvard: “This court concludes that the application of the regulations to the specific facts in this case is clearly erroneous.”  Unlike the 26 vested projects, 741 Harvard’s initial plans listed a “Kitchenette Elevation” in each purported sleeping room.  The plans also showed refrigerators next to sinks and mounted microwave ovens.  Project opponents requested a code interpretation to determine whether 741 Harvard was an eight-unit building.  Interpretation 13-002 initially concluded that the project consisted of 57 “dwelling units,”[1] because each sleeping room had a “food preparation area.”[2] The applicant submitted two revised plans, each of which prompted DPD to revise Interpretation 13-002.[3]  The project opponents relied upon the project-specific Interpretation 13-002 to legally challenge the project. And Judge Middaugh’s decision is based upon a specific record that includes the applicant’s initial plans showing a kitchenette and the project-specific Interpretation 13-002.

Judge Middaugh’s decision does not justify DPD’s action, and DPD’s action is contrary to its own code.  A code interpretation is a “decision by the Director as to the meaning, application or intent of any development regulation . . . as it relates to a specific property.” SMC 23.88.020.A.  As concisely stated by the City Attorney in the 741 Harvard pleadings, “DPD has a history of consistently interpreting and applying the term ‘dwelling unit’ to similar [microhousing] developments more than 25 times in the last five years alone.”[4]    The opponents to the project at 741 Harvard timely requested a code interpretation, but the time has long passed for anyone to request a code interpretation for the 26 projects that relied upon DPD’s consistent and long-standing interpretation of the City’s code.[5]  When the time periods expired for requesting a code interpretation for these 26 projects, the applicants for these projects vested to that consistent and long-standing interpretation.

Judge Middaugh’s decision was project and property-specific, and so was the code interpretation that Judge Middaugh reviewed.  Now DPD has made a policy decision, not a legal decision, to depart from its consistent and long-standing interpretation of the code, but no policy can justify causing gratuitous harm to 26 projects that invested and relied upon DPD’s consistent and long-standing interpretation of the code.  DPD’s policy decision leaves these project proponents with no choice but to seek relief from the superior court for the harm that DPD is gratuitously causing.

In Mission Springs v. City of Spokane, 134 Wn.2d 947, 954 P.2d 250 (1998), the City withheld issuance of a grading permit for policy reasons: the City Council wanted the applicant to address neighborhood traffic concerns even though the applicant had complied with all code requirements for permit issuance.  Our Supreme Court held that the City had no authority to withhold the permit that satisfied the ordinance criteria:

In the eyes of the law the applicant for a grading permit, like a building permit, is entitled to its immediate issuance upon satisfaction of relevant ordinance criteria … Id. at 960, citing Juanita Bay Valley Community Ass’n v. City of Kirkland, 9 Wn App. 59, 84, 510 P.2d 1140

The State Supreme Court held that the City’s refusal to issue the permit violated both a state statute, RCW 64.40, and the due process clause of the federal constitution, exposing the City to liability under 42 U.S.C. § 1983:

Arbitrary or irrational refusal or interference with processing a land use permit violates substantive due process. Mission Springs v. City of Spokane, 134 Wn.2d at 970.   The Court ordered the City of Spokane to immediately issue permits, pay damages, and pay attorney fees.  By refusing to process and issue permits for the 26 projects that relied upon a DPD’s consistent and long-standing interpretation of its code that no one challenged in a timely request for code interpretation, DPD is acting in a similarly arbitrary or irrational way and exposing the City to much greater liability for the damage done to 26 applicants than the City of Spokane faced for damage to a single applicant in the Mission Springs case.

Because Chapter 64.40 RCW requires an action for damages to be brought within 30 days, DPD is forcing these 26 applicants to commence litigation within 30 days of its September 21^st notification.  DPD is also exposing the City to damages in tort, for negligent misrepresentation and for intentional interference with these 26 applicants’ business expectancies.  The City has paid substantial damages in the past for policy-driven interference with the permitting process, Pleas v. City of Seattle, 112 Wn.2d 794, 774, P.2d 1158 (1989); the City of Burien paid more than $11 million for such interference, Westmark Dev. Corp., v. City of Burien, 140 Wn. App. 540, 166 P.3d 813 (2007); and a jury recently awarded $12 million in damages against Thurston County for such interference.

The last thing any of these 26 applicants want to do is litigate with the City; they simply want to build their projects.  But DPD is leaving them no choice by making a policy-driven, legally unjustified decision to refuse to process and issue permits to applicants who have complied with the DPD’s consistent and long-standing interpretation of its code.  The applicants request that the City immediately process and issue building permits for the 26 projects.

 

Sincerely,

Roger Valdez
On behalf of the SMART GROWTH SEATTLE MICROHOUSING GROUP*

*The Smart Growth Seattle Microhousing group is a group of builders, developers, and investors that build microhousing in Seattle and are affected by this decision.

cc:        Diane Sugimura, Director of Department of Planning of Development.

Pete Holmes, City Attorney/            Roger Wynne, Director, City Attorney’s Office – Land Use Division.

Tamera Van Ness, City Attorney’s Office – Land Use Division.

 

 

Microhousing: The City Council Eliminates Another Housing Option

Yesterday, the Seattle City Council went ahead and did exactly what we asked them not to do: pass numerous restrictions on microhousing that will make them fewer and more expensive. Here’s a great summary of what the Council passed by Publicola’s Erica Barnett.

Council members—headed up by Planning, Land Use, and Sustainability Committee chair Mike O’Brien—proposed restrictions that went far beyond requiring each living space to count as an individual unit. The legislation will also require multiple sinks, set a minimum apartment size (220 square feet, as opposed to the previously proposed 220-square-foot average), a mandate for minimum parking standards, and an increase in the size of common areas, among other regulations. Microhousing proponents argued that the proposed new rules would make it more difficult, and more expensive, to build the relatively affordable units.

We had offered a compromise of putting most projects through design review, and we shared lots of information, including the most comprehensive analysis on rents caused by legislation I’ve ever seen. But nothing moved Councilmembers who seem impervious to facts these days. Here’s what I said to Publicola:

This vote gives the council the best of both worlds; they can claim to have simply regulated microhousing publicly, but know that neighbors are cheering because they’ve, in truth, outlawed the product. The council again today has demonstrated a ‘fingers in their ears’ approach to housing. Hear the facts about how their actions will actually boost rents, but take the action anyway. One more step down the road to becoming San Francisco.

But even worse than that, the Department of Planning and Development has turned the screws on microhousing projects that are vested and in the pipeline for permitting, subjecting those projects built to the existing interpretation of the code to new rules based on a court decision a month ago.

We’re reviewing our options, including a path through the courts seeking damages for builders who are now having to redesign their projects to avoid a costly trip through design review and SEPA or a year long wait for an appeal to the court decision. I’ll post the language we used in our letter asking the Mayor to reconsider this decision.

What we’re seeing the City Council do is continue to bargain away housing capacity to make angry neighbors happy. While Tom Rasmussen thinks he’ll never have to talk about microhousing again, he’s wrong: we’re going to make it an issue in next year’s election. The Council has to be accountable to the people looking for housing as they rule and fee us into higher and higher prices.

 

 

 

 

Seattle’s Love Affair with Housing Committees and Fees

To great fanfare, Seattle Mayor Ed Murray launched his housing advisory committee on September 23^rd, 2014, seeking recommendations on how to address Seattle’s housing affordability crisis. The 28-member Housing Affordability and Livability was created by a city council resolution, and the unpaid, volunteer committee includes private property developers, local housing experts, and advocates for tenants and low-income residents.

Yet, this process seems eerily familiar.

In March 2013, former Mayor Mike McGinn created the Advisory Committee on Affordable Housing Incentives to provide “input, guidance, and recommendations” on Seattle’s two primary affordable housing incentive programs: incentive zoning and the multi-family property tax exemption (MFTE). The committee had 20 members, who were unpaid volunteers and included private property developers, local housing experts, and advocates for tenants and low-income residents.

The McGinn committee met 14 times, with the first three meetings focused on changes to the MFTE program, and the next 11 concerning incentive zoning. Forgoing compromise, committee members found no agreement on any of the core policy issues before them. Privately, one committee member described the process as “very frustrating, similar to herding cats.” The committee agreed to publish 11 core principles, all of which are uncontroversial, summarized here:

1. Seattle is growing and needs new construction.
2. Equity is a fundamental value for Seattle.
3. Seattle has a housing affordability challenge.
4. Seattle desires a higher share of the region’s families.
5. Development should use maximum capacity while providing opportunity for affordability.
6. Incentive zoning has its strengths and limitations.
7. Incentive zoning should recognize public goals.
8. Incentive zoning presents developers with opportunities as well as new risks.
9. Incentive zoning should help create mixed-income development in transit- and service-rich areas.
10. Incentive zoning should create affordable units where growth is happening.
11. Incentive zoning policy should be predictable and simple.

Somewhat confusingly, rather than wait for the McGinn committee to publish their findings, the city council decided to start their own committee. The McGinn committee first met on March 22nd, 2013, but in May the city council began their separate investigation into housing incentives, hiring consultants to assist their efforts. The starting premise for this research was investigation into why the present incentive zoning scheme was producing so few subsidized units (roughly 55 per year since 2001). The consultants worked into 2014 and analyzed a variety of issues related to housing affordability, with this breakdown for their efforts:

1. Otak Inc., Paul Peninger. Workforce housing benchmarking and best practices report – $64,000;
2. Cornerstone Partnership, Rick Jacobus. Incentive and inclusionary housing – assessment of Seattle’s program, best practices report and development of policy recommendations – $50,500;
3. David Rosen and Associates (DRA). Pro-forma and market analysis; commercial and residential nexus study – $126,500.

Taken together, the data cost city taxpayers $241,000.

The consultants were hired on separate contracts, but their work was intricately linked. The central issue? Either to refine the current incentive zoning scheme or to create an entirely new fee. Using DRA economic analysis, Cornerstone maintained that a new affordable housing linkage fee would drastically increase the development of new subsidized housing units.

Previously, the McGinn committee also addressed the issue of a new mandatory fee. Again, there was no consensus on the matter, but they helpfully summarized their arguments:

1. A mandatory requirement would result in significantly more affordable housing, would encourage developers to build to maximum density, would be more predictable and simpler to administer, and has been implemented successfully, without legal challenge, by other cities in King County;
2. A mandatory requirement would effectively create an illegal tax on housing production, significantly increase the cost of development, and push housing prices even higher by restricting supply.

Rather than wade into this specific debate, I think it prudent to briefly look at the history of linkage programs in the U.S. in order to see if the fee will be the housing affordability panacea that city leaders envision it to be.

Background

In The Encyclopedia of Housing, Edward Goetz offers a short version of the history of linkage fees, writing:

Linkage programs emerged at the historical confluence of three trends in the political economy of U.S. cities. The first trend was the phenomenal growth in the office-based economy of major cities. From the late 1970s through most of the 1980s, cities across the country experienced a huge increase in the amount of commercial office space in their downtown cores…At the same time, in the United States, many urban areas were experiencing a severe housing affordability crisis.

The final trend that led to local housing solutions such as linkage (fees) was the almost complete withdrawal of the federal government from housing assistance during the 1980s. Under the Reagan administration, the U.S. Department of Housing and Urban Development (HUD) budget authorization fell by more than 80% from its high mark in 1978. At the same time that housing conditions were worsening in inner cities, the federal government was dramatically reducing its contribution to assisted housing for low-income persons.  

In 1981 San Francisco became the first major area to adopt a housing linkage program. Housing activists that backed the linkage fee anticipated a drop in the rate of downtown construction following its introduction, but office development actually was not deterred and the program was deemed successful, earning millions in revenue and effectively building subsidized units.

Success in San Francisco led to Boston and Miami adopting linkage fees in 1983, and by the mid-1990s, approximately ten to 15 percent of medium- to large-sized cities had some type of linkage program in place. The cities that adopted the fees were characterized by strong nonresidential development markets, and were coastal, with California, Florida, and New Jersey having a number of cities using the new fee scheme.

Much like the design of inclusionary zoning programs, linkage fee ordinances also come in a variety of shapes and sizes. The majority of programs require commercial developers to provide affordable housing. By the end of the 1980s, these programs dealt more inclusively with other types of nonresidential developers, including industrial developers, entertainment, research labs, and hotels. Most commonly, linkage fees apply to ALL nonresidential development.

The linkage fee requirement can be fulfilled a number of ways. Just like inclusionary zoning, developers can pay into a fund, or provide rental (and ownership) units on-site to fulfill their obligation. Some cities have developers pay into a fund as well as provide new units.

As the first city to enact a linkage ordinance, San Francisco deserves attention. The city created their “Jobs-Housing Linkage Fee” by ordinance and put it in their city planning code. The fee applies to all commercial developments (and expansions) greater than 25,000 square feet, and the city collects revenue on the basis of net additional square feet of commercial development. City code mandates that all funds collected be deposited into the same fund as inclusionary zoning fees. In 2014, fees ranged from a low of $16.01 for research and development space to a high of $24.03 for offices.

A major influence on the results of the San Francisco linkage program is the impact of growth control measures that have effectively neutralized the ability of high fee levels to contribute to housing programs. Total revenues collected have gone through eye-raising feast or famine periods. From 1981 to 1985, the housing linkage fee yielded $28.1 million; from 1986 to 1992, the linkage fee yielded $7.2 million; and from 1992 to 1999 the linkage fee yielded $5.8 million.

In San Francisco total units and revenue for the linkage fee and inclusionary zoning are lumped into the same category, and date only to 2002. From that year until 2011, the city has created 1,052 on-site units on revenue of $117.6 million.

For those cities considering the implementation of linkage programs, two potential fears weigh heaviest on the mind of policymakers. First, is the legal question, with developers loudly declaring such fees as an unjust taking. Possible court challenges may await. Secondly, city stakeholders hope that linkage programs do not deter nonresidential development. However, in The Encyclopedia of Housing, Goetz survey of U.S. linkage programs did not find a decrease in total supply. Instead he found that developers merely planned to pass all added costs from the linkage fee onto tenants. Undoubtedly, this development is problematic for both housing activists and city leaders, forced to contend with the double-edged sword of angry citizens and a higher priced housing stock.

Hope in Seattle

Seattle leaders are eyeing the linkage fee as a way of raising more funds for affordable housing, and in structuring the fee, they hope to avoid the pitfalls seen with the current incentive zoning policy, namely, that it is voluntary and developers choose not to use it. Indeed, only 38 percent of eligible developers took advantage of incentive zoning, either paying into the fund or by building housing on-site.

First, the proposed linkage fee would apply to all new offices, hotels, retail stores and labs, in addition to multi-family developments. Single-family homes are not subject to the fee. Every urban center and urban village could potentially be targeted, and the fee does not need to be limited to only the current incentive zones. Thus, if applied citywide, the fee could raise significant sums. Secondly, developers would still have access to the bonus density incentive. Moreover, building on-site would satisfy the fee requirement. Lastly, any new fees would be phased in gradually – likely a three-year period – with city leaders optimistic that as a result, land prices would adjust accordingly, taking the brunt of costs.

Councilmember Mike O’Brien, chairman of the Planning, Land Use and Sustainability Committee, says the linkage fee proposal would use one of two fee structures:

Option 1:

Low-cost neighborhood: $7 per square foot

Medium-cost neighborhood: $12 per square foot

High-cost neighborhood: $22 per square foot

In this scenario, a South Lake Union developer building a rental property would pay roughly $4.5 million, or 4.3 percent of the total development cost.

Option 2:

Low-cost neighborhood: $5 per square foot

Medium-cost neighborhood: $10 per square foot

High-cost neighborhood: $16 per square foot

A South Lake Union developer building a rental property pays roughly $3.2 million, or 3.1 percent of the total development cost.

Unsurprisingly, the city-hired consultants are bullish on the linkage fee, speaking confidently on its potential impact. Now the issue is being fast tracked for an October city council vote. The consultants maintain that a linkage fee would collect ten times more revenue than incentive zoning. In turn, Councilmember O’Brien says that the fee would generate five to ten times as many subsidized units than did incentive zoning. Most illuminating is that for either statement, no timescale is given in which these targets are to be reached.

Further analysis of these claims is necessary. First, if the proposed fee produced ten times the amount of revenue as incentive zoning, that figure is: $31.2 million x 10 = $312 million. By comparison, this city record shows that the San Francisco linkage fee raised only $56 million in 23 years.

Next, if the linkage fee were to produce five times the amount of units now produced by incentive zoning, that would be: 714 x 5 = 3,570. Ten times the amount of units is: 714 x 10 = 7,140. On the low end of estimates, 3,570 is fewer units produced than the multi-family tax exemption (MFTE), a market-based city incentive program that stimulates production of new multi-family developments by exempting property owners from tax on residential improvements for 12 years. Since 1998, the MFTE helped create 4,477 units. Additionally, I have learned that the development community is firmly behind the MFTE because, unlike incentive zoning, it helps greenlight projects that are on the cusp of penciling out. In sum, the controversy that is attendant with incentive zoning or the proposed linkage fee is simply nonexistent for the MFTE. If only city leaders paid more attention to it…

On the high end of linkage fee production estimates, 7,140 units created would be a great success. No figure exists for San Francisco on the amount of off-site housing units created, but between 2002 and 2010, the city created 1,052 on-site rental and ownership units.

Seattle policymakers are hopeful that consultant estimates come to fruition. Yet as I sat in a media briefing at City Hall, listening to Rick Jacobus of Conerstone Partnership, I found one of his statements particularly troubling:

“We are confident that the new fee will be completely absorbed without an effect on cost.”

Certainly, Seattle property developers and policymakers will offer different opinions on the veracity of this assertion, but no doubt mainstream economic theory objects to the bold claim.

In future, it might be necessary to approach future linkage fee debates with far more skepticism. Despite the lessons provided from other cities, the mood of Seattle councilmembers seems fairly easy to discern. New fees of some sort appear to be imminent. Councilmember Tom Rasmussen recently stated, “We are already using a variety of taxes, some of them at quite a high rate. What we’re hearing from the public is, let those who are causing congestion, who are creating a demand for more housing, let them pay for the cost to the city.”

Is Seattle truly in the midst of a “San Francisco Death Spiral?” A debatable contention.

But additional fees do impact development price, which has knock on effects throughout a housing market. Interesting, though, is that the same year (1981) San Francisco debuted its linkage program, it also enacted its Transit Impact Development Fee. Presently, Seattle leaders are discussing the introduction of both impact fees and a linkage fee.

A worrisome facet of contemporary San Francisco history may be repeating itself 858 miles to the north.