From the Field: More Single-Family Please

My friend Joe Nabbefeld has a great post from the front lines of the real estate game at the Daily Journal of Commerce. Nabbefeld reports that people hunting for single-family homes are facing a struggle. What’s the solution?

It’s simple economics: Lower price by increasing supply. Supply supply supply.

As we’ve pointed out before, the City Council decided that 250 additional homes was not, in the words of Councilmember Burgess, “meaningful.”

Like many other people in the single-family market, I’m sure Nabbefeld’s customers would sure appreciate having a couple hundred additional options. Instead, Nabbefeld points out

If you’ve got more than 1 kid, you better have Income with a capital I or tolerance for a commute. Yuck.

It’s very easy to dismiss the single-family market because many people feel priced out. Theres a strange idea that no real human family is actually shopping for a single-family home in Seattle because they are all out of reach. That just isn’t true. There has and always will be a single-family market in Seattle.

With more jobs coming to our city–18,000 last year–many more folks will jump in the market. When the Council dialed down supply with their vote last Monday, the “nobody can afford single-family housing here” story becomes true. And once again young families will be talking over their lattes and soccer games about how expensive it is in Seattle–and maybe that house in Maple Valley might be worth it even with the long commute.

The conversation is about to get switched back on. Two-plus years of price gains have swung the pendulum back.

It’s too bad we can’t get a “do over” on that vote. Maybe in 2016?

Ready to Work on Microhousing Legislation

Here is our extensive response to proposed microhousing legislation. The bottom line is that if the legislation passes in its current form, the people who want to see microhousing end will likely have won. The myriad of requirements together with design review will essentially incentivize building fewer, larger apartments which will cost more. Building microhousing won’t make any financial sense for the builders or the people who would want to live there. We hope the Council will work with us to find a way to address substantive issues and keep microhousing a viable choice for those who want it. 

Thank you for listening to the many concerns raised by neighborhood groups about microhousing as well as our own growing concerns about the proposed legislation. Based on the City’s own principles included in the Directors’ Report, the evidence is overwhelming: microhousing safely and efficiently meets a critical housing need in the city. Furthermore, microhousing is a healthy and low-cost housing choice for many people of all ages who want to live in the city and prefer less space. We need to keep this housing choice available and low-cost for renters.

Any legislation affecting microhousing should avoid adding costs to production that will, in the end, push up rents and discourage the development of this kind of housing. Currently, the economic and financial climate supports the continued development of microhousing projects to meet surging demand from customers for this housing option. More unnecessary regulation and process will make microhousing less affordable and incentivize larger more expensive apartments.

Most importantly for Council to consider, however, is that most of the proposals—especially requiring design review—will not substantively address the myriad concerns raised by neighbors. Adding more regulation and process would have a negative effect on the biggest selling point of microhousing—its low price—without any real effect on neighborhood concerns.

In the interests of engaging in a dialogue with you about the proposal and microhousing itself as an innovative housing product, here is our latest and comprehensive response to the proposed legislation. 

Review of Proposed Legislation (Ordinance)

• New definitions and requirements on congregate and microhousing

We have no substantive objection to developing a definition of microhousing that codifies micrhousing and congregate housing in a way that keeps these housing types intact. We are concerned about the unintended (or intended) consequences of the changes to Section 12 of the legislation which would amend Section 23.84A.032 of the Seattle Municipal Code.

Unit Size

In particular, we wonder why, in subsection 19 (page 27), a micro defined as 285 square feet or less of net floor area?  Why put a cap on the size of the units?  This is unnecessary and somewhat arbitrary. What community concern is this responsive to and how does controlling the size in this way address it?

Food Prep, Sinks, and Fixtures

The proposal has pays inordinate attention to bathrooms, food areas, sinks, and bathrooms as a way to control microhousing development. But this effort will make microhousing less appealing and useful for the end user and more complicated to build.

The way the proposal defines bathrooms and fixtures would substantially impact the feasibility of creating microhousing. It’s fine to state that microhousing “contains a bathroom with a toilet, bathing facility, and lavatory,” but why are we not being allowed “a food preparation area”?

How would the DPD define and enforce around such a term. Almost any flat surface could function as a preparation area, and given stated concerns by some Councilmembers and neighbors about the health and diet of microhousing residents this proposal seems to counter creating units where residents have the ability to prepare their own food.

Why does the proposal not allow a sink outside the bathroom?  That prohibits an industry best practice and what our customers want.  This alone will cripple microhousing production from a market standpoint (this isn’t what customers want), a financing standpoint (banks like to see the amenity area in the sleeping rooms), and from a construction standpoint; putting the sink in the bathroom is inefficient

And in subsection 20, why does the proposal require a common kitchen of 120 square feet?  What standard is being applied here? Current common kitchens vary in size and adding more square footage is not responsive to resident needs or demands.

On the contrary, all these changes affect unit lay out, room count, and construction in a way that will increase costs and reduce the number of rooms. This would translate into having to divide higher costs among fewer units when determining rent structure.  The same is true of the requirement in the proposal for congregate housing to have 10 percent of the square footage to be communal areas. Again, where did the 10 percent figure come from? And why do college dorms get to avoid all these requirements, essentially allowing institutional builders to meet this housing demand? Does the City want only enrolled students to live and benefit from microhousing, because that is the effect this legislation is likely to have.

The proposal also limits congregate housing by allowing no more than 25 percent of the rooms to have sinks in the sleeping room.  What is the basis for this? This almost certainly would mean the end to this housing option since very few customers will be interested in paying for a unit without a sink.

DPD Director Discretion

Finally, the Director of DPD is given more discretion to make rules and judgments about how to implement and interpret these and other issues in changes to 23.42.010, 23.45.575, Table B for 23.54.015, Table A for 23.54.040, etc.  In our view, making these additional requirements presents a challenge, but leaving them open to the discretion of DPD staff will certainly put them between neighborhood interests opposed to microhousing and builders trying to build it.

We oppose these changes and requirements because they seem to have been made without consideration of any benefit to residents or their specific requests. Furthermore they do nothing to enhance health or safety but definitely do complicate construction, financing and would likely increase rents.

• Design Review for Microhousing

We appreciate DPD developing a threshold for design review that is based on building size not number of units. Building size is what is visible to the neighborhood, not individual units, and the size threshold is consistent with principle behind SEPA thresholds.

However, there is almost universal sentiment—not just among developers but residents, as well—that the current system of design review—including so-called Streamline Design Review—is broken. The process is open-ended, too costly, and has no impact on the concerns surfaced by neighbors. Design review has no effect on parking, for example.

Even City staff made the observation that after going through the design review process “projects showed little evidence of substantial modification” (see page 3 of the recent report written by DPD). They also testified during the appeal of the legislation by neighbors that the design review process would result in fewer microhousing projects.

We believe that before microhousing projects are subjected to this expensive, time consuming, and ineffective process it should be fixed so that design review becomes a useful, predictable, and more affordable process for all projects in the city. And if notice is an important issue to microhousing opponents, we think a mailed notification to residents within 800 feet of a project during permitting would make more sense than requiring design review to get at notice issues.

Our analysis (attached) found that on a 40-unit project, design review could add as much as $100 a month to rents. What benefit would customers be getting for that additional expense of as much as $1200 per year? We haven’t seen any analysis that design review will improve resident quality of life, neighborhoods satisfaction with microhousing, or that it would substantively address any of the concerns raised by neighbors.

• Bike Parking  

Table E for 23.54.015 – Bike parking requires 1 bike parking spot per 4 sleeping rooms (micros) instead of 20 before?  Shouldn’t customers and builders be able to work this out? What was the basis of this ratio? Were there any utilization studies completed?  Not every location will need this much bike parking.  This increases costs, again, without any good, studied, reason.  What problem is the proposal trying to fix??

• Solid Waste Storage

Changes to 23.54.040 and Table A for 23.54.040 require much more space for solid waste?  Why not smaller containers but more frequent pickup?  Here again this is an attempt to fix a problem that doesn’t seem to be a problem that has resulted in it being addressed by builders. And there doesn’t seem to be any other data to support that there is a problem and that this particular mandate would be the best way to solve a problem if there was one.

• Multifamily Tax Exemption (MFTE)

The only party hurt when requirements for MFTE participation by landlords and builders are residents of multifamily housing. Previous efforts to make MFTE harder to use won’t affect developer profits but will mean higher rents, exactly what the program was intended to address.

This proposal does two things that will simply make the savings in operating costs created by MFTE impossible to pass on to renters. First on page 23, “income-eligible households” are defined as ones with 400 square feet. Where did this number of square feet come from? What is the basis to reduce workforce-housing subsidies based on this square footage that will discourage the building units of 400 square feet or less?

Additionally, the Area Median Income (AMI) requirement has been drastically reduced from 80 percent AMI to 40 percent AMI. What is the basis for this? If units above that 400 square feet can be leased at 80 percent of AMI, but a unit that is 395 square feet rents for half that unit because of 40 percent AMI requirement, the City is incentivizing building of larger units; why?

Even if microhousing gets built at 200 square feet, it isn’t fair to cut the MFTE requirement in half. Did DPD staff assume that cutting the size and AMI requirement in half mean that the market rent required would also fall simply because the unit is smaller.  Microhousing units do rent for more per square foot, but construction costs are higher (more walls, more fixtures) and all the same soft costs (perhaps more because of the complexity) apply to microhousing as apply to other multifamily housing, so this 40 percent figure incentivizes larger apartments and punishes microhousing projects and renters.

Conclusion

Taken together, this legislation would unfairly and inexplicably add rules, costs, and mandates that would make building microhousing more expensive to build, raise rents, and lower the quality of life for residents. Additionally, the legislation appears to incentivize the construction of larger apartments over 400 square feet with full kitchens by private developers, and the construction of microhousing by colleges and universities in the area off campus.

The question is, why, if the City’s principle statements hold that this is a form of housing that works is simultaneously proposing legislation that could well end the products viability in this housing market? Whatever the neighborhood advocates opposed to microhousing might say in their opposition to this legislation, it could very well result in the end of microhousing, accomplishing what many of them want: a moratorium.

We strongly urge the Council to redirect this effort. Please codify microhousing in our land use language and regulations, but allow builders to continue meeting the demand with this housing choice. We think incentivizing colleges to build this product and private developers to build larger apartments will not eliminate the angst over microhousing, but it will simply generate more complaints about what does get built (even by a college) and will reduce the overall supply of units to meet housing demand.

When it comes to housing, what does the City really need and what is the best way to meet that need? We want to work on this with you. We’ve advanced Ideas for Change: Seattle’s Housing Future, a document that gathers together ideas for improving Seattle’s housing market. We look forward to collaborating with you in the coming weeks on how improve this legislation and address broader housing concerns.

 

Sincerely,

Roger Valdez
Director
Smart Growth Seattle

More Housing Means More Diversity

The idea that increasing housing supply creates more housing opportunity and positively affects price is one that many of us accept as axiomatic – if we make more housing people have more choices and prices will stabilize or fall.

But how does increased housing supply and availability impact ethnic diversity?We’ve already seen evidence that growth in Seattle is making us a more diverse city. A recent study published by the American Sociological Society, Neighborhood Diversity, Metropolitan Constraints, and Household Migration looks in depth at patterns of movement within cities. The study points out something called the “housing availability perspective.”

A central tenet of the housing availability perspective is that the composition of the metropolitan-area population and characteristics of the local housing stock shape patterns of inter-neighborhood migration and resulting aggregate population patterns. For example, by increasing residential opportunities in general, and especially after the implementation of fair-housing legislation, a large supply of new housing in a metropolitan area is presumed to increase mobility and facilitate the movement of black and white households into diverse neighborhoods (Crowder and South 2005; Farley and Frey 1994; Logan et al. 2004).

Some people will still insist that building more housing will simply increase price. It’s almost as if opponents of the idea that supply and demand applies to housing think they have to deny supply and demand in order to keep their worries about growth. That just isn’t true. One can trust the data and science and still wonder about how we grow.

But based on the housing availability perspective hold that if we build more we not only impact prices positively, which creates obvious economic mobility, but we can also promote and support more integrated neighborhoods. That means we can have neighborhoods with a mix of people from a variety of economic and racial backgrounds. We can achieve diversity and integration  by building more housing of all types, in all neighborhoods, at all price points, including subsidized housing without mandates for racial profile (see Puget Sound Sage) or inclusionary zoning. 

It just makes sense; the more we close off housing options with rules, regulations, taxes, and fees to make people who live here already comfortable, we’re ensuring higher prices and less diversity.

Thanks to David Moser for sharing the study on City Builders.

 

In with the Old and New

The 652,000th Man: Seattle Tops Growth Chart

If the now retired and apparently found Casey Kasem did a top 40 for growing cities Seattle would be on the chart, holding the number one spot for the fastest growing city and the number 21 spot for overall population size. A Seattle Times blog post yesterday caught a lot of people’s attention, including me; I said in public comments at the microhousing hearing Monday that we ought to be more focused on how we house the thousands of people moving to Seattle rather than obsessing about where they wash their hands. I know I am annoying  Councilmembers with my sink routine, but yesterday’s blog post only highlights how important increased housing option and choice will be in the years ahead.

What’s the reason for Seattle’s population boom? The Census Bureau offers no interpretation of its data, but surely the city’s healthy economy is responsible for attracting many new residents. According to Seattle’s Office of Economic Development, the city added nearly 15,000 new jobs between 2012 and 2013.

Seattle didn’t just surpass other big U.S. cities in 2013. For the second consecutive year, it outpaced its suburbs — and the new census data show this trend is accelerating.

Seattle grew at double the rate of surrounding King County between 2012 and 2013. That is significantly faster than in the previous year’s census estimates, which clocked Seattle’s growth at 25 percent faster than its King County suburbs.

I told Councilmember Sally Clark in a meeting yesterday morning about microhousing, that every concession the Council makes to neighbors angry about change and new growth makes it harder on all these new people moving to our city, costing them units of housing. The math is pretty simple, and a colleague point out that based on the Census numbers in the Times, the figures I quoted at the microhousing hearing were underestimating growth.

One thing I would challenge though is the growth projection of 120,000 by 2035.  The census shows we added 18,000 people in the last year alone.  18,000 x 20 years = 360,000 people.

Amazon’s 3 new towers alone are adding 15,000 new jobs.  Add a jobs multiplier and a population multiplier to that, and we’re talking maybe something like 45,000 new people as a result of those new jobs just from that one new expansion of Amazon.

Now we can either spend our time resenting and lamenting new growth or we can plan for it and welcome it. Unfortunately the Council slashed single-family infill growth with a massive downzone on Monday. As we analyze microhousing legislation it’s easy to see that it is filled with added requirements, costs, and takeaways. And the Council is considering increases to the so-called “incentive zoning” fee.

Taken together I’d argue that the Council is squeezing down on housing and supply and choice, handing out the eliminated units from their new rules, regulations, and fees like candy to angry neighbors who are defending the status quo. I know that this criticism is upsetting to Councilmembers but it is valid.

The numbers are right in front of us. Why are we having to fight for hundreds of single-family lots, additional microhousing, and increased density in neighborhoods with the greatest capacity for new people? We must continue to make the case that we need more housing, of all kinds everywhere in the city, not less. Even saying that might make some Councilmembers and and angry neighbors uncomfortable today, but if someone doesn’t stand up for growth, life will be miserable for thousands later.