Yesler Terrace 2.0, this time with private developers

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Mayor Ed Murray

Mayor Ed Murray was on hand to celebrate the opening of Anthem apartments on Tuesday. Anthem is the first private development in the Seattle Housing Authority’s new Yesler Terrace complex. All 120 units are "workforce housing," meaning the rent is below $1,500 for a one bedroom. However, 36 units are actually reserved for renters who earn between $40,820 and $53,380 a year — or 65-85 percent of Seattle’s median income (AMI).

It says a lot about the state of affordability when the city is building subsidized housing for what used to be middle class renters. But given Anthem's First Hill location, and the fact that rent on a one bedroom “workforce” unit cannot exceed $1,523 a month, does this really qualify as affordable?

The cost of housing has become one of Seattle’s most hotly debated issues. Last March, the mayor announced his intention to develop 20,000 new affordable units over the next 10 years. A noble goal, to be sure, but the path to 20,000 — even Murray called it a “stretch” — is far from clear.

The mayor formed an affordable housing task force last summer and charged the members of the Housing Affordability and Livability Agenda (HALA) to come up with a plan for making affordable housing a reality. But e-mails obtained through a public records request show that HALA, at times, has been splintered into activist and developer factions. In a February e-mail sent to seven nonprofit representatives on the task force, HALA member and former Tenants’ Union president Jonathan Grant worried that task force members from the private sector were trying to “block us [activists] with the consensus process.”

Grant was concerned that compromising with developers would only water down the effort to push forward with affordable housing. After his email, HALA co-chairs seriously considered asking Grant to leave.

At the heart of this tension is an expectation that private industry both create more affordable housing and sustain enough market-price units to keep up with growing demand. Some interested parties, including City Council members Kshama Sawant and Mike O’Brien, favor using a stick to persuade developers: levying additional per-square-foot “linkage fees” on those who do not provide affordable housing. Critics of the stick approach argue that it discourages developers from building at all, which then drives supply down and prices up.

The carrot approach comes in the form of Seattle’s Multi-Family Tax Exemption (MFTE), a program that exempts developers (for 12 years) from paying taxes on affordable housing units.

By dedicating 30 percent of its units for affordable housing, Anthem qualified for the tax exemption (the minimum to qualify is 20 percent). Jake McKinstry, a Principle at Spectrum Development, said his company will save about $1,700 per Anthem unit per year in taxes. Over the course of MFTE's 12-year exemption span, Spectrum will save $734,400. Savings aside, said McKinstry, “I believe in providing affordable housing.”

Unlike low-income housing, workforce-housing subsidies target the middle class. Murray, who spoke at Anthem’s opening, talked about how the program helps teachers, police and healthcare workers. “We’re giving people the opportunity to live where they work,” he said. “Spectrum proves private developers are a part of the solution.”

John Fox of the Seattle Displacement Coalition is “not impressed in the slightest. It's an insult to replace a legacy for generations of poor people [the original Yesler Terrace] with a principally market rate development.” The Seattle Housing Authority has committed to replacing each of the 560 Yesler Terrace units that were demolished. But Fox isn’t convinced that all 560 will be comparably affordable. He also questions how committed developers like Spectrum really are to building affordable housing.

Fox claims that between the MFTE exemptions and the per-square-foot price of Anthem’s property on 12th and Yesler, Spectrum received about $3 million in discounts from the Seattle Housing Authority. In addition, brokerage firm CBRE sold the property to Spectrum, in 2011, for $128 per square foot, which at the time was less than half the sale price of seven nearby properties.

Kym Michela, who handles communications for Spectrum, insisted that the property “was purchased at fair, market rate value” with  “no depreciation or subsidy.” She acknowledged that the “price might seem low today, but the purchase was actually negotiated in 2011 during the real estate bust and recession. That [$3 million] was actually considered a lot of money for the site since the 100-plus projects you see going up today were not even in the pipeline.”

McKinstry called Fox's claim of a discount a "baseless claim."

Price aside, what do Anthem's 36 workforce units do for Seattle’s affordable housing shortage? Since, by Murray's own definition, any unit set aside for households earning between 0-80 percent AMI qualifies as “affordable housing,” Anthem apartments do count towards his goal of 20,000 units in 10 years. Only 19,964 to go!

Could Ed Murray achieve his stated housing goal without ever building a unit for people who earn between 0 and 65 percent of Seattle's median income — or less than $40,000 a year? The mayor said he wasn’t ready to answer that question yet. He did say that HALA had an answer. We will know the details in June when the task force presents its recommendations.

In theory, the rent for affordable housing should be less than the market rate prices of neighboring units. But data from Seattle’s Consolidated Plan for Housing and Community Development says the average market-rate rent on First Hill, the official location of Anthem, is just over $1,200 a month. By that standard, the market price for a one bedroom on First Hill is already the same as what Anthem is calling "affordable" housing.

One unanswered question is whether it pencils out for private developers to build actual low-income, rather than higher-priced workforce housing. “The challenge with the private model,” allowed Murray, “is how do you finance it?”

Spectrum paid $28 million to develop Anthem and it is certainly hoping to make a profit. McKinstry said there wasn’t any way his company could get the finances to work if it developed housing for people who earn less than $40,000 a year. For the private sector, said Murray, the 65-85 percent AMI bracket ($41-$53,000 a year) is “probably the only financially reasonable method.” The sweet spot.

John Fox thinks Seattle needs around 45,000 units for people who earn less than $30,000. HALA agrees. The city then faces a two-pronged challenge: preserving Seattle's threatened middle class and helping those who are most in need.

Correction May 29th: A previous version of this article said the Seattle Housing Authority (SHA) sold the Anthem property. In fact, the sale was made by brokerage firm CBRE. 

  

About the Authors & Contributors

David Kroman

David Kroman

David Kroman is formerly a reporter at Crosscut, where he covered city politics.