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October 26, 2017
Seattle is experiencing a long-awaited building boom. Is this set up to create winners or losers? Let’s go over the many pieces and players making this much-loved city.
Let’s start with land price.
One of the factors that affects land price is its zoning (and the height of structures permissible under that zoning). If the property is over zoned, i.e. it allows for more development than the market needs or that will be supported by financing, this can inflate the price of property.
This aggressive pricing will most likely price out the homegrown or entry-level developers, thereby setting the stage for out-of-town deep pocket entities to come in. Those well-funded developers can absorb this initial cost, but eventually it gets passed to the renters or condominium owners. Woe to the local development enthusiast and renters/condo owners. However, banks and out-of-town developers can expect great returns on their investment.
The price of the property is also influenced by Realtors who have little incentive or checks and balances to set a reasonable price on the sale of a property. This has created a wild market in Seattle where properties are being sold for unimaginable prices.
Both the above factors set the stage for market speculation, where instead of strengthening community through building, properties are held in limbo for prospective sales in the future. This creates great wins for property owners, banks and Realtors. Losing out are developers and renters or condominium owners.
Let’s take a look at design guidelines or standards. Of late, the flurry of design standards adopted by cities across the state all aim for the same mixed-use look of Vancouver up north. Most new developments replace family-owned establishments that are frowned upon by economists who prefer that all our streets are occupied by high-end restaurants, banks and law offices.
Planners and designers oblige with design standards that price out small businesses and instead set the stage for a fancy new establishment. The spaces that are created are not conducive to small local businesses, since they are limited in the amount of capital they are able to raise. Moreover, the jobs and income afforded to these families and small business owners are irreplaceable. As a result, we are seeing more franchises opening up in place of unique boutique stores.
Winners in this scenario are the planners, economists, designers and franchise owners, while building owners often have to wait for a long time to fill in their ground floor retail spaces with retailers or offices that are able to afford their rents. Local entrepreneurs and immigrants also lose out since they are unable to find spaces in which they can leverage and use their talents. Even if they are able to enter the market, they are unable to charge the prices that neighboring residents can afford to pay.
In the end, Seattleites lose out as their commercial spaces fill with the same franchises that are in every other city, and they have to spend more for goods, services and restaurants.
Lastly, let’s look at the type of units being built. While as discussed above, the commercial spaces are large in order to attract the more established commercial entities, and residential spaces lean towards studios or one-bedroom units. This works well for the entry level job market, but offers few options for others, including retirees and families who seek the larger apartments with three or four bedrooms.
The price of these units in tall, expensive apartment buildings is exorbitant and affordable to a few. Therefore, without any encumbrances or regulations encouraging market-rate family units, our limited mixed-use land will be flooded with well-established singles while families and retirees are priced out and move farther from the urban core.
This is a big win for developers and the new singles in the IT sector, but leaves singles in other sectors as well as families and retirees with few options to live in Seattle.
While some of us are bemoaning the lack of equity in Seattle’s growth, it is possible to temper some of this with thoughtful and innovative planning, financing and regulations. This will be the challenge that the next mayor of this city will have to address. Regulations are not all that they are cut out to be if they are implemented without thought and consideration for every member of our community. We don’t have to create winners or losers. We CAN win, together.
Anindita Mitra, AICP, is the founder of CREA Affiliates, a sustainable planning and design firm in Seattle. You can learn more about her upcoming publication “Planning for the 99%” on Facebook. She has sat on local boards including the Seattle Design Commission, Seattle City Light and Seattle Public Utilities where she advocated for a sustainable approach to growth.