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Real Estate: Crib Notes by Joe Nabbefeld

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Crib Notes
By Joe Nabbefeld

June 30, 2016

Crib Notes: Design review killing townhome construction

Special to the Journal

See all those modern townhomes being built in L-zoned locations around town providing an “affordable alternative” for people in “the workforce”?

No, actually you don't see them.

A recent study reveals that a 2011 revamp of the rules for L-zones was supposed to improve “the townhome” — but just about killed it instead.

Oops. The study calls it a classic — and sad — case of unintended consequences.

What you see being built are not townhomes. And, more importantly, they are not affordable.

Fifty-two percent of the projects built in Seattle L-zones since the 2011 revamp have been ... very expensive single-family homes! Let's call them “single-family clusters.”

They kind of resemble a townhome project, but if you look closer they are actually each free-standing, with no shared wall.

These clusters typically have fewer units than if they shared walls. And that means the city is increasing its badly needed housing supply at a slower rate than it would have been before the “improvements” were made in that 2011 revamp.

Thirty percent of projects in Seattle L-zone since the 2011 improvements have been rowhouses. That's bit better for affordability.

Townhomes make up 18 percent of the projects built since 2011, according to the study that was done by architect David Neiman.

Neiman said the 2011 change “precipitated a critical failure by suppressing the number — and raising the price — of new dwellings available for sale.” Neiman and Dan Bertolet wrote about the study in a recent piece on the Siteline Institute's website: “More generally, Seattle's 2011 multifamily regulation is a case study of the unintended consequences of innocuous-seeming housing rules.”

Let's look at what happened to one site at the northwest corner of 19th and Union in the Central District. Five years ago there was a long-abandoned small commercial building there, and dumpy homes on the other corners. It's all L zoning.

Now on part of the corner are two new, free-standing, modern, view homes — about 2,000 square feet each, with rooftop decks — that have sold for $940,000 and $960,000. Three new slightly smaller free-standing homes are on the back of the site and have sold for $820,000 to $900,000.

Just south of these, on that same northwest corner, are two gorgeous, modern, free-standing view homes that recently sold for $900,000 and $925,000. Three new modern rowhouses along the back of the site — by the surface parking on the alley that all five homes share — sold for $750,000 each.

So much for affordability to “the workforce.”

Foundations have been built on the site next to these — right on the corner, where the abandoned commercial building was. Any bets what those will go for?

Crib Notes owns a home nearby. Like any property owner, we don't mind watching our values rise with activity like this. Every property owner benefits from this. Wealth is being created. Shucks, one old eyesore on the corner has been replaced by several expensive homes!

But if the goal was making housing more affordable for teachers, baristas and firefighters anywhere close to their jobs by increasing the housing supply, well ... kiss that g'bye.

Who's Neiman's culprit for this? Who's the perp?

In short: Design review. The 2011 improvements require that townhome projects go through design review — and only townhomes. Meaning rowhouses or single-family clusters don't have to.

“Design review” means bring a proposed project before a citizen-oriented panel that gets to comment on and make suggestions about certain aspects of the design. With the public, meaning the neighborhood, in attendance and empowered to make any and all comments they wish.

It sounds pretty good in theory. It's been in place for decades now in Seattle — but mainly for large commercial projects, like high rises and six-story apartments over retail. It's generally considered to have improved some of the detailing on projects. It's also part of a greater commitment to involve neighborhoods and citizens.

It's also known to increase costs, which are passed on to the people who use the buildings. A delicate trade-off: We accept a certain level of increased costs (rents, sale prices) in return for prettier spaces and prettier public plazas and walkways.

As Neiman and Bertolet put it in Sightline: “Seattle's low-rise story is a cautionary tale of the sensitive relationship between housing affordability and regulations.”

Taking a townhome project through design review takes months, meaning it adds months to the project's timeline. Months and risks. Both of those equal costs.

Neiman's study shows that builders since 2011 — which is right when we came out of the Great Recession and started building housing again — shifted to the project types without those costs and risks: Single-family clusters and rowhouses.

Neiman estimates that 400 more homes would have been built in L-zones since 2011 if that shift hadn't occurred.

That's not a lot, relative to the need. Increasing the supply of affordable homes takes many, many different steps. But in this case Neiman points out that the city took an unintended step backward, away from the goal.

Neiman's Madrona architecture firm, Neiman Taber, designs townhome projects. He served on the city's Housing Affordability and Livability Agenda committee, known as HALA. In 2015 HALA issued a major report calling for 65 initiatives aimed at meeting Mayor Ed Murray's target of 50,000 new housing units in 10 years.

“L-zones” means blocks designated for lowrise multifamily residential development. Before 2011 that meant up to 30 feet high; now it's 40 feet. Condo and apartment buildings up to 40 feet can go in L zones. But in the decade or two before 2011 market conditions meant almost exclusively townhomes went on L-zoned land. Since 2011: Mostly single-family clusters and row houses.

Neiman estimates that L zones comprise about 10 percent of Seattle's land. That's not a whole lot. But often the L zones are where run-down, small single-family homes are — perfect sites for putting 4 or 6 new units.

So is the solution to put single-family clusters and rowhouses through design review, too?

Not if affordability is your goal.

Joe Nabbefeld is a Realtor with Windermere Capitol Hill. You can reach him at www.RealSolutions.biz. He was the DJC's commercial real estate editor back in the late 1990s and early 2000s.

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