Seattle Times: More Housing Means Lower Prices

Whatever one might think of the Seattle Times editorial board, there is one story that the paper is running this week that confirms that their reporters are at least in touch with reality. The headline—Apartment boom in Ballard comes with risk of overbuilding—is a little bit odd and displays some of the basic prejudices held by many about density, housing, and affordability. Reading the headline one would think “overbuilding” was a crisis for Seattle. But the story simply confirms what many of us have been arguing for a while now: if you want lower housing prices, allow the construction of more housing. The only people hurt by too much supply are developers.

Increasing housing supply could mean lower rents, more jobs, and developers eating themselves!

The article by Eric Pryne reads like a primer in the economics of housing supply and demand.

Developers are building [apartments] because demand has risen, led by a demographic surge of young adults who prefer in-city living, at a time when there’s little new supply.

Few projects were built during the recession. The last new complex in Ballard opened more than two years ago.

Because of the economy—it is harder to buy a single-family house these days—and the appeal of living in the city younger people are opting for living in Seattle rather than other places. This is exactly what transit advocates, sustainability  and smart growth proponents all want to see happen. But all these people need a place to live, and the market is responding by building more housing.

What does that do to the price of housing in the Seattle market?

Owners of new rental projects, with loans to pay off, will do whatever it takes to fill units, Gardner says, and that will put pressure on other landlords to cut rents or offer concessions to keep up.

“By the end of 2013,” he says, “it’s going to get ugly.”

Ugly for whom?

Because there is so much demand for the apartment housing product developers are building more of it. Yes, they are trying to “cash in” on the trend of people wanting to live in the city. They figure if they can get their projects out of the ground fast enough they can ride the wave of demand, profitably supplying all those people with housing.

But if they “overbuild” the chief beneficiary are the people looking for housing. What’s “ugly” for developers is a boon for people looking for affordable housing. What happens next, though, when developers see prices dropping and demand staying steady?

Such concerns already are influencing some developers’ decisions. Pillar Properties had planned to break ground on a 124-unit complex in Ballard this fall.

A few months ago it put the project on hold.

Pettit says he looked at all the other projects under way in the neighborhood — including AMLI Residential’s 304-unit complex, just across the street from Pillar’s site — and decided “that’s just not something I’m prepared to compete with at this time.

” At lease-up, we were all going to be cannibalizing each other,” he says.

Yes, developers start to cannibalize themselves! Imagine that, granting more building permits for housing helps lower housing prices and creates competition between developers. As the developers fight over new tenants the prices go down, and eventually they decide to quit building. When they stop building, and supply stays the same, prices will go up again. It’s called a housing market, and like other markets it is, indeed, affected by supply and demand.

(Does unleashing supply with more building permits mean that no subsidies or incentives are needed to create housing for people who are very low income? Of course not, because there are some people who simply can’t pay enough rent to generate enough of a return for land lords and developers to offset the cost of housing. When a person can only afford $500, for example, a month for rent in some Seattle neighborhoods, then those tenants and developers could use help to bridge the gap between rent revenues, development costs, and other costs of living. You can read my post on where rents come from to get an idea of why rents end up being what they are).

So there it is. In places like South Lake Union the answer to the affordability problem is to build more housing. As in Ballard, the glut of new apartments, condos and other options will have a beneficial effect on price. Plus all that housing construction leads to jobs and new sales tax revenue on construction. The best thing the city can do is encourage more development, especially now, when prices are dropping. We simply can’t lose by allowing more housing. And if you happen to be one of those people who don’t like developers, allowing them to overbuild might be the best revenge.




Comments

  1. Dave0 says

    “The only people hurt by too much supply are developers.”

    Kinda true. Developers will be hurt first as they foreclose on brand-new buildings, rents will come down. As rents come down, landlords may have trouble making enough money to properly maintain their buildings. Over time, this means worse living conditions for renters as buildings become less well maintained.

    We all will be better off if we don’t allow markets to be over-built, causing another bust cycle. If the city can slow down the over-building of apartments, they should.

    • Eric says

      There will always be well-maintained buildings available for those who are willing and able to pay for them. In an “overbuilt” environment, even those apartments will likely be cheaper due to competition from nearby buildings that aren’t as nice.

      People who can’t afford high rents may well decide that a poorly-maintained, low-rent apartment in the “overbuilt” city is a better overall choice than something out in the suburbs that was the only thing they could afford before.

      • Andrew Brick says

        This reads like advocacy for slums, or at least for letting property deteriorate as much as the market will support. However, history elsewhere shows that a market will support a massive amount of deterioration until, well, it doesn’t support it, at which time you have blight. It’s not a good policy to support the lowest common denominator.

    • Ben Schiendelman says

      Dave, you’re saying that you’re willing to accept a *sure* outcome – higher rents everywhere – for a *small risk* of a handful of buildings being less well maintained.

      That doesn’t make any sense to me, and I doubt it’s really your position, but it’s the outcome choice you seem to be making.

    • Andrew Smith says

      Over time, this means worse living conditions for renters as buildings become less well maintained.

      It costs more to build a new building than to maintain an old one, so it should be pretty hard to get into this situation.

    • Dave0 says

      Ok, maybe my particular hypothetical is a bad example. My point is that advocating that certain people in the economy make gigantic bad bets is bad for everyone. I want a healthy stable economy where things growth at a modest pace, not the non-stop boom and bust cycles we’ve been experiencing here fore decades.

      Anybody remember this: http://seattlebubble.com/blog/2010/04/12/25-story-apartment-tower-built-in-2001-now-a-teardown/

      I could see that happening again if we get in a situation where developers are rushing to get their project finished before the apartment bust happens.

      • RossB says

        A boom bust cycle that is so bad that it hurts most people seems unlikely to me. To begin with, we still have high unemployment right now. Who knows what jobs will be available if and when we have a bust? It is possible that other sectors of the economy will do OK, which will soften the blow overall. This happened in 2001, when the tech sector completely collapsed, but folks could get jobs in other industries. As for right now, I would hate to restrict opportunities for folks in this industry (who are just barely crawling out of the nastiest recession in our lifetime) just because we might, maybe, could possilby have a hard landing.

        Investors could be hurt, but so what? Unlike the housing bubble, you are are talking about commercial investments. I don’t know anyone, personally, who owns an apartment building. I know plenty of people who own houses. When the housing bubble collapsed, it meant that lots of people owed more money than their asset was worth. If they had trouble paying the mortgage, they were forced out of their home (thus worsening the cycle). If apartment owners lose money, the banks might take a hit, but banks deal with that possibility all the time. Unlike the housing bubble, this is a local situation, so it is unlikely to spiral into big bank problems. Also, unless banks are doing the same sort of trading that got us into the fiscal crisis, we should be able to handle some bad investments.

        Furthermore, there will be an upside if there really is a bubble. The buildings that are built will be built and ready to rent. The original investors will take a hit, but other than that, I don’t see the problem. Worse comes to worse, can I buy one of these buildings for a dollar? Of course not. Which means they will operate as normal. The folks who own the building will try and rent each unit at whatever price they can get. To quote the article:

        “It … could be a disaster,” Cain, whose clients are mostly landlords, wrote of Ballard nearly a year ago.

        “Except, of course, for the tenants.”

        Yes, the tenants. To quote the article again:

        … rents so far are averaging nearly $2,000 a month.

        So, the tenants will pay less than $2,000 a month. Horrors! Seriously, I don’t see how this couldn’t be great news for the city. Imagine if the rents suddenly dropped in Ballard. Lots of young people flock to the area and lock in long term leases. Now imagine you are startup software company, or own a bar, or a restaurant, or work in a bar or a restaurant. Well, you get the idea. This is all a good thing. Maybe I’m overly optimistic, but I just don’t see how this could end very badly.

        I understand your concern (bubbles are bad) but this one is local and has a very good upside when all is done. In general, that is one of the things to think about bubbles: what they leave behind. A railroad bubble left lots of rail lines through the country. A dot-com bubble left a lot of skilled workers and entrepreneurs who then later built a bunch of the newer tech companies. The housing bubble left us with way too many really big houses in the suburbs, but it also left us with plenty of extra housing in the city. The city housing never really collapsed (I still can’t buy a nice little house in San Fransisco for 100 grand) which is why the cities recovered so quickly. In this case, at worse case there will be lots of cheap rental property in Ballard. Sounds like a good problem to have.

      • says

        It’s indeed bad for everyone when a 25-story apartment tower has to be emptied out less than 10 years after construction. You know who it’s worst for? The building owners. And they’ll probably make it bad for the designers or builders in court. There’s no lack of incentives to build with quality.

      • RossB says

        Yes, it is bad when a 25 story building has to be emptied. But you are assuming that it is simply because rents got too low because of overbuilding. That building had structural problems. Those problems would have existed regardless of the rent situation in the neighborhood. What will they do when they tear it down? Put up a parking lot? I doubt it. This isn’t Detroit. I would give you ten to one odds that in twenty years (if not sooner) there will be a big apartment building (or office building) in that spot.

        Again, I just don’t see abandoned buildings in Ballard’s future. Rents would have to be ridiculously low (and expected to be ridiculously low) to make it more profitable to just let a building lay fallow rather than rent it out. Now a half finished building is another thing, and we may see that before too long. But typically (like in this case) those buildings eventually get built.

      • Mike Orr says

        “I don’t know anyone, personally, who owns an apartment building.”

        I knew somebody in Vancouver WA whose father owned an apartment building that he (the son) lived in. And one apartment I lived in was owned by a man with a two-person construction company and a portfolio of a few apartment buildings and a couple dozen houses. I’ve always been fond of the idea of someday owning a small apartment building I would live in, although it’s never gone beyond the idea stage.

        So my experience is that “people” tend to own smaller, older apartment buildings, whose rents are naturally lower and thus they have an easier time keeping it filled no matter what the state of the economy is. People who own large apartment buildings tend to be more investors than landlords. And only “developers” own the brand-new buildings that need big financing to build.

    • Mike Orr says

      Well, rents would proabably flatten out with “First month free!” sales rather than actually declining. Rents only declined $100 or so in 2008, and most of that was sale gimmicks rather than a cut the baseline rent. Significantly declining rents would indicate a long-term recession and people moving out of the area. That’s why it’s vital to build enough housing to keep rents from rising in the first place.

      Unmaintained buildings would mainly occur in a severe downward spiral. I don’t think there was a disproportionate number of unmaintained buildings in the 1980s when Seattle’s population reached its nadir (low 400,000s).

      Our main problem is that so much of the built environment is unwalkable sprawl. Doing nothing means perpetuating this situation. We need a lot of investment in housing and transit and commercial districts to reverse the mistakes of the past half century. Unfortunately this goes hand in hand with rising or flat rents, and is contradicted by a recession and falling rents.

    • John Bailo says

      “Tenants are gobbling up new apartments almost as quickly as developers finish them…It’s already 50 percent leased”

      Isn’t a 50% vacancy rate already a disaster? Typically in a tight market, there would be a waiting list 5 people deep for each and every apartment.

      • John Bailo says

        Well, yes it is, because if there really was pent up demand, it would be 100% full at opening…because of the waiting lists.

      • Lack Thereof says

        New apartment complexes generally take a long time (several years) to fill out. They aren’t like condos where half the units are presold before construction even begins.

        Soaking up a massive initial vacancy rate is part of the typical apartment business plan, no matter if it is a city apartment tower or a sprawling suburban campus. The larger the complex, the longer it takes to fill in.

      • Lack Thereof says

        If it was 100% full at opening, it would be a sign that the building/complex manager is doing a terrible job of pricing the units. They want to attract the top of the market; a high vacancy rate is OK and expected, so long as it is steadily declining month-to-month. The goal is to retain those initial high-rent tenants as long as possible, for maximum revenue once the building does fill in, rather than to fill the building instantly with low-rent tenants.

      • John Bailo says

        You’re still not logical.

        You say the apartments are priced high, which is why they are at 50% vacancy.

        This means there are not enough high paying customers to fill those up.

        Then you propose building more apartments.

        Are those going to be priced high or low then?

        Are you saying that the future apartments will be priced lower than these existing, 50% vacant ones?

        Or will there be this sudden influx of high paying customers? From all that I’ve heard, these people should already be here, and therefore there should be a waiting list and 0% vacancy on the existing apartment buildings.

  2. Ryan says

    The more appropriate headline would have been: Valdez Bait.

    This is no surprise. However, I would add that there are two sets of individuals for whom it “gets ugly.” One is developers, true. The other is existing landlords who may or may not be “developers” per se. What Vancouver’s experience teaches is that the newer units that come on line can usually continue to charge the higher rents, the more aged multi-family housing stock starts to decline in price. Again, all to the good for those that want to live and work in this city.

    • NSBill says

      It also hurts “accidental landlords”. Those that are underwater through no fault of their own, continue to make payments like a responsible person, who can’t sell, but need to move. Maybe you don’t care about these people either, but it does hurt them.

      • Adam Bejan Parast says

        So because you made an investment and it didn’t turn out renters should pay for your mistake in the form of high rents?

      • NSBill says

        Adam, please point out where I said that renters should pay for my mistake. I said that lower rents hurt people in my position. I brought it up as a missing piece to who gets hurt. There are a lot of people in this situation. Why do you think the housing supply in Seattle is practically non-existent? There are multiple books on the subject of “accidental landlord” for a reason. I know it’s easy to be cavalier about hurting faceless, evil developers (but who you also want to build all those apts), but it’s not just them who are hurt. I don’t expect you or anyone else to care really. It’s just another data point.

        Oh, and no, it wasn’t an investment that didn’t turn out. It was a place to live and then circumstances changed and had to move. Big difference. Since I was a responsible person and bought well within my means, I didn’t get a bailout/loan modification/whatever, and couldn’t comprehend just walking away, so at least I get higher rents.

      • RossB says

        Yes, accidental landlords get hurt. So do home owners, potentially. If you want to take out a reverse mortgage, the last thing you want is their to be ample supply of housing.

        Even with that, I sympathize with renters more. Most renters have no choice but to rent. Accidental landlords can walk away from their property, even it means a loss. If that doesn’t make sense, move into the property. I know people in this situation, and while it is bad, I don’t think it is as bad as when rents rise and the renter can’t afford it. In other words, people start sleeping in their car for various reasons. Increasing rent (or a high rent in general) is probably one of the big factors. An accidental landlord (or elderly owner) dealing with decreasing property values seems far less likely.

      • djw says

        Oh, and no, it wasn’t an investment that didn’t turn out.

        Well, yes, it was an investment. Surely when you decided to buy rather than rent, you knew that that choice contained financial upside that renting doesn’t provide, and with that upside comes some financial risk? If you understood this, and decided to go ahead with the purchase instead of renting, you knowingly made an investment. That you may have had other primary motivations for buying the house you bought doesn’t remove this dimension from your choices, regardless of the story you choose to tell yourself.

      • Adam Bejan Parast says

        “Adam, please point out where I said that renters should pay for my mistake. I said that lower rents hurt people in my position. ”

        Ummmmm. I don’t understand. You’re essentially saying low rents are bad because they hurt you, thus you don’t want low rents. You want high rents so someone else’s rent pays to cover your mortgage, a financial investment you made that didn’t work out.

        Both renting and owning have their own financial risks. I rent month to month knowing my rent can increase any time (it has twice) and you bought knowing that you’ll have a fixed payment for the next 30 years. I understand the risks I’m taking and so I don’t complain when my rent goes up. I don’t like it of course, but that is part of the deal. Same deal with my dad. He bought property to develop, market tanked and he just sold it for a big lose.

    • Nathanael says

      In economic theory, grabbing money simply because you hold legal title to something is known as collecting “rent”. There is a very, very, very long tradition in economics which is hostile to rents, because they are the epitome of unearned income, of privilege providing itself with more privilege.

      So a situation which primarily hurts landlords and lowers rent… is generally considered a *good thing* economically. Unless you’re an elitist who believes in titled lords.

  3. LWC says

    Let me pre-empt the normal Ballard contingent and mention that there’s another group who will be hurt by this: people trying to get into or out of Ballard on a daily basis. With no HCT, and surface streets as the only alternative, mobility between neighborhoods is hugely hampered.

    All that to say… we need Seattle Subway, and we need it ASAP.

    • Ben Schiendelman says

      Even before that, if there are enough people, actually taking a lane for transit makes sense.

      • says

        If transport between Ballard & Downtown becomes intolerable, and the City decides to maximize existing capacity, RR-D could be alot faster with transit/HOV lanes across the Ballard Bridge and for the southbound left turn to Mercer. Those two changes would save significant time for transit commutes. All it takes is political will and paint.

      • Adam Bejan Parast says

        @d.p. this refrain is getting a bit old. Lets stay more productive and less sarcastic.

      • d.p. says

        Sometimes — and in Seattle, often — cynicism is just plain justified.

        LWC above (“people trying to get into or out of Ballard [will be hurt by overbuilding and lousy transit]“) and Mike Orr below (“the lag just makes people insist more on parking minimums”) are absolutely correct. There was an implicit bargain to Ballard’s rapid densification, and transit that actually worked was the city’s end of the bargain. It should exist by now, not be sort of on the drawing board with wild variations in potential quality and usefulness.

        This city and its constituent transit agencies have dropped the ball in spectacular fashion.

        Anyway, this is the productive flip-side: http://www.flickr.com/photos/viriyincy/8210188824/

      • mic says

        Yes, d.p., try not to be so negative and just look on the bright side of things, like me.
        (these new meds are really great)

    • Mike Orr says

      Yes, it’s really unfortunate that rapid transit the building boom in Ballard, and that people will have to wait 10 years or more for something faster and more reliable than RapidRide D and the 44. We really need to start putting rapid transit in ahead of development ratherthan letting it lag behind so severely. The lag just makes people insist more on parking minimums.

      • RossB says

        I’m not so sure. To quote the article:

        It [Ballard] has good transit access to downtown, including Metro’s new Rapid Ride bus line.

        If the Seattle Times says it, it must be true. All snarkiness aside, this in some ways is the best part of the article. It suggests that good transit is essential to a good apartment system. I agree, even though I would suggest that Ballard has a long way to go before it has “good transit”.

        Furthermore, with the increased traffic, someone in Ballard will figure out that traffic is a bigger problem than parking. If I lived in Ballard, that would be my opinion. In other words, if I lived in a house in Ballard and was simply thinking selfishly, I would oppose parking minimums. Yes, it would be harder to find a parking spot in that area, but maybe fewer people would own cars in general, thus making my drive out of Ballard a little more tolerable. Then again, those folks are likely to oppose any construction, but since that ship has sailed, maybe they will choose the next best option.

      • Anandakos says

        Mike,

        Who is “we”? It seems to me that Seattle government is doing pretty much what “we the people” want. I say that because there doesn’t appear to be revolution in the streets. In fact, from a weekend spent in a city of mostly smiling folks, it looks like the people in Seattle are pretty happy.

        While it’s always true that government could do some things better than it currently is, when it gets too far ahead of the people or too far behind them, it is replaced. Rather than “putting rapid transit ahead of development — shades of the Shaker Heights Streetcars — it would be better to create LID zones in up-zoned areas to capture some of the increased value of the area, and use that to pay for transit improvements. That way the city is not gambling on development following the tracks, as Portland is with the Eastside Floop line.

      • d.p. says

        someone in Ballard will figure out that traffic is a bigger problem than parking.

        This is already largely true, as you go on to say.

        Though with the transit subjected to the same traffic — plus cherry-on-top detours — there is little incentive for residents new or old to choose to be that “one less car on the road”. Textbook Tragedy of the Commons.

        Also, with the latest Metro reblunderstructure making it nearly impossible to come to Ballard on transit in the evenings, parking in dense and desirable areas has gotten ever scarcer. The well-handwrung parking problem is not imagined.

  4. Ben Schiendelman says

    Absolutely. Our controls on how much housing can be built raise rents. Releasing those allows the market to create situations that decrease rents.

    There are so many reasons our restrictions on building height and amount screw over the poorest people.

  5. says

    Seattle Times has been playing with the title of this article. The print edition says “Ballard’s Risky Apartment Boom” across the front cover.

    Roger above quotes an online title of “Apartment boom in Ballard comes with risk of overbuilding.” Currently at 1:30pm the Seattle Times web site has an article titled “Ballard’s apartment boom comes with risks.” It seems they are downplaying the risk side of the subject since publication.

    They haven’t yet come around to my suggested title: “Apartment Boom in Ballard Comes with Hope of Lower Rents.”

    • Jack says

      The Times got spanked by a really bad article and headline on the ST rail yard plan for Bellevue. I am not surprised they are second guessing themselves today.

  6. Bellinghammer says

    If rents continue to rise unabated, I bet that the Times will probably run articles decrying the lack of affordability in the city. As much as I think they have a strange anti-urban bias, their wild inconsistency leads me to believe that it’s mostly just lazy, contrarian journalism. “A, ~A, QED.” The framing is almost always, “The current state of affairs is A, but some say that A is bad and would like them to ~A. ~A was the way things used to be, and nostalgic return is a great way to inflame sentiments and sell papers.”

    • Jason Mitchell says

      Completely agree. Put another way, if any 10 citizens complain loudly enough about anything local government is doing, the Times will give it front page coverage, put government spokespeople in defensive contexts, and downplay, push down, or flat-out ignore facts, experts, or majority opinions supporting said government action.

      This piece from last spring was classic and entirely emblematic: http://tinyurl.com/dxazboh. What does the story tell us? That neighborhood associations have been working for the park for more than a decade. That funding comes from a levy passed by the entire city for the purpose of acquiring land for parks. That more than 100 neighborhood residents turned up at meetings to help plan the park. That the city has received *fewer than 20 complaints* about the park. The Seattle Times’ resulting headline? “Plan for new Ballard park stirs up battle over parking.”

      Sorry, but there’s no other way to look at that as anything but lazy or sensationalistic or ideology-driven, or some combination thereof.

    • Andrew Smith says

      I wonder if they are crunched for time or something, because most of this stuff is a step beyond laziness.

  7. John Bailo says

    Under your logic, Manhattan should be the cheapest place to live in the US.

    Yet, it’s the most expensive.

    Why?

    • LWC says

      Different time, different place, different story. If Manhattan were currently in the process of replacing many single family homes with multi-family dwellings (i.e. adding supply, like Ballard is), it would be a fair comparison. As it is, it’s apples and oranges.

      Are you really trying to maintain that increasing supply will not lead to suppressed prices? I’m no economist, but I did take Econ 101 at some point along the way…

      • Steve Wight says

        On my first ever visit to Manhattan in September, I was surprised at the amount of land that could be further built up (e.g., in Chelsea, there’s lots of old two story buildings) and wondered why no one would build more given the exorbitant rents of the area. Must be the zoning, and the “maintain neighborhood character” activists.

      • Nathanael says

        Steve, it’s worth nothing that building tall buildings in the most desirable parts of Manhattan is actually *hard*, even if you get past the preservationists; there’s no room to work in, since the existing buildings are jammed up tight on both sides, and there’s a gigantic mess of stuff underground. (Some of the most obvious ‘vacant lots’ are actually contaminated and expensive to clean up.) There’s some serious incentive to retrofit rather than rebuilding, unless you expect to make a huge amount of money.

      • I lived in NYC says

        Steve: The major answer is geological; the bedrock goes deep between Midtown and Downtown Manhatten (including Chelsea). See here.

        We should be thankful, since the result is one of the greatest diverse urban islands on earth–Imagine if Wall Street and Midtown has combined; there would be no smaller scale neighborhoods anywhere south of Central Park.

      • I lived in NYC says

        Well, embarrassment: The site I linked says the bedrock story is a myth! (That will teach me to post before reading my cites carefully.) This link has more on the subject.

    • Mike Orr says

      Furthermore, if other cities had as good a good walkable environment and comprehensive transit as New York, it would diffuse the population demand and make rents more equal between cities. There’s a chunk of people in Manhattan who will never leave: those who want to live in the #1 city or live within ten blocks of Wall Street or are lifelong New Yorkers. But there’s another large chunk who just want a convenient non-driving life: lots of walkable destinations and fast/frequent transit to all parts. It doesn’t have to be New York in particular but there are few other choices in the US. The only cities whose walkability/transit approach New York’s are DC, San Francisco, Boston, Chicago, Philadelphia, and maybe a couple others. These are the SAME metro areas that have higher rents than Seattle. (Exceptions: Chicago is at par; I don’t know about Philly; and Los Angeles is at par.)

      The only conclusion is that demand for walkable/transit-oriented environments has far outstripped supply. Increasing the supply in other cities would shrink the demand in New York and San Francisco which has led to a $3000 rent crisis there.

      It can be done in small cities! In Germany even cities the size of Bellevue have frequent trams that go underground in city centers, and walkable neighborhoods, and regional trains to all cities throughout the country both large and small.

      • John Bailo says

        So then it would make sense to build brand new “walkable cities” out in the middle of nowhere where land is cheap.

      • djw says

        People don’t want to live in the middle of nowhere. They want to live in Seattle and New York. (In part because of walkability, but mostly for other reasons). It’s probably never going to be cheap to live in these cities, but it can be less expensive if we let people build housing where people want to live.

        For as much as conservatives love the rhetoric of free markets, they seem very confused and frightened by actual ones. This really isn’t as complicated as they’re making it out to be.

        (The Times article makes perfect sense, as long as the financial interests of rentiers are identical to the health of the economy. It’s quite revealing, actually.)

      • John Bailo says

        Ok, I just wanted to confirm the same circular logic.

        They want urbism.
        But they only want it in Seattle.
        On land owned by Vulcan.

        Thanks…I’ll just read the brochure next time…sorry to have disturbed the seance.

      • Lack Thereof says

        There’s a chicken/egg problem with building a brand new walkable city out on cheap land in the middle of nowhere. No one wants to live there because nothing’s there, and nothing’s there because no one lives there.

        Find an underdeveloped neighborhood in Seattle and you can quickly grow it into a walkable urban village with just a couple of zoning changes.

      • djw says

        There’s a chicken/egg problem with building a brand new walkable city out on cheap land in the middle of nowhere. No one wants to live there because nothing’s there, and nothing’s there because no one lives there.

        Right. Also: there aren’t many jobs in the middle of nowhere. What makes cities desirable places, especially for those who prefer walkable/transit lifestyles, isn’t something that can simply be created overnight by central planners. Governments try this occasionally; they generally fail, unless some radical steps are taken to draw jobs in the new planned city, like making it the new capital (Naypyidaw, Brasilia, Canberra, or from a much earlier era, Petersburg). Even then, such cities experience pretty profound growing pains in the early decades. They tend to be built by governments rather than private investment because it’s really not a viable strategy for profit-seeking entities. The best, most functional cities, tend to grow more or less organically.

        At any rate, I’ll make you a deal: let’s write the law to let people invest in both. Assuming environmental impact issues are dealt with, I support not using the coercive power of the law to excessively restrict building apartment buildings in neighborhoods people want to live in in Seattle, AND not using the coercive power of the law to prevent some ambitious investor from trying to build a new giant walkable city on cheap land in the middle of nowhere. I’m happy to let private investors decide which is a better investment.

      • DanG says

        John – You seem to think you are a lot smarter than you actually are. I think half your issue is an inability to comprehend that there exists a multitude of conditions between the polar extremes in which you categorize and attempt to “analyze” everything. Think more about what’s being said, less about generating a rhetorical device that makes your position “right” only through some twisted logic and then you might bring something to the conversation.

        /Keep on trollin’

      • John Bailo says

        Seattle will be the new Ghost City

        China’s ghost towns and phantom malls

        Investment in infrastructure accounts for much of China’s GDP – the country is said to have built the equivalent of Rome every two months in the past decade. And with such a large pool of labour, it is harder to put the brakes on when growth slows and supply outstrips demand.

        http://www.bbc.co.uk/news/magazine-19049254

      • djw says

        At this point, it’s pretty obvious that you’re trolling and I really shouldn’t bother to respond, but it’s worth pointing out how absurd this comparison is. On the one hand, we’re talking about an authoritarian state, drunk on its own ambition, building monuments to that ambition. On the other hand, we’re talking about a local government enacting a zoning policy that allows private investors to decide how many apartment buildings they want to build. The difference in incentives and likely behavior here couldn’t be more obvious.

        Conservatives often lecture liberals on how they underestimate the positive power of markets. Occasionally, they even have a point. I guess sometimes we need to return the favor.

      • Mike Orr says

        Yes, it would theoretically be possible to build a brand new walkable city. If only Klahanie/Sammamish were that. Of course, the developer would have to arrange for it to be on an all-day transit line and to attract a variety of businesses (diversity of jobs). But it’s much easier to start with the core of existing towns that used to be more urban in their history, whose infrastructure is already there, and whose people have already accepted the idea of a town center there.

      • Nathanael says

        I live just outside a very nice small walkable city.

        What’s my problem? *Poor intercity transportation*. Well, there are planes (yuck), and there are a startlingly large number of buses (I get motion sick, so yuck) pretty much all of which go directly to NYC. To go to a neighboring city (necessary to get specialist medical care without staying overnight in NYC) there is no option except to drive.

        People like to be *connected*. You don’t want to build brand new walkable cities in the middle of nowhere (Alaska? Wyoming?), you want to build walkable within a short train ride of a city which already exists. You know, like Kent is within a short train ride of Seattle. :-)

        A walkable Kent with frequent trains to Seattle is actually a completely viable type of suburb which is very popular whereever it exists. Some of the most spectacularly expensive suburbs in the US are the “streetcar suburbs” and “railroad suburbs” of Philadelphia and NY. People still want to be able to get easily and quickly to the large variety of amenities which is *only* available in a big city — only available there because only with a large population can you *have* a large variety.

  8. Tim Whittome says

    I couldn’t agree more that we need more development and nice modern buildings where in many places there are just holes in the ground or vacant lots.

    Eric Pryne is someone I used to write to a lot about Insignia on 5th and Blanchard in downtown Seattle. This twin 41 story complex is very exciting but I couldn’t get him excited at all about the project. I think he has an economist’s view that supply and demand must always be in equilibrium for things to work out. A slight excess of supply in housing or commercial real estate is good for us but not for the developers whilst an excess of demand is the reverse. I tend to veer more towards the idea that supply needs to run ahead of demand when it comes to building but not to be so far ahead Marion Jones style that prices drop and developers cannot afford to build more! When it comes to economic recessions, demand needs to exceed supply in order to generate the economic incentives to fullfill it and to boost the economy.

    • RossB says

      I think that makes sense for this sector of the economy. I would say there are a couple other things to consider. If the Ballard apartment boom collapses, will it take anything else with it? I doubt it. Some folks might get hurt, but building (in other parts of the city and state) will continue. The workers (of all types imaginable) can simply move to the other areas.

      The other issue is what it does for the city in general. If we overbuild housing (anywhere), it is good for poor people. Cheap condos in Burien (and I mean really cheap) mean that some folks can afford to live really cheaply out there. In this case, cheap housing in a very vibrant part of town would mean that more people can afford to live in that area. I think this is a good thing. A poor tenant in Ballard can more easily and cheaply travel to a job if he or she doesn’t own a car. I think it is a good thing in general, as someone in Ballard will likely be easier on the environment and the overall infrastructure than someone who lives in the suburbs.

  9. RossB says

    When I read this article this morning, I wondered if you (at Seattle Transit Blog) would comment on it. In general it wasn’t too bad an article except for two things:

    1) The misleading headline (The National Enquirer would be proud).
    2) Not putting this article in the business section. The fact that Ballard is going through an apartment boom is news (perhaps) but the fact that many may lose their shirt is just a business article. Consumers (renters) will be better off, but owners and developers could be hurt (if their really is a collapse). Sounds like the kind of article that belongs next to those dealing with hog futures.

    I’m surprised you didn’t mention one of the more interesting quotes form the article:

    It [Ballard] has good transit access to downtown, including Metro’s new Rapid Ride bus line.

    Really? Maybe if the Seattle Times says it, then it will become true? It is nice that the Times acknowledges that transit is good for something.

    • Mike Orr says

      “It [Ballard] has good transit access to downtown, including Metro’s new Rapid Ride bus line.”

      “Really? Maybe if the Seattle Times says it, then it will become true?”

      Jarret Walker says it too.

      I guess there really is something about that red paint, it makes buses go fast like fire engines.

  10. Morgan says

    The housing market is quite imperfect, in the academic sense. Many are throwing about conventional assumptions about supply & demand & price as if we were looking at the market for pencils or shoes. The premise that adding housing units will apply downward pressure to rents isn’t as simple as suggested.

    I think that adding supply significantly stimulates demand. Cap Hill, for example, wouldn’t be a desirable place to live w/o the density. I’ll suggest that driving down prices by building additional units is analogous (weakly) to driving down congestion by adding road capacity.

    I’m not saying don’t build. I’m saying don’t do it in the name of applying downward pressure on prices. We need to recognize the housing market’s imperfections and that housing has many qualities of a public good, and we should manage it accordingly.

    • GuyOnBeaconHill says

      No developer is building to create cheaper rents–I think that’s obvious. They are building where there looks to be an opportunity to keep prices high. If rents in other neighborhoods fall and properties become financially unproductive, the developers will take a look and see if the failing properties can be rehabbed or redeveloped into newer, more productive properties. That’s the nature of free market competition: investors are always trying to maximize their profits.

      The problems start when investors fail to recognize that they are part of a larger economic ecosystem. Does the building strip mine the neighborhood of its charm? Are the builders dumping battery acid in the economic river? Do the new constructions create a smog of blandness that lead to widespread economic asthma in the neighborhood?

      There are plenty of risks with the new Ballard building boom. Ballard will always be close to downtown and the U District, but if this building boom doesn’t create a successful neighborhood, the results will be disastrous. If the D Line and the faster 44 don’t adequately serve the mobility needs of the new Ballardites, we’ll see more cars, congestion and a less desirable living environment. If the new Ballard construction drives out the unique businesses of old and replaces them with modern retail banality, the new neighborhood will be less attractive and the larger economic ecosystem will be damaged.

      • RapidRider says

        “Does the building strip mine the neighborhood of its charm?”

        This right here is what I’m worried about. I see it happening on Capitol Hill, where the only things that go into the new buildings are dry cleaners, tanning salons and large, soul-less chains like Z Pizza, GameStop and frozen yogurt shops, as small, one-off businesses and restaurants can’t afford to take chances with the higher commercial rents the new buildings demand. All of a sudden, the reason why people wanted to live on Capitol Hill is gone.

        It’s started in Ballard with the Leva, Hjärta and Canal Station. I only fear it will continue with Avalon Ballard, Market Street Landing and Ballard Jacobsen. And how long until our precious downtown is bulldozed over and turned into bland commercial storefronts in the name of density?

        But density and uniqueness don’t have to be polar opposites. Portland and Chicago are two cities that come to mind that are able to keep both. Seattle, however, seems completely unable to reconcile neighborhood density with allowing the uniqueness of each neighborhood to thrive. The fault lies with both the developers, with no incentive to allow small businesses to rent and the Seattle DPD for rubber stamping condo buildings with no concessions sought by the city.

        The way Seattle is heading, in the future, neighborhood names will just be a formality, a stop on the Seattle Subway, harkening to what used to be, before the neighborhoods became one bland, homogenous entity.

      • Mike Orr says

        Capitol Hill is changing, but it’s hard to say if it’ll be worse or just different. Seattle has been creating a lot of local businesses, and as those buildings age they’ll probably get more of them. Yes, it would be nice if the storefronts were deep rather than wide, but that just seems to be unattainable in this era. To me the main issue is, if we want people to drive less, we need to have more urban housing so they have a viable choice. It could be on Capitol Hill or Columbia City or downtown Burien, but Capitol Hill is the largest and most successful urban village so it’s easier to expand it than to build them elsewhere.

        “how long until our precious downtown is bulldozed over and turned into bland commercial storefronts in the name of density?”

        Aren’t the bland commercial storefronts already there? Pike Place is protected and will be for the foreseeable future, but I wouldn’t call Pine Street a mecca of small, independent businesses. And the highrise core between Pike and Yesler is just an office wasteland: it sorely needs more retail and residential to balance it out, so that it doesn’t become a ghost town at 5 o’clock. The only way to do that would be to bulldoze office buildings.

      • RapidRider says

        Beyond my first paragraph, my comment was mainly geared towards Ballard and its downtown. I would love to see an example of a downtown with the same character, businesses and uniqueness that has been replicated with the type of buildings that Seattle developers seem to love.

        Again, I’m not against density, I’m just against the bland, homogenous density that Seattle seems to attract. Like my original comment, why can’t we have similar buildings to Portland, that look nice and still attract unique businesses that aren’t boring chains like Subway or Sprint stores.

      • Matt the Engineer says

        @RapidRider I think we see the same thing on the street as we see up in apartments. Build something new and shiny and you can charge high rents. This leads to boring chains.

        The problem is, if you just ignore increasing demand this will happen anyway. Homes will increase in value over time, as will storefronts, unless you add capacity. What you need in Ballard is a second street of storefront – add supply and you’ll reduce prices and let the Mom & Pop stores afford rent.

        We have the same issue on Upper Queen Anne. There’s really only one retail strip, and small stores are renting at upwards of $5k a month (that’s for the old ones, I imagine the new ones go for more) which has driven quite a few interesting shops away. The reason prices keep going up is that there’s a lot of demand for that strip, and what we end up with is high-end botiques and no burrito shops. What we need there is to extend development down Galer and McGraw, and someday 6th W, to eventually create a retail loop instead of a strip (if demand ever grows that much). Of course, we’d build apartments or condos on top. [/dreaming]

    • Eric H says

      I’m not sure what you mean that the housing market is “imperfect.” People buy what they can afford, more if they can, less if they can’t. When they make more money they buy more, or they rent more. Sellers attempt to profit by identifying market sectors in high demand, building units, and selling them.

      I don’t see any imperfection there. It’s complicated, true–few markets are more heavily regulated. But it’s a very rare, very unusual good where increased supply makes prices go up. That’s akin to suggesting that increased oil production in North Dakota is making oil prices go up.

      • Bernie says

        I don’t think a housing boom makes prices go up; for like valued properties. However, it does tend to replace low price options with higher priced options. That forces those who can’t afford the high priced spread out of neighborhoods (i.e. gentrification). Like freeways there is an element of “induced demand”. Build a bunch of high priced condos in Belltown and suddenly “everybody” decides it’s a hip place to live and wants to move there. As for regulations zoning is essential to creating a livable city. Impacts on transportation, schools, utilities are very real. And yes, neighborhood character is also important to either preserve or shape. The lack of effective regulation on the financing end was the major driver of the housing bust. It allowed banks to make vast amounts of money without assuming the risk.

    • Neo-Realist says

      i.e., a lot of poor people congregated anywhere is a recipe for trouble. On the other hand, if the neighborhood is gentrified and some of the poor is forced to relocate, the mix of better to do and poor makes for a very enriching cultural environment, e.g., the fort greene and bushwick sections of Brooklyn, NY.

    • Nathanael says

      Studies of subsidized housing show that it works *waaaay* better to have a mix of about 50% subsidized, 50% market-rate than to have a giant concentration of nothing-but-poverty. There are many possible explanations for this, but it’s an empirical fact.

  11. Geoff says

    My only problem with the development in Ballard is the lack of variety in style. Everything being built is of the massive dorm style mold, buildings that absolutely suck to live in, IMO.

  12. Bill says

    Affordable housing is a social justice issue. Many of the people who do so much for our city – teachers, police officers, and nonprofit employees (just to name a few) – may not be able to find affordable housing in Seattle thirty years from now. Although everyone in the city has contributed to the major infrastructure improvements downtown and around Capitol Hill, many public employees have already been priced out of those neighborhoods, the same way that they have been priced out of many of the neighborhoods in New York and San Francisco with the largest public infrastructure projects. If our mayor and city council do not act now to preserve adequate amounts of workforce housing, only the wealthiest citizens will be able to reap the benefit of the walkable, transit friendly neighborhoods we are finally creating in Seattle.

    How do we do this? One way is to give developers an economic incentive to dedicate a percentage of their buildings to pure workforce housing forever in exchange for additional building heights. If they want Amazon execs spending money on the million dollar views, they need to make sure that a public school paraprofessional can afford living on the second or third floor, this year and thirty years from now. We are already doing this with the Yesler Terrace project and other projects but we need to be more aggressive and perhaps be willing to offer even higher heights and even more pro-developer benefits in exchange for ensuring that working class people will be able to continue to live in Seattle generations from now, in a way that they won’t be in Tokyo, Moscow, San Francisco and New York. People should not be discouraged from taking a lower paying public service job because they want to be able to continue living in a city. Seattle must preserve access to affordable housing before it is too late.

    • Nathanael says

      “One way is to give developers an economic incentive to dedicate a percentage of their buildings to pure workforce housing forever in exchange for additional building heights”

      Mixing a percentage of subsidized housing in with “market-rate” housing seems to be the best way to provide subsidized housing, according to all the studies I’ve read.

  13. phil says

    Many of the new big apartment buildings being built around me (Uptown & Belltown) are being financed/owned by REITs or private trusts. They aren’t going to hurt by short term overbuilding, they’re in it for the long term investment.

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