I think Sherwin’s piece rightfully complained about the commercial environment on 3rd Avenue; no one can argue that payday loans and smoke shops make for an attractive streetscape. But to counter Sherwin, I don’t think that adding a more desirable slate of businesses (as if one could just do so by fiat) would fix what is an undoubtedly structural problem. Fixing the shops is fine, but it doesn’t fix the shoppers. We have a huge number of workers, tourists, the homeless, and a small number of the condo-owning elite. Missing are the middle-income folks so common to all our other neighborhoods: hipsters, students, immigrants, and families with kids.
In my opinion, downtown’s problem is most easily seen by looking at income inequality. Not enough people live downtown, and we have made it largely illegal to develop residential space downtown (most new construction is in Belltown/Denny Triangle/SLU). As a result we have encouraged housing policies that are doubly exclusionary – where the middle and upper-middle classes are excluded by both the very rich (due to the economics of new construction) and the very poor (due to government support for deeply subsidized housing and centrally-located homeless shelters).
Now some data. One quick and easy way to measure income inequality is to divide mean household income by median household income and look for positive skew (>1.0), indicating that a small number of very high incomes distort the otherwise representative value of the mean.
Central neighborhoods (Downtown, Belltown, Pioneer Square) really stand out for their inequality. Downtown, Belltown, and First Hill are rich and unequal. Pioneer Square is poor and unequal. Bellevue, by virtue of its general lack of poverty, is rich and equal. The most livable neighborhoods in this limited analysis, Capitol Hill* and the suburban counties, are middle-class and relatively equal. (*Capitol Hill is becoming more exclusive every day, and this data only captures the more affordable portion of Capitol Hill bounded by Aloha, Pine, I-5, and Broadway. )
Downtown Seattle is an economic powerhouse. We have more than a quarter million jobs downtown, the most of any Central Business District for 1,000 miles. We have fantastic amenities for tourists, arts patrons, foodies, and sports fans. From downtown, almost any location within a 3-county area is reachable via a one-seat ride on buses, ferries, and rail. But what we don’t have is nearly enough housing and the attendant business housing brings: hardware, groceries, daily necessities.
What’s more, downtown rents command a 50% premium over competing neighborhoods like Capitol Hill, even without the wealth of urban amenities that make those other neighborhoods generally superior places to live. In addition to the linked combination of wealth and destitution, there is a certain inertia to downtown rents that resists market pressures. Developers can add, say, 10% of the cost in high-end finishes and easily charge more than that as a premium. These hurdles to affordability are intractable.
So what to do? I want to push back against the notion – pushed by some fellow STB bloggers, Ryan Avent, Matthew Yglesias, etc… – that we can build our way to affordability. I’d argue that demand is so robust, downtown space so precious and limited, and the availability of high-income imports so strong, that we just can’t build enough to make the city cheaper. (Even if we tried, Shoreline, Lynnwood, Covington, et al…would still always be relatively more affordable). The only way to make downtown more livable is to make it richer and infuse it with permanent residential growth. We should build whatever the market can take, accept the high-end rents and sale prices that entails (I personally couldn’t afford to live downtown), and let our vast single-family neighborhoods upzone modestly to absorb the new middle classes that our world-class downtown will sadly (but necessarily) exclude.
I reluctantly argue for outright gentrification, despite its social costs, only because the alternative (sprawl, greenfield development, flight of talent and capital away from the city) is even worse. The social costs of institutionalized poverty and lack of housing supply simply exceed those caused by gentrification, and it is the proper role of government to mitigate those social costs, NOT through the artificial restriction of housing supply but rather through the provision of enough subsidized housing.
I’m not arguing for mass teardowns of historic buildings, or high rises everywhere. What I’d like to see are more mixed residential-commercial properties, select teardowns (parking garages/surface lots, single-story structures, single-use buildings (post office etc) and renovations of blighted properties. If we don’t take these new arrivals, the suburbs will. We need their talent, creativity, incomes, and the life they will bring to our city. Downtown’s future will be bright if we let it be, but it will be a rich future. Despite the misgivings of our progressive consciences, isn’t a rich future better than a poor one?
100 Replies to “Downtown’s Inequality Problem”
Appreciate the sentiment of your last sentence. Nice article, Z.
And thank you for calling my attention to the lower paragraphs of the posting, Lloyd. Zach, wherever I end up living in Seattle, and I plan to live here for the rest of my life, I’ll welcome your vision for this city exactly as much as I’ll welcome another outdoor drug market.
In an nutshell, to cure a sick animal you don’t call a taxidermist. And you don’t want an embalmer heading your medical team, no matter how talented. Personally, I know this is a matter of personal experience and memory- but I’d take the Chicago and the Detroit of my K-12 years before 1963 a hundred times over the stratified boutique envisioned above.
In both of those places, Downtown was a place where people of many income levels could live- and more important, earn a living because they could work there. Making things, not just buying things.
I had a defining experience in your urban vision in South Lake Union last week. Looking into one of the new buildings on Harrison Street on my way to the streetcar, I thought I saw an espresso machine just past the elevators. I’m always looking for new cafes.
I walked into the lobby, and was about to pass the central elevator bank, when a barrage of alarms went off. A private guard in a sports jacket came up to me and admonished me about setting off the alarms. A place where an intending customer without proper credentials is a trespasser is blight I’ll fight with every fiber.
I don’t care how good the transit is.
Not entire sure what happened, Mark, but it sounds like you might’ve mistaken a corporate kitchenette for a public cafe?
We’ve got a full-on commercial espresso machine at my office. We would be upset if strangers who saw it wandered into the office looking to score a cappuccino.
As to your main point, there’s “downtown,” and then there’s Downtown. Downtown Ballard (which I assert is a perfectly valid and increasingly popular name for the commercial district also known as Old Ballard), for example, has a much different feel than Downtown Seattle.
Downtown Seattle doesn’t have to be solely the purview of 9-to-5ers. It could support a much healthier mix of retail and indeed more housing. But just as people like to be located near other people, businesses often like to be located near other businesses. Downtown Seattle could expand its offerings to better cater to the residents of Belltown, and to residents taking our shiny new subway system, and to the bridge-and-tunnel nightlife crowd. You don’t need tons of apartment blocks to have an enjoyable, useful commercial neighborhood.
I was dismayed by the last sentence. After a thoughtful analysis and interesting data, the author resorts to saying we only have two choices: poverty or gentrification. There is clearly much more to this complex situation, and increasing inequality is not a solution.
And, if you’re really a fan of gentrification-as-solution, I suggest reading more about the backstory. This case study from Portland is great history and the lessons can be generalized: Bleeding Albina: A History of Community Disinvestment, 1940-2000
Need to also to help distribute the various social agencies from the core…Lohi, phg, sha, the diocese,etc… And have a local school…
As that’s flat out not going to happen because it would involve forcing people to move, isn’t the answer to build more in downtown?
A couple of clarifications here. Ben, who’s talking about forcing anybody to move anywhere? Considering the upscaling of Ballard these last years, my wife an I could have to move any time. We’d love to live Downtown- provided there’s rent we can afford- or we can earn wages to let us pay more.
And what’s the truth about it being made “illegal” to build residence Downtown? If this is what’s been blighting the area for thirty years, like any other stupid law, it can be changed.
Who benefits from laws making living Downtown illegal, if this is in fact the case?
This is a brilliant post, one of the best I’ve ever seen on STB. It makes the crucial point about downtown’s problems – they stem from inequality. Not from a lack of policing, not from bad design (though there’s plenty of the latter), but from the economic policies of the last 30 years that said “the market will fix everything.” No, it won’t fix everything, and some people are losing out. They happen to be congregating downtown, and no amount of panhandling ordinances will solve it.
I really like how Zach put this:
“The social costs of institutionalized poverty and lack of housing supply simply exceed those caused by gentrification, and it is the proper role of government to mitigate those social costs, NOT through the artificial restriction of housing supply but rather through the provision of enough subsidized housing.”
This is absolutely right. The laws of supply and demand won’t solve the economic crisis, at least where it comes to affordability for the low end of the income spectrum. But it will help a lot of other people in the middle, especially if there is a lot of new housing construction. Many of us who live in Seattle now can only afford to live here because of previous waves of new construction, especially those that took place before more restrictive rules were imposed in the ’80s and ’90s.
But for those in greatest need, those who have been hit the hardest by 30 years of right-wing national economic policy, part of the answer is subsidized housing in one form or another. The market will never save us. So we have to step up and do it ourselves.
Another part of the answer is to reduce other costs of living where possible, particularly transportation costs. Poor people across the country, and I would assume this is true in Seattle, pay significantly more of their income for transportation than others do. It’s one reason people become poor.
This is one major reason why I reject arguments that transit policy should be one of investing in high-ridership corridors at the expense of lower-ridership corridors, or that we should favor frequency at the expense of coverage. Proper transportation policy provides both frequency AND coverage, providing a mix of routes and services so that the greatest number of people have fast and convenient transit available to them. That reduces costs and saves money.
There are a lot of people who would love nothing more than to “clean up” downtown by essentially rounding up its low-income residents and shipping them somewhere else – probably to a suburb. But we’re not doing ourselves any favors if we simply recreate the conditions of postwar America in reverse, with urban centers getting all the love and the suburbs becoming slums.
Urbanist policies need to be informed by deeply progressive economic values. Zach’s done an excellent job of laying out how that works downtown in this post. Well done.
Downtown Seattle illustrates the reality that our nation is polarizing into 2 groups: the subsidized and the subsidizers. The number of families that can afford to live without some sort of government subsidy is dwindling. In addition to the welfare recipients we see downtown, I also include things like education loans, transportation subsidies and other tax write-offs in the list of government subsidies that more and more families need to stay afloat. Meanwhile we see the individuals in the now-famous 1% claiming that they are the engines of our nation’s economy and that raising their tax rates will only stall the economic recovery. But the real question is whether the billionaire in the downtown penthouse is subsidizing the bum in Pioneer Square or is the bum subsidizing the billionaire?
Did you just finish Atlas Shrugged or something? :)
“But the real question is whether the billionaire in the downtown penthouse is subsidizing the bum in Pioneer Square or is the bum subsidizing the billionaire?”
The latter, just to be clear.
It’s not just that. Newer construction also commands higher rents – who would’ve thought? So you can build as many new residential units as you want. It wouldn’t make rents more affordable. The only things that work are:
– protecting the rents of existing affordable units
– mandating some share of affordable units in new construction
Rent control is a disincentive to property owners and results in folks who are not the intended targets becoming the renters…
Rent control is one thing, helping protect the buildings with affordable housing in them is another.
We shouldn’t even have a concept of “buildings with affordable housing”. SHA buildings are the pits, and any affordable-housing project is doomed to be the same.
If you want to encourage housing development, subsidizing rents is a much more effective policy than limiting them.
Similarly, though tangentially, I would love to see the government abolish the minimum wage in favor of wage subsidies. The minimum wage is a tax on productivity, just like rent control is a tax on development. Both of them are supposed to protect the poor, but actually hurt them.
In a discussion of Seattle zoning, “affordable housing” is not a synonym for “low-income housing”. They are very different things. “Affordable” units are not subsidized, except in that they can help you qualify for zoning bonuses (i.e. extra height) in some areas. An “affordable” apartment must initially rent for 1/3 of the average Seattle household income, which last time I checked works out to somewhere in the neighborhood of $1200/mo.
“Low Income” housing will be directly subsidized by SHA or a large nonprofit, and will rent for 1/3 of the applicant’s income. This is often somewhere in the neighborhood of $400/mo or lower, but varies greatly depending on each tenant’s income.
There’s a sizable gap in the market where low-income housing ends and market rate housing begins.
Yep, big doughnut hole. Government needs to start loaning money to folks like Lack which have a proven history of making rent payments equal to the mortgage payments instead of funding housing for people that just abuse the system. I’ve been there. Buying our first home was a bitch even though it would have saved us hundreds of dollars a month over the 3-5 years of solid credit history we had plus the 10% down payment. But it seems policy is more about buying votes than houses.
I quibble with Zach use of “the city” although I would probably agree if he used “the center city”, ie the inner ring neighborhoods around Downtown. I doubt there is a world class city anywhere where housing downtown isn’t unaffordable to most people in the region.
In my opinion it’s more a few specific neighborhoods, central ones, not “the city”, which have a hard time building themselves out of high demand. There will always be expensive neighborhoods, Queen Anne is a perfect example, but on a city level, if Queen Anne wasn’t there where do you think all the wealthy people that can afford a house or condo there would want to live? Fremont, Ballard, Capitol Hill? Through rising housing costs the wealthy people from Queen Anne would displace people in other parts of the city… ie gentrification.
I think I’m in essence agreeing with the general premise that Zach is proposing, but I disagree that high housing costs in a few neighborhoods means that creating affordable housing on a city wide level through the use of market forces is not critically important or generally doable. I would wholeheartedly agree that the role of affordable housing needs to grow in the future, but I think the importance of market based housing in creating a overall improved affordability of the city is greater than the more targeted ability of the public sector to proved subsidized affordable housing to those that can not afford market priced housing.
I also would also add that getting development in neighborhoods throughout the city, not just the hip neighborhoods is important. I think that this is a perfect place in which government can act as a catalyst to get projects in neighborhoods that might not otherwise have the market forces to support new development. I would also add that HCT is a important tool many regions have used to allow people to live in more affordable housing outside the city center but still have access to jobs and education.
I agree with you Adam, there simply will never be enough money to building enough subsidized housing. We should consider, however, breaking down existing barriers to market-rate housing. Why, for example, are there still so many parking lots downtown? Why are there so many unfinished pits around town?
We need to figure out how to create the right incentives to get infill to happen.
One more thing. A parking spot downtown (depending where) can be worth $300 a month even if no one uses it on the weekends. A typical apartment is going to be the size of at least three parking spots, and costs much more to build, rent out, and maintain. This kind of puts a minimum price on things and the high price of parking also helps keep dozens of garages and surface lots in business throughout downtown. Maybe a higher tax on parking can help spur development.
You’re right, developers always build for the high end. More construction will not result in any initial rent drop.
However, today’s expensive high-end apartments are 2050’s mid-range affordable apartments.
We’re coming off of 50 years of restrictive zoning, and there is a hole in the market where middle aged, mid-to-low priced apartment buildings should be. Nothing we do now can immediately correct this problem, but we can try to avoid having this happen again in the future.
That’s exactly right, new construction won’t be cheap but it can move other, older housing supply into a more affordable category. If new housing is constructed downtown, I might desire to live there, but desire is not the same thing as demand so I’ll likely be living in other neighborhoods–at least until about 2050.
We all desire a downtown penthouse, a spiffy new Lexus and month-long vacations in Hawaii, but
It’s categorically impossible for new construction to be cheaper than old. Even if a developer built with no amenities at all — Formica countertops, used appliances — new materials cost money, and modern building codes are expensive to implement. The absolute cheapest new construction I’m aware of are the “apodments”, which are effectively dormitories — units don’t even have their own kitchens — and they still cost $500/month for a room. (Incidentally, those “apodments” have granite countertops, further proof that what people think of as luxury has little to do with what things actually cost.)
Like any other manufactured (and unlike land), buildings depreciate. The initial owners and residents pay extra for that depreciation. The only way around that is to have the government subsidize that depreciation, as it does for designated affordable housing. Otherwise, the only cheap units are old units, just like the only cheap cars are old cars.
Of course, if we don’t build lots of new units now, we won’t have lots of old ones in the future. :)
From 1950 to 2000 Seattle’s density was essentially unchanged (it annexed land). But people per household dropped from 2.7 to 2 increasing the demand for housing units. That 2.0 ratio remained steady between the 2000 and 2010 census. The population increased by a shade over 45,000 meaning an additional 22,500 housing units should be needed. In fact the number grew by 38,000. Simple supply and demand would suggest an inflation adjusted reduction in the cost of housing but even with the reset to 2006 prices that hasn’t happened. Note that the number of housing units has in both cases exceeded the number of households; 9% in 2010 and only 4.4% in 2000. The answer isn’t in the supply side but in the demand for nicer (i.e. more expensive) housing units. Developers are supplying what the people demand and lots of it. I’d bet the same trend holds for coffee, cars and food.
Plenty of affordable space in the Rainier Valley, Renton and Skyway.
what about the ….black people…? Gotta love Seattle liberals
Affordable… so long as you don’t want more than 500 sqft. And so long as you have a high enough income to get past the competitive rental application.
Renton and Skyway aren’t part of Seattle. Renton has been looking at annexing Skyway but potential changes in State tax incentives have for the time tabled that (and made Kirkland hopping mad).
This is nonsense. You build new expensive apartments, and *the price of everything else goes down*.
Yes, the poor will always live in older (more accurately, less-recently-renovated) apartments. If you don’t keep building new (or newly renovated) apartments, those will eventually be REALLY old and you’ll have a serious problem.
See also: Pioneer Square.
What’s wrong with putting most new downtown residential development in Belltown? If I were looking for a place to live downtown, the last place I’d want is right in the middle of the office core, surrounded by buildings that are animated only 10 hours/day, 5 days/week.
Residents want to live in a neighborhood that is, well, residential.
It’s a bit of a chicken and the egg: You don’t want to live in a place because it’s only animated 10h/5d, but it’s only animated 10h/5d because no one lives there.
Most of the office core is already filled with large office buildings that are not going away. Yes, you can squeeze in a few apartment/condo towers in here and there (e.g. tower @ 5th & Madison, on the Bank of Cal block), but it doesn’t make it a residential neighborhood.
Not really, There are crap-tons of parking garages downtown. If you walk around enough, you realize that most of the buildings on 2nd are parking parking, and there are parking lots and garages sprinkled here and there through out the area. When you get north of westlake, it goes to at least 50/50 parking lots, and SLU is chockablock with parking as well.
Timely (if Belltown-y): http://seattletimes.nwsource.com/html/businesstechnology/2017734289_viktoria13.html
What about places like belltown, which despite having some high-rise housing and a reputation for nightlife, feels like a ghost-town much of the time… and tons of empty space—and yet it’s like 5 feet away from downtown.
Why on earth isn’t there more housing getting built there (along with the retail it attracts)? It’s like everybody forgot to tell the builders the place is there…
Separating residential from commercial development is how we got into this mess in the first place.
Many of those large office buildings have residential floors, and others could easily be retrofitted, if it were permitted in zoning and the economics made it worthwhile. Also, there are tons of surface parking lots, structured parking garages, and relatively short buildings, any of which could be replaced by high-rise with residences if it were allowed and economically feasible.
Plus, Belltown has even fewer grocery stores (0) than downtown (1). :)
Anyway, be careful when you say “residential neighborhood”. Of course downtown and Belltown are never going to feel like Queen Anne. They’re the city center. But many people want to live in places like that — look at downtown/midtown Manhattan, for example. There’s absolutely no reason you can’t have a thriving, ultra-urban district with 24/7 activity, except for the fact that it’s currently illegal. And until then, we’re wasting a huge amount of land for 75% of the time.
The rents listed above tell me that there are people that disagree with you.
Are you referring to the chart? Because that includes Belltown…
If you’re honestly making the argument that rents downtown are low, I’ll do the research for you to prove otherwise. But please don’t waste my time.
Actually, the average rent in downtown neighborhoods is shockingly low, but that’s because most units are subsidized. In 2000, here are some average contract rents (based on urban center boundaries):
– Pioneer Square: $193
– ID/Chinatown: $255
– Commercial core: $344
– Belltown: $598
– Capitol Hill: $668
– Outside all urban villages: $727
But the same chart tells us that 153 units (10%) rented for over $2,000.
It would be nice if there were a way to find the average price of market-rate units only.
No, *you* want to live in a neighborhood that’s residential.
You want to live in a neighborhood that’s? Agricultural, ridden with crime, industrial, what?
Me? Some residential, some commercial. Some light industry never hurts either. If I can walk to the bus or the shop, or the neighborhood local, great. And if I can walk to work, I’ve hit the jackpot.
A short transit ride is almost as good as a walk.
This hardly describes anything unknown or impossible. If fact, I’ve probably described many a nice ‘hood.
I’d like a mixed commercial-residential neighborhood. I know a *lot* of people who are not farmers but who prefer to live in essentially agricultural neighborhoods (it’s a common fantasy, and we are near enough to the countryside in Ithaca to do this). I’ve met people who prefer to live in mixed industrial-residential neighborhoods.
As Nathanael said, I want to live in a mixed-use neighborhood. If I was more than a block away from a coffee shop, I would be very unhappy.
You can redefine the meaning of words all you want, but in common parlance, a “residential” neighborhood is defined as a place where the defining use pattern is residences, and other types of development are few and far between. Many people, including myself, do not want to live in such a place.
Also, “residential” and “ridden with crime” are not even in the same category. That’s like saying, “what do you want for dinner, pizza or yellow?”.
Interesting. I’d love to live on 4th or 5th right in the middle of the office core. Just so long as I’m high up. 505 Madison, for example, if it ever gets built, or that tower on the same block as the Union Bank tower.
Assuming that desirable residents include those in the active breeding mode, downtown Seattle is lacking the key requirement of conveniently proximate, green, open space where children can be let off the leash in a relaxed way. There are no suitable parks for free-range young ones. Particularly if you’ve been responsible for marshaling very young children you may be able to appreciate why the public transit we now have is not at all up to the job of helping with frequent, casual trips to a park beyond walking distance. In point of fact, such trips are a key ingredient to raising children; no practical access to a pleasant outdoors is a showstopper for doing comprehensively good parenting.
For those with older children, schools are a bus trip away and again there’s the issue of access to parks, where sports events happen.
So even if rent/purchase prices were in the realm more can afford, lacking public transport and walkable, adequate parks is a major problem.
It’s pointless to address such worthy objectives as density without taking a comprehensive, circumspect systems approach. In this case we can’t wave a wand and create parks but we could do some improvements to transit that wouldn’t leave every parent satisfied but could nonetheless make Zad’s vision more likely.
Unfortunately to do that we’ll have to stop pretending there’s a money shortage, restore taxation to what it was back in the day when things worked better. Another systems challenge…
Not everyone who wants to live somewhere has children. Seniors and youth are two groups that rarely have children, and many middle-age people choose not to as well. Thinking about children is a good idea, but we should provide housing for everyone.
Good point, but nearby parks are a boon to all, not just those with kids. Same with transit good and simple enough for kids to use.
Doug: No, they’re not. Parks are a liability to everyone, because they take up valuable land for an extremely low-intensity use.
In Seattle, most parks are empty most of the day (when it’s dark, or people are at work) and most of the year (when it’s cold and rainy). Even the smallest nail salon gets more daily use than most neighborhood parks. And that’s if you’re lucky; if you’re not, parks will become a meeting place for bums, drunks, and the mentally ill, or a haven for drug dealers.
Families with children tend to use parks for a very select portion of the day: between 10am and 2pm for preschool children, and from 3pm till dusk once they start school. And that will be at most a couple of days a week, since today’s children are so heavily scheduled that they’re unlikely to have much more free time. During those times, and on weekends, there’s enough critical mass for a handful of parks to be safe places. But the rest of the time, they lie dormant.
Now, parks with amenities are another story. The playfields at Cal Anderson see constant use, for example, as does the skate dot at Summit Slope. But the attraction of those parks lies in their rarity. People will walk much further than 1/8 of a mile to get to them. (Think about that — Seattle Parks & Rec thinks that urban parks should have a walkshed no larger than 1/8 of a mile. How can you have vibrant use if so few people are even in the target radius?
But in this case, I firmly believe the real solution is not to build more parks, but to capitalize on the good ones that we have, and make it easier to get to them. And the solution to that is to continue improving our transit system, so that it works for *all* trips, rather than the select few origin-destination pairs that happen to be served by one-seat rides. That means improving frequency (so dawdling children don’t ruin an important transfer), simplifying routes (so it’s easier to travel without backtracking), and streamlining boarding (for example, introducing level boarding on 3rd Ave would make it much easier to transfer with strollers).
[Doug] The rents listed above tell me that there are people that disagree with you.
I think this is a prime reason why families choose suburbs: they want a home with a big yard, so that their children have outdoor play space. For the purposes of density, you do better with people in apartments/condos and one park, rather than in SFHs with big yards.
You’re not asking for parks, you’re asking for playgrounds.
It used to be that every neighborhood had a school (since the public schooling acts were passed in the 19th century), and every school had a playground, *and the playground was open to the public all the time when the school wasn’t in session*, which is crucial.
So why not do that?
+1. The distinction between park and playground is not academic — Seattle Parks & Recreation specifically calls out children’s play areas, and there are many fewer of those than parks (by about 2 orders of magnitude).
There’s a huge advantage to co-locating schools and playgrounds, too: the playground will see much higher use, both because it’s in a neighborhood with families (since there’s a school), and because it will get used both when kids are in school and when they’re not.
This discussion has been much too civil and enlightening. It must be some sort of troll holiday?
You forgot about Vancouver. You know, the Olympic class city 2 hours north of here.
There are more jobs in Downtown Seattle than in Downtown Vancouver.
1000 miles would include San Francisco and LA. Surely they must have more jobs downtown than Seattle does. Unless they’re using some pedantic definition of downtown that excludes; e.g., SOMA.
SF is 800 miles, my bad. LA is 1,150.
I could go on and on about this, but I’ll try to be concise:
1. We want as much business as possible downtown. Residential is important to make the city more safe and fun 24×7, but downtown is for business. The reason companies will pay high rents to be downtown is because how easy it is to do business in a dense environment – you can walk a block over to have a meeting with a client at a moment’s notice, rather than getting your team in cars and driving somewhere. So a walkable downtown is very important – that means business density. It’s good to put in residential towers, but that’s a secondary concern. Of course the best solution to this is to build everything tall and dense – then you have more room for both uses.
2. I interpret your point about never being able to provide enough housing to lower costs enough as related to #1. Given a limited amount of space, we can’t build enough to meet demand. That doesn’t mean we shouldn’t try. Build residential as tall as possible, as dense as possible, as close as possible to downtown. Yes, the rich will live there. But same with the almost rich. And the somewhat rich. And this keeps them from living elsewhere in the city, lowering rents there. It also helps the street. I don’t care whether the street is filled with rich pedestrians or the middle class pedestrians – more people makes for a better pedestrian environment.
3. Long term, I wouldn’t worry too much about parking lots. Parking lots there as an investment for the future, making a small amount of money while the owner waits for demand to increase enough to sell at a high price. Even though they make $300/month/stall, physics and geometry generally limits them to a few stories. You can put many more apartments on the same land if you build tall. That said, I agree that they’re awful for the street in the short term, and would support a parking tax to hurry the process along.
4. Great article! Love the data.
A few stories of parking? How about the garage on 5th between the library and the Fairmount?
I think that thing is at least 6 stories
“A few” was an exaggeration. You’ll never see a parking skyscraper. Ever parked near the top of a 6 story parking garage and tried to leave at rush hour? It makes the bus seem very attractive, regardless of price.
Matt, also setbacks, etc.
How much does it cost to build a 90 storey building? No one is going to spend $100 million to get a $1.5 million return. Few are going to spend $50 million to get that return.
Let’s see… assuming standard construction for highrise residential, plus Seattle’s 5% markup, that’s $122/sf. Times 1,200sf times 7 times 90 equals $92M. Assuming an income of $800k/mo that’s a 9.6 year payback.
That’s a long payback, but $1,500 is also a very low rent for downtown. You’d certainly be making more money than you were at the parking lot, but depending on how valuable your capital is you might not act at this rate.
Matt, those costs seem awefully low. VSstudios pegs 20 stories at ~$158/sq-ft and that’s for office space. Residential would be much higher (more walls, detail work, fixtures, etc. And 20 stories being the sweat spot isn’t exactly skyscraper. That would be well below the height limit in DT Bellevue which is puny compared to Seattle. It does explain the reason for the 24-story apartment tower set for Second Avenue downtown. I’m guessing it’s about 200,000 sq-ft. Say $5M for the parking so $90M construction plus $10M for the land it’s coming in at $500 per square foot for lower end apartments. Or maybe the $95M includes the land and there’s more sq-ft; it’s still upwards of $380/sp-ft. That means rents will have to be comparable to the mortgage on a $380,000 home.
OK, I’m making the math way more offuscated than necessary. $95M divided by 249 units is $381,526 a piece. That’s more than the median price of a home in Seattle.
You’re wrong Bernie. I’m pulling my data from the same place as they are. Here’s the updated RS Means* from 2012, pages 1452-1457:
High Rise Apartments, median cost $120/sf.
High Rise Offices, median cost $158/sf.
Seattle’s cost factor is 104.2 this year, so add 4.2% to those numbers.
* Based on about 11,200 projects. Includes contractor’s overhead and profit, but generally not architecturaal fees or land costs.
Seriously Bernie. Read the post I linked to. It was written for you. Highrise construction is not expensive.
Sounds like you’ve factored in the 5% but even if not $122 * 1.05 is only $128. I’m glad you agree with my number of $158 (why am I wrong?) but you’re referencing office space not residential. And office space is typically built out at additional cost once a tennant lease is signed.
Costs are for a 10-20 story building not a 90 story 1000′ skyscraper. Did you miss that part about costs going up, way up once you go past 20-24 stories??
You’re $92M is close to reality. The real world project being built in Seattle right now is $95M… for 24 stories! That’s 249 scaled down units not your pie in the sky 7 X 90.
I had used 2011 numbers, and noted in my comment I was switching to 2012 numbers.
You’re wrong because you’re claiming that office space is cheaper than residential.
You’re also claiming the Viktoria units to be “low end apartments” which would be a stretch at $343k construction cost per unit (ok, including parking and anything they put on the 1st floor) compared to the median $100k predicted by RS Means (plus some for architectural services and demo).
You do have a point about the number of stories. I was using “High Rise” apartment data, but it does only go up to 24 floors. It would be nice if RS Means would look at real highrise units.
The article I linked to has a link at the bottom, Cost per Square Foot for Construction for 8 to 24 Story Apartment Buildings. Seattle comes in at $222.27 slightly above the median of $220/sq-ft. You missed by exactly $100/sq-ft. Why would you think residential could be built cheaper than an empty shell for offices? Even at an average 1200 sq-ft apartment and knocking off $30k for parking that’s $290/sq-ft. By lower end (not low end) I was referring to the downscale from the condo project originally planned. Obviously you can’t build Hostel X style units and command the rents necessary to break even. SF homes are anywhere from $125/sq-ft for starter tract homes to $250/sq-ft for high end custom.
Again, I’m listing straight from their source: RS Means. For 2011 the median construction cost for a high rise apartment is $116/sf, and you add 5% for Seattle.
Regarding shell and core offices, yes I’d think they’d be less than apartments. But Means doesn’t give a description of whether “Offices High Rise” is shell and core or a full buildout. I would assume a full buildout.
I don’t know what you’re doing with the numbers but here’s another source using RS Means pegging Seattle 8-24 story apartments cost at $233.91/sq-ft. This is some decade old data from NY:
$120/sq-ft is about what it would cost to build low rise public housing or to renovate and existing old building. RSMeans aside, we have real numbers on a real project right here in Seattle built at the sweat spot of 24 stories.
Look at the style of those charts. They copied and pasted the data from your other source.
“we have real numbers on a real project right here in Seattle built at the sweat spot of 24 stories.”
Do you have more than the one data point presented so far?
Maybe they’re wrong and nobody on the internet has commented on major architectural firms having left bad data with high search engine hits stay in place for years. I’m not going to pay for the data from RSMeans. I assume you have a copy through work?
First off, you have less than one which would be zero. Apartment building is booming in Seattle. Pull up the numbers from some of the other projects and show me that they are coming in at 1/3 of the cost. I will be suitably shocked and humbled to see 24 story apartments in DT Seattle being built at a cost per sq-ft equal to tract homes in Marysville.
One more data point although it’s a sale price not construction cost. The seven story Mural apartment sold for $32.4M, $238,000 per unit. Size varies from 550 to a little less than 1100. Guessing it’s pretty close to the average 861 sq-ft formula yields $276/sq-ft. Of course with this market it’s hard to know if the sale was at a gain, loss or a wash.
You’ve absorbed both the price of land, the value of retail, and the developer’s O&P in that number.
And you ignored the Columbia City purchase in that same story, that works out to $68,550 per unit (still absorbing those other factors). You’re cherry picking again!
Good point about the land value. King County appraised the land at $2.5 million. But then the total appraisal is for $18.3M. It seems pretty standard for KC to way under appraise commercial property. And as I said, it’s a sale price not a direct construction cost so it’s pretty fuzzy. I didn’t use the Columbia City property because the Seattle Times story said it was still under construction and there’s no way to know how much would be needed to complete it. I wouldn’t want to be accused of cherry picking :=
OK, original estimated project cost was $14 million. Interesting transaction to sell a property for twice what it cost and is appraised at to the equity firm that is putting up the cash for acquisition of your company. The construction firm estimated cost for 1-3 stories in Seattle ranges from $112 to $145 per sq-ft. For fun I signed up for the free 7 day trial of the RSMeans cost estimator. First I selected a 8-24 story apartment and the defaults kicked out $185.86/sq-ft at 15 stories. 24 stories was $190.60. Location is “National Average” and this is before “adders” like ovens, range top, sinks, elevators, smoke detectors, etc.
Oops, the default was set to 2008 prices. Updating to 2012, setting location to Seattle and adding bare bones appliances and a pair of bumped my 24 story Tower Of Doom to $260/sq-ft. I can get it down to $228.49 by switching to stucco over concrete block. Admittedly I have no clue if the defaults for contractor and architectural fees are valid. It probably doesn’t include construction financing expenses, insurance or things like impact fees (default user fees is 0%).
Should have read “a pair of 3000# elevators”.
There are a bunch of huge ones, too. The one on the corner of second and james is at least 7 storeys.
Groan had the same idea I had, with a different lot, too. Think about a 6 story parking lot, it must have 500 spots in it. At $300 a month, that’s $150,000 a month. Plus you have no plumbing, no painting, etc. (I guess you have to change a light bulb once in a while). Plus the building’s already there, so it doesn’t cost you anything to keep it around. Try changing that to housing, and the numbers just don’t work out, even if you can build a 1000 foot tall building.
Let’s call it a 1000 apartment unit building (10 units per floor, 100 stories). At $1,500 a month, that’s $1.5M a month – an order of magnitude higher. Sure, capital costs are also much higher. But at some point that balances out.
Yes, but the footprint is not the same, so we’re not comparing the same things. To build a 10-unit-per-floor apartment building you are going to need a lot larger than you would get from a 90 parking stall-per-floor building.
Especially when you consider the number of elevators, garbage shutes, etc. needed for a 90-storey building (I don’t think you can quite fit 100 storeys into 1000 feet).
I don’t know. At 83 spots per floor, let’s say 100sf per spot (including half the driving lane), that’s the same as 10 x 830sf apartments (ignoring core spaces for both, and ramps in parking garage). To make it more realistic, let’s go with 1,200sf spaces. That makes 7 units per floor. So drop it down to 90 floors and you’d be taking in $945k per month. Still massively larger than $150k.
Of course these 6-floor garages will be the last to drop. You’ll see the ground level ones go first, then the 2-story, etc. Although they just dropped a 3-story one yesterday to build apartments, so maybe we’re further than that already.
I dunno, Matt. There’s a brand new parking lot going next to the polyclinic on 8th, it’s not so obvious.
Belltown would definitely be where parking is worth less, and it gets more valuable as you go toward the office core.
Is that a stand-alone garage, or driven by the desires of the owner? I’d be surprised if it were the former. I know the parking lot Seattle built for Nordstrom has lost money since the day it opened.
The land downtown is too valuable to be wasted for parking. You’re more likely to find it as an amenity to a high-rent building on top or next door.
Hey, I just realized a terrible aspect of our code – do our FAR rules effectively create an incentive to build parking? If you can only fill 1/4 of your buildable envelope with building, why waste the rest on windswept plazas when you can build a parking garage? Yuck.
Why wouldn’t you just put 6 floors of parking IN your new structure and have the best of both worlds?
Obviously “downtowns” are a concentration of retail and business, and housing direction in the center of them tends to be very expensive (but that’s what some people what).
However, I think with any sane city design, there’s a smooth change as you move away from city centers, with prices going down, elevations going down, and the amount of housing going up. So there’s a place for many incomes level that might not be too far from the downtown core.
But in Seattle, what is there surrounding doｗntown? Basically a wasteland. Used car lots. I-5. Vaguely abandoned-feeling areas. A bit of housing here and there but so little that it feels isolated.
I dunno why this pattern emerged, but it’s pretty depressing. It seems like there’s plenty of room, but no will to use it.
Office space is far far more valuable at adding to the retail customer base than residential is. Here in Vancouver, retail businesses in the residential areas struggle because no one is shopping during the day. Stores and restaurants in office districts catering to the lunch time crowd survive much better than those relying on a purely residential base where workers return home at 6 – 7:00 pm after typical retail stores have closed. That’s why the vast majority of retail spaces in Yaletown are occupied by restaurants – uses that cater to nightime uses and remain open after the residents have come back home.
This is what housing downtown is competing against…
(via Seattle Times)
Which would you rather deal with: 200+ individual apartment renters or a few big corporate leasers with long term lease? Anyway, who really wants a view of some skyscrapers windows from their home.
Obviously we need more housing in the city. Limits and restrictions need to be removed to make this happen. This could help the middle class some, but as mentioned won’t do anything for the poor. We’ll have to subsidize their housing.
HOWEVER. The reality is even if we were to remove all barriers to growth with the wave of a magic wand at best it will only stop rents from increasing as much as they would otherwise. The problem is much greater. We’ve got to figure out how to raise incomes (recouple productivity with wages) and lower other costs. The three biggest/lowest fruit would be:
Education/Skills: Free tech schools or 2 years at junior college for everyone in selected fields (Accounting, IT, Medical, etc = Yes. Underwater Basket Weaving, International Political Economics = No.)
Medical: Government Takeover. Seriously. No if ands or buts. Our government pays more per capita than any other government in the world and they only cover HALF of the bill. The rest comes from our employers and out of our pockets. And for what WORSE healthcare results for most of the population? No thanks.
Transportation: Uh… do I really need to go into this? Car ownership should be a luxury, not a necessity. Forcing everyone to have to own a car (or more likely two since a single income doesn’t cut it for most families anymore) is a huge tax on the poor and middle class.
Now, I realize that most of that is outside the purview of this blog, but in this thread and others I’ve seen it argued that allowing this old cheap lowrise to get torn down and replaced with luxury condos, or by removing that unridden bus line to put the hours on productive/overcrowded lines will destroy all hope of retaining our working class/middle class. While I disagree (I think it does the opposite) I just wanted to point out that no mater what we do on the transit/land use side, at best we’ll just make things more tolerable.
We could use a lot more people who understand international political economics — it might have prevented some of the economic and military disasters which played out over the last few decades — but I agree with you on the rest.
I think I agree with the overall thesis. Downtown will always be a rich neighborhood. I don’t expect that to ever change, any more than I expect Broadmoor to become affordable.
Let downtown build higher, let downtown build high-income. So long as it opens up affordable, walkable neighborhoods within reasonable transit reach of downtown, I count it as a win.
wow! what a thing to read! as one who is a newbie to this conversation, let’s say i’m bringing *beginner’s mind* to this topic. is this the best seattle can do? as someone echoed earlier: poverty or gentrification? dare i ask where do all the homeless, marginalized, impoverished people go, when gentrification happens? oh-oh. not a politically correct answer in seattle. i’ll refer to tim harris and *real change* for the real answers to that question.
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