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As Seattle Grows At A Scorching Pace, Affordable Housing Remains Out Of Reach

Despite increasing construction costs, higher land prices and vast land entitlement waiting periods, Seattle continues its commercial real estate boom, with few signs of slowing down. But one perennial sore spot remains: the region's ongoing struggle to provide enough affordable housing.

Though panelists at Bisnow’s State of the Market event last week were bullish about Seattle’s economy, they acknowledged that an affordable housing crisis looms over the city like an ominously, and that it is a problem with no easy fix.

 

As Seattle Grows At A Scorching Pace, Affordable Housing Remains Out Of Reach
Schwabe, Williamson & Wyatt's Ryan Dumm, Martin Selig Real Estate's Martin Selig, barrientos RYAN's Maria Barrientos, Holland Partner Group's Tom Parsons and Abbott Construction's Doug Klein

Developers feel like they are always under attack when they are trying to build workforce housing, barrientosRYAN’s co-owner Maria Barrientos said.

“You have all these silos in the city where people are trying their best to make things better, without any thought to the fact that they are adding millions to the cost of development,” she said. “We need to be forward-thinking and create more middle income housing.”

Holland Partner Group Executive Managing Director Tom Parsons hopes upzoning will ease the housing crunch.

“The pricing goes up when the product is scarce,” he said. “Instead of adding more restrictive measures we need to add housing supply quickly.”

That housing supply for the middle income tenant should be clustered in lively, sought-after neighborhoods, Barrientos added.

As Seattle Grows At A Scorching Pace, Affordable Housing Remains Out Of Reach
Hutchinson & Walter's Marc Hutchinson, Seco Development's Michael Christ, ACORE Capital's Kyle Jeffers, Kidder Mathews' Jason Rosaur, Walker & Dunlop's Craig Russell and KeyBank Real Estate Capital's Josh Berde

“I’m a data geek and I really look at where younger Gen Z wants to live,” she said. “They want interesting, high-density urban centers with a lot going on, but they can’t afford it. We need to figure out how we can provide more housing for those making $60K to $150K a year so they can live in the best neighborhoods near light rail stations and services.” 

Martin Selig Real Estate founder Martin Selig, meanwhile, said he brims with confidence that the Emerald City's good times will last for years. 

“Construction costs are going up 5% or 6%, but rent has gone up 15% this year,” he said. “And there’s all kinds of equity available. There’s a 2% vacancy factor in new buildings and we are mostly leased as soon as we come out of the ground. We see no slowdown and there’s lots of money out there.”

Selig recently shrugged off the fact that The W Company canceled its WeLive plans to occupy Selig’s Belltown tower. He said as soon as the WeLive cancellation was announced his phones “rang off the hook” from tenants wanting to occupy that space.

As Seattle Grows At A Scorching Pace, Affordable Housing Remains Out Of Reach
American Life's Henry Liebman and Kidder Mathews' Matt Wood

“We’re down to the last five bidders to fill the building up again,” he said. “We have a building that’s done and ready to go, and there’s a huge demand for that.” 

Though Seattle’s construction economy continues to boom, Doug Klein said Abbott Construction will be ready for the inevitable slowdown.

Abbott weathered the 2008 recession, in part, by instituting a small pay cut so the firm wouldn’t have to issue layoffs.  

 “Culture is important to us,” Klein said, who said the idea is to create a work culture where employees will want to stay.  

“If you find the right person you want to keep them,” Klein said. “Everyone in our market knows there is stupid money out there right now and someone is always willing to pay more.”