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Originally published February 22, 2013 at 9:36 PM | Page modified February 23, 2013 at 8:48 AM

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If developers can build taller, city should push for more in return, report says

A Seattle City Council report says the public is not getting enough benefits, such as affordable housing, in return for allowing taller buildings, which creates wealth for developers.

Seattle Times staff reporter

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When the city of Seattle changes zoning to allow taller buildings, it creates significant wealth for property owners.

And the public is not getting enough benefits such as affordable housing in return, say consultants hired by the City Council.

Their findings show that city officials should push for greater benefits in South Lake Union than Mayor Mike McGinn has proposed, said council member Tim Burgess, who is running against McGinn for mayor.

“We are not currently balancing public and private benefits,” said Burgess, who prodded the council to hire experts to review the mayor’s proposal to allow taller building heights in South Lake Union, with some as high as 400 feet. “We must craft a better deal for the people of Seattle.”

The experts concluded the city could dramatically increase its affordable-housing requirements in South Lake Union and developers would still get a financial return greater from 24-story buildings than they would if heights stayed at the current limit of roughly eight stories in the area and they weren’t required to contribute to affordable housing.

At the same time the council’s report went public, McGinn called for a new advisory group to recommend changes to the city’s affordable-housing incentive programs.

“That’s the biggest new thing in here,” the mayor said of a sweeping plan to update city affordable-housing policies.

The timing of the mayor’s announcement was coincidental, according to his spokesman Aaron Pickus, who said the mayor’s office has been working on the new plan for a few months.

“The economy is turning around, and the current housing market is strong. We think the programs should be adjusted to reflect these new realities and to ensure a good balance regarding public benefits,” Pickus said.

But it could take up to a year for the new advisory group to complete its work, the mayor said, and the council hopes to vote on height changes in South Lake Union next month.

With implications for this year’s mayoral contest and the future of South Lake Union, at issue is the city’s so-called incentive zoning program.

Under current rules, developers can build taller than zoning allows by paying fees now set at nearly $19 for every square foot constructed above existing limits. Or, developers can build an equivalent amount of affordable housing within a new project in lieu of payment.

Behind the complicated policies, language and math, Burgess maintains, is a simple idea: fairness.

The city has gotten about 50 affordable apartments since 2006 within new developments, Burgess said. When developers pay fees instead, the money is commingled with state, federal and city funds to produce low-income housing. Used that way, the fees have produced the equivalent of about 100 apartments since 2006, according to Burgess.

The council’s report, by Spectrum Development Solutions, looked at different scenarios for 24-story towers, which would be allowed through most of South Lake Union under McGinn’s proposal.

The report found that if a developer was required to make 10 percent of a new tower’s units affordable to moderate income workers (a single person with an income of $45,100, according to federal guidelines) the city would get 23 new affordable apartments and developers would get an 8.4 percent return on their investment.

To attain the equivalent benefit though the payment in-lieu program, the fee would need to be $62 per square foot, or more than triple its current level.

If the city required that 20 percent of a new tower be affordable, the city would get 45 apartments for moderate-income workers. That would be equivalent to fees of $104 per square foot.

A developer would still see a return of 6.8 percent in that scenario, the consultants noted, which would exceed the 5.6 percent return on equity they’d get for building under current zoning with no incentive payments required.

Burgess called the existing fees “incredibly low.” He said he’s not sure what change he will recommend. “My goal is to make sure payment-in-lieu is not an escape hatch, and that’s what it is today,” he said.

Pickus said the mayor’s office hasn’t yet had time to review the consultants’ conclusions. Lori Mason Curran, investment director for Vulcan, South Lake Union’s largest property owner, said she was withholding comment until she hears more explanation from the consultants on Monday.

Burgess predicted that developers and others would disagree with the council’s consultants, arguing that their model is not accurate. “I think the model is pretty sound,” he said.

Some affordable-housing advocates support stronger incentive programs in South Lake Union.

“Seattle’s housing-incentives program needs to be updated,” said Marty Kooistra, president of the Housing Development Consortium, an umbrella group for nonprofit developers.

Requiring affordable apartments within new buildings would bring diversity to the neighborhood, advocates say, allowing restaurant workers, retail managers and biotech researchers to live alongside more affluent neighbors. That would mean less car traffic and fewer people pushed to the suburbs.

Bob Young: 206-464-2174 or byoung@seattletimes.com

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