Yet another tech giant moving to Seattle?
In the wake of the news that Expedia will be moving its offices to Seattle’s waterfront, there’s been a lot of chatter lately that Chinese online retail giant Alibaba may be looking for up to 80,000 square feet of Seattle office space in which to set up its US headquarters. But why would Alibaba pick pricey Seattle? At least partially, because we’re cheaper than San Francisco!
In addition to much lower rents than the San Francisco Bay area and cheaper housing for workers, the region is filled with e-commerce and cloud computing talent thanks to Amazon and other growing Seattle tech companies, and Sea-Tac has recently increased the number of flights between Seattle and China. Alibaba could benefit from the four daily nonstop flights to China from Seattle-Tacoma International Airport.
Hear that? “Much lower rents!” I guess it’s all relative.
I’ve had this running argument with some in the urbanist crowd over Seattle’s growing affordable housing crisis. Free up developers to build more housing faster, I’ve been lectured, and the market will do its magic—you know, supply and demand, and all that. But I just don’t believe that the market can address this problem on its own.
Freed from neighborhood NIMBYism and municipal interference, no doubt developers would build more housing faster, substantially bringing down the price of luxury housing. But since developers will almost always target the top of the market first (in order to squeeze as much profit as possible out of any piece of buildable land), we won’t get many new units aimed at median income or below households. In fact, we may see a loss of affordable units as older buildings are torn down or converted to meet demand from more affluent renters and buyers.
But as Alibaba’s decision-making process demonstrates, our residential and commercial real estate markets don’t exist in a vacuum. Global financial capital is pouring into Seattle’s real estate market seeking a higher rate of return, pushing up real estate prices and rents with them. And when it comes to attracting high tech companies like Alibaba, Facebook, and HBO, Seattle is competing with cities like San Francisco and New York where office and housing costs are much higher. Ironically, the more supply we build, the more competitive we become, increasing demand, and pushing prices back up. And as more high tech companies locate here, attracting more talented high tech workers, Seattle becomes even more attractive, especially to companies doing business with Asia. Even our growing traffic congestion bumps up in-city demand by incentivizing the choice to live closer to work.
In this scenario, it’s not clear that the market alone can ever build itself out of our affordability crisis as long as there is such a huge cost disparity between Seattle and San Francisco. It’s kinda like attempting to build our way out of traffic congestion by just adding more freeway lanes: build it, and people will come.
So, yeah, I’m all for lifting height limits and other NIMBYist restrictions, particularly around transit centers. And of course we should be smart about streamlining the permitting and approval process. But I’m convinced that if we want to substantially add and retain middle and low income housing in Seattle than we’re going to have to build and retain tens of thousands of units outside of the market.
I really don’t see how you can make housing here cheaper. In fact, the only way to make housing cheaper is to be a place where people don’t want to live. Like Detroit. I think they will give you a house for free there.
There’s a really easy option here: ADUs and DADUs. Allow people to turn their oversized single-family house into multiple units, and you get close-in density like in Somerville, MA without having towers. The housing is also cheaper, as people convert basements and attics into productive space instead of building luxury condos. Much of the converted space is 2-3 bedroom, which fits families or allows people to have housemates. Finally, it brings existing room rentals on-board with new rental registration requirements by the city.
Unfortunately, current restrictions on ADUs/DADUs are keeping people (myself included) from utilizing wasted space in their SFH.
Could you address the argument that building luxury apartments frees up housing at other price levels as wealthier residents move into them, vacating their previous, more affordable dwellings?
One wonders how many needy residents could fill your average, ballpark 28th floor downtown office space.
I love urban density, but I wonder if there’s an example of a city that has built its way to affordability. I’ve posed that question to some urbanists and they’ve answered “not yet.”
Building more roads does alleviate traffic. I mean I guess we could have a shitty economy and no one would want to live here and businesses will run away, but that’s not a solution.
Likewise if you have no roads, you have no traffic, but no mobility.
Unfortunately for those looking for Seattle to remain a small town where someone making 50k a year can buy a house, that will never happen. The increased taxes need to go towards infrastructure improvements so people who end up living in suburbs can commute to work easily, that includes real expansion of light rail including Renton, Kent, Auburn, Federal Way, and Burien, along with the North of Seattle expansion.
I guess as someone who lives in the suburbs, if there is quality mass transportation the housing market is irrelevant.
“Global financial capital is pouring into Seattle’s real estate market seeking a higher rate of return, pushing up real estate prices and rents with them. And when it comes to attracting high tech companies like Alibaba, Facebook, and HBO, Seattle is competing with cities like San Francisco and New York where office and housing costs are much higher.”
Investors call this “mean reversion.” In our case, this means reverting upwards, because we’re below-mean compared to San Francisco. Get set for even higher rents. Seattle’s gonna need a $25 minimum wage before the $15 wage phases in.
“So, yeah, I’m all for lifting height limits and other NIMBYist restrictions, particularly around transit centers.”
The Shoreline City Council just did that with respect to the future light rail station at I-5 and N. 185th and the neighbors are livid. How would you like a 6-story, block-sized, apartment building next door to your single-family home? Your alternative is to sell your burrow to a developer and go dig another hole somewhere. At least rabbits have mobility going for them. There’s always more parks and waterholes. Even if nothing else is available, a rabbit can live on a golf course, and they’ll always find space for golf courses, even if they have to displace parks to make room for them.
@1 “Cheap” is relative. You make housing cheaper by raising incomes at the bottom with a higher minimum wage. $25 here we come!
@6 “I guess as someone who lives in the suburbs, if there is quality mass transportation the housing market is irrelevant.”
We’re planning mass transit from Cle Elum, Mount Vernon, and Enumclaw to Seattle?
Meanwhile, in Olympia, Republicans are trying to write a balanced budget with “no new taxes” by making state employees give up hundreds of millions of dollars of the first COLA they’ve had in six years. As a retired state employee, I wouldn’t accept a state work assignment in Seattle today, because it’s no longer possible to live in this city on a state salary. A poster @6 above mentioned not being able to buy a home on 50k a year. That’s probably more than what the average state job pays. The only reason I was ever able to work as a public servant in Seattle was by being married and having two incomes. At some point we’re not going to have public services here, because you’ll not only have morale problems, you’ll be unable to hire people here and unable to keep them working here.
I think you’ve misunderstood induced demand on roads.
When you add more capacity to a road, you’ll often wind up with the same level of congestion but with more cars transporting more people. More people are benefiting from the freeway than before, even though congestion has not been relieved.
Your analogy doesn’t support your point. The analogous situation would be more people being housed at the same prices.
@3, “wealthier residents move into them, vacating their previous, more affordable dwellings?” Once they vacate the previous dwellings, those dwellings are sold to developers who raze them and put up expensive apartments. That’s why low/moderate-income housing is being lost in Seattle.
adding more buildings creates a better location for the extant buildings, raising demand for them, therefore, adding more does NOT lower rents or mitigate rents — it DOES help build a world center of world capital or human capital or high tech talent making Seattle even MORE attractive. lookit SLU — are rents going down, as they add more buildings? nyc? london? no. real estate is unlike other goods in this way. add a widget to a pile of widgets, the other ones are not made more valuable. add 3,000 expedians in a company expected to grow, to the amgen site, and immediately all values in interbay, magnlia and QA went up 4 points overnight.
here’s how you get more affordable housing.
first, you have to do all the FDR semi socialist stuff to get INCOMES UP. progressive income tax, infrastructure development, education, health etc. the problems is “incomes are too low” not just rents are “too high.”
second, build the damn trains out faster. rents are cheaper in seatc and federal way. it’s not a tragedy if you will live in seatac and take trains to sccc and a job downtown then go to ballard for a drink on a date or a walk then train it home. 4 million people in brooklyn live like this, accessing manhattan via trains. notohing adds more affordable units more quickly than opening up 5 train stations to what was a lower-rent neighborhood. yes, this means lynnwood, this means adding renton to the train system, etc.
third, eliminate the requirement that any new unit have parking, you lower the cost by a significant amount. and yes, new housing is consumed by middle and working class, go look at the new building on lake city and 143d it’s full of younger folks doubling up and sharing $1600 a month rent. they take a rapid ride downtown. fourth, push and allow the ADU’s and DADU’s don’t require the off street parking and end the rule you have to live in the main house. MANY SF homes are already rentals. adding a back house NOLA style, adds value and helps the middle class owner. fifth, build out the existing density and allow some selective upzones.
none of this will stop rents from getting to san francisco levels, though — our location is just, that, awesome. nature abounds. beauty abounds. and high tech is booming like gang busters, expedia is just the first and I imagine alibaba could find a site in seatac and utterly transform south county.
@10 we should absolutely plan better rapid transit — TRAINS — from cle elum and from mt. vernon. cle elum is just like an hour drive. on the east coast, fucking greenwich is an hour from nyc if the rich fucks can take a train 60 minutes, why can’t we? imagine if cle elum had the 8 trains a day to seattle and back, immediately we could add 2,000 affordable homes in cle elum, no problem.
as part of the high speed line hitting snoqualmie pass skiing also spokane. maybe yakima then spokane. or maybe spurs. trains. trains. they work. they are efficient energy wise. they prompt little nodes of density called cities or transit dependent suburbs. the old kind of suburb. ever been to white plains? bethesda? they are significant downtowns now themselves, since we built trains connecting them to downtown nyc and dc.
Government subsidized housing has to be part of the plan. No, it can’t solve the problem as a stand alone solution, but neither can any of the other suggestions put forth on this thread. Yes, build out rail to outlying communities quickly. Yes, change zoning laws to allow dividing of existing SFH’s into rental units. Yes, build more market rate housing.
But the state has to build and maintain low income housing. There is no other way that the other solutions have the desired affect.
First off we are talking two different markets here So Alibaba needs 80,000 feet of space There was this building spree for several years and Seattle has an abundance of commercial space Alibaba is in the market for space and it’s going to consider commercial rates for the space, and digital infrastructure They are going to put in a lot of routers, computers ect, How many employees will they need locally may not be that many A lot of their worker bees may remain in China and those few American workers they finally hire will be well paid, except for the ones in the warehouses shipping out product They ultimately could locate in Iowa
We are talking two different markets here that play off one another
Yes there are housing solutions Seattle could go small soviet style housing Seize the land and build housing for the workers Ok an extreme position Still they said Paris couldn’t change, but it did Guess it helps to have an autocratic king, but Seattle is going to have to change and build multistory housing for everyone The suburbs are going to be severely challenged as a way of life They are not sustainable Unless you can basically commute from home
Mass transit is a must However where are the plans for more in Seattle or a subway? Or a Vancouver like monorail These things are possible. AS is affordable housing, only there is not the political will in Seattle, so you will continue to see high end housing until the whole mess collapses, as it’s beginning to in California. They are struggling still with having some place for the teachers and police officers and janitors to live. The water issues may resolve some of the housing issues, and potentially some areas may look like Detroit and maybe the rust belt will look a lot greener to some folks and companies
Government subsidized housing has to be part of the plan. – Really Worf? So it seems you want to create a Seattle Rap Genre now and high crime zones?
Don’t you remember these great government subsidized housing projects of yesteryear?
– Cabrini Green, Chicago, Ill Even USA Today called it “a virtual war zone, the kind of place where little boys were gunned down on their way to school and little girls were sexually assaulted and left for dead in stairwells.”
– Marcy Projects, Brooklyn NY – Jay-Z called it “Murder Marcyville” and “Where I’m From” raps discussing gun violence, poverty, and crack cocaine… “Where you can’t put your vest away and say you’ll wear it tomorrow / Cause the day after we’ll be saying, damn I was just with him yesterday.”
– Queensbridge Houses, Queens NY home or rappers Nas, Marley Marl, MC Shan, Roxanne Shante and Mobb Deep where they describe the gun violence and a vibrant illegal drug-trade there. The “Dream Team” drug syndicate.operated from there until it was dismantled by the choke-hold NYC police force.
– Robert Taylor Homes, Chicago IL home to Maurice Cheeks Kirby Puckett, Deval Patrick and Mr T. Had some of the highest rates of violent crime and gang activity in Chicago for years.
Or last but not least…
– Magnolia Projects, New Orleans LA home of rappers Juvenile, Soulja Slim, and Jay Electronica who described the place as having one of the highest murder rates IN ALL OF THE US in their music.
Yes government housing is the answer per Worf. So where will these wonderful units go Worf? What will they do differently this time? Because it’s in the great northwest? How much rent would you charge? How much in taxes would be allocated to ensure their upkeep?
Puddy is sure you’ll volunteer in your neighborhood association for their construction to be near where you live right? Any self-respecting DUMMOCRETIN would welcome these units just down the street, right? Maybe Bellevue? Issaquah? Shoreline? SoHo? Lynnwood? Edmonds? Federal Way? Tukwila? Renton? Kent? Des Moines? Have to keep them near Seattle so public transportation costs are low, right? Hmmm…?
Puddy,
It is possible to build subsidized housing without re-creating the crime riddled projects of big rust-belt and East-Coast cities.
In fact Seattle already does this through the Seattle Housing Authority and various housing non-profits.
The key seems to be avoiding giant monolithic neighborhoods consisting of only low-income housing as well as avoiding certain design elements that make buildings and their surroundings feel unsafe.
Low to moderate income developments consisting of anywhere from a cluster ow townhomes to even a high rise tower here and there aren’t going to re-create Cabrini-Green.
Other alternatives are providing incentives to developers to create low-moderate income units in new developments and voucher programs.
David,
I don’t think I’ve ever seen a density advocate claim building more housing was going to lower rents. At best more housing slows the rate of rent increases. If for no other reason that at some point developers stop building as many new residential projects since the ROI isn’t nearly as good as it once was.
So yes if we want housing affordable to low and moderate incomes it will need to be subsidized in one form or another.
However we need to open more land to development (including sane ADU and DADU rules) and remove some of the more inane roadblocks to new construction as well. To do otherwise risks becoming just as expensive as the Bay Area.
@5
city that has built their way to affordability ?
You mean like Ordos China ?
http://www.thebohemianblog.com.....china.html
When a conglomeration of property developers began planning a new urban centre just outside the existing city of Ordos in 2003, the Kangbashi New Area, Ordos seemed set to become the futuristic jewel in China’s crown of city states.
….
While some developers still labour on with their thankless construction projects, others are busy slashing prices. Typical housing prices in Kangbashi have fallen from $1,100 to $470 per square foot, over the last five years alone.
Nowadays the Kangbashi district, planned to accommodate a population in excess of one million, is home to a lonely 20,000 people – leaving 98% of this 355-square kilometre site either under construction or abandoned altogether.
I’ve actually come back around to supporting some level of command-and-control in residential rent pricing. In markets where there just isn’t enough land, soft rent control doesn’t actually deter much investment very much, or result in artificially low vacancy rates.
Another factor is that the suburbs have to play their part. There just isn’t enough space in the city limits. In related news, Bellevue is trying to outlaw having more than four adults live in one house unless they’re related.
Seattle job growth may be hot right now
http://www.cnbc.com/id/102570584
but can cool off just as quickly, and rents and the housing market with it. If I were an investor putting up new buildings, I’d be thinking in terms of a 30 to 40 year timeframe.
Assuming a construction cost of about $150/sq. ft. (see link below), which is slightly above the national average, a 900 sq. ft. unit of average quality would cost about $135,000 exclusive of land and site preparation costs. So you’re probably looking at a minimum cost of $200,000 per unit.
I’m sure there’s software that developers, lenders, and investors use to calculate breakeven rents based on development costs, ongoing maintenance costs, overhead costs, depreciation and amortization, and other expenses of owning and operating an apartment building. My back-of-the-envelope wild guess is that an investor probably would be operating at a loss at rental rates below about $1,500 a month for a standard unit.
Anecdotal comments I’ve heard from real estate agents and people of rent-paying age is that it’s hard to find an apartment in the Seattle area for less than that. This means a person earning a $15 minimum wage would pay approximately 60% of his/her before-tax income in rent, at the bottom of the market, unless s/he doubles up in a rent-sharing arrangement, either with a cohabitation partner or roommate.
Feel free to correct my figures if you feel I’m way off.
http://www.rsmeans.com/models/.....n/seattle/
It’s pretty absurd that some of our local drama kings and queens are so vituperative about having to pay $15 an hour for labor. Do they think employees are dogs? They talk about them like they are.
Chris Stefan,
You may have a point here regarding low income housing and they seem to screen individuals appropriately. Looks like certain leftist posters would have a hard time passing their scrutiny!
Puddy thinking on this one… http://www.seattlehousing.org/.....igibility/
How much taxes will these places vacuum up and what does one do to move out of these locations or is it rent there forever?
Seattle should first of all embrace being urban It should embrace having a lot of people living downtown It should insist on big buff tall building being built that are multi purpose You are building an office building downtown well at least 25 to 30 percent is going to be residences A whole floor is going to be for school rooms/education, ect There will be public space and maybe just maybe some childcare for residents
@25 Seattle’s low income housing, both acquisition costs and operating expenses, is largely federal money. Over the years, Seattle voters have approved a pair of bond issues for roughly $48 million each. So, Seattle gets its public housing at almost nil cost to local taxpayers.
http://www.seattlehousing.org/about/history/
http://seattlehousing.org/news.....y-2015.pdf
I’m pleased to see a few posters, and Goldy, understanding that simply increasing units does not result in reduced rents or sale prices. Chris @ 20: Developer shill Roger Valdez does nothing but claim increased density results in lower housing costs. He usually trots out a few statistics for the entire Puget Sound area showing some correlation between vacancy rates and rent. But, if density really was the driving force for rent then Hong Kong, London and New York City would be cheap and Kansas expensive.
Seattle has places for increased density without destroying existing neighborhoods (all along Aurora, parts of Beacon Hill etc.) but developers want to build in mostly white, north end neighborhoods like Ballard because that’s where the tech people with money want to live.
As for ADUs, they might have a place but are not a real solution. Converting SF to rooming house situations creates a host of problems for neighbors.
Lastly, nobody builds affordable housing. Builders build the most expensive housing they think they can sell. I’m really tired of people trying to present themselves as altruists invoking “affordable housing” when their real goal is their own financial gain.
Building new units always decreases the price of the existing old units.
Every apartment building was high-end once. Shiny new luxury apartment buildings opening today, will not be shiny and new in a decade. After 20 or 30 years of use, luxury housing becomes workforce housing, just as swanky condos of the ’80s and ’90s have become today’s run-down starter homes.
Strictly looking at the long term, we need more units in this region, period. A lot more. There is no way around that. Zero.
Even if every lot in Seattle currently zoned for multifamily suddenly was built to the maximum height, we would still not have enough units.
In the short term, people need rooves over their heads. Public housing programs, rent control, and nonprofits could all have a hand to play in this. But in the long term, there is no way around the fact that we need to absolutely flood the market with housing in order to correct for decades of supply restriction. This is a long term investment that could pay off big for the housing affordability of the next generation.
“building new units always decreases the price of the existing old units.”
this is not true at all.
buildings unlike say widgets, when built, raise the value of the buildings near them. so in this funny non market, adding “supply” can increase “demand” and they are connected. but take a pile of 500 widgets and throw 500 more on the pile, those widgets do not increase the value of the other widgets. swith buildings? well if you take my office building and add 500 more nearby the whole area has more stuff thus the land is more valuable thus MY RENT GOES UP.
want facts of this? um…..are the lowest rents where there are the most buildings? no, they are NOT. the lowest rents are not on maiden lane or wall st. nyc, the lowest rents rents are not in the middle of london or paris or rome or dc chicago.
the lowest rents are where there are the FEWEST buildings. say, in outer okanagan county washington.
look at high tech. the concentration here of first microsoft then MS alums then amazon now that plus facebook plus expedia does not “lower the wages of high tech workers thru additional supply” it DRAWS EVEN MORE COMPANIES HERE which boosts wages leading to more buildings and growth and more high income people. so “more buildings” will not lead to “lower rents in close in fremont or ballard or the eastern side of magnolia, the lower rent side” it will RAISE RENTS. again, this is not a “market” as defined in your econ 101 microeconomics little supply and demand curve charts. there are LINKAGES between supply and demand as noted above and the economics of land is just different than, say, widgets.
throw in the political power of the elites the rich the developers? what do you get? policies favoring development with a few property taxes thrown in to have some more social spending for basically mascot populations of poor people while MOST poor people working and middle class are just economically driven out of seattle.
we will become san francisco. we will become san jose. with our nature and single family and parks. we are so attractive, capital will come here, high tech, jobs for yuppies, rents and values will be double what they are now in 10 years. me, glad I have my home now worth $650K hope it is worth $1.2 million in ten years, that’s my nest egg.
the comment that ADUs “create problems” is ignorant. look at the neighborhood called uptown new orleans. it’s upper class. half the homes have back houses. the adu is an awesome solution for lots of the new capacity we need. and yes we do need it, and yes we will get it under existing zoning. we could have 20K new units as adu’s dadu’s no problem. just making 1 in 20 single family homes a 5 person group rental adds huge capacity. existing zoning allows TONS of new units to be built. there is no need to loosen zoning or wreck the single family zone. selective upzones, more towers done right — we do density wrong, btw — we do it ugly style — doing it right is important, too. look at the article on our ugly so called townhomes and so called rowhouses. which actually we don’t even allow. rowhouses. they’re ugly as sin. there’s plenty of new units to be had with better style and charm and we’re on a course to get density done the ugly way. another source of new capacity or units is all the underused public land hereabouts that is just…well, it’s underused. and I don’t mean park land. I mean like look at NSCC, it’s a vacant parcel for 80% of its huge square footage or dispersed suburban style parking lots, with an entirely empty parcel to the north, a huge one. you could put 3,000 units there in towers done right. the police station land nearby, also can be developed. the low slung school a few blocks to the SW, also kind of could be taller and have units on top floors, I think bottom floors are community centers. take northgate. huge parking lots can become buildings with walkable sidewalks in between and underground parking for transit AND residents AND shopping. or take 20% of that land and just build garages above ground. that whole area of northgate plus nscc could be 5,000 new units. so out of the 80K we need, say 5K there, 20K adu dadu, 5,000 more in having just 1,000 more sf homes be group rentals, that’s 30K, now then you need 50 K more can get that thru existing zoning and having more towers, some selective type upzones, easily. lack of land is NOT our problem. building ugly crap IS our problem.
“absolutely flood the market with housing in order to correct for decades of supply restriction.”
yes, awesome idea. let’s take greenwich village nyc raze it and build 50 story towers! let’s take park slope brooklyn and other lower rent parks of brooklyn with rowhouses or queens take archie bunker rowhouse land raze it and put in towers! great, let’s lose all neighborhood character and charm! let’s take dc and its silly 12 story limit, let’s built 50 story towers all around the capitol building! who needs to see it. let’s put 50 story towers on the DC mall! let’s take seattle’s great SF neighborhoods, and change it to multifamily then everything here can look like hte ballard blocks buildings or ballard landing, that would be so awesome to have greay boxy corporate block architecture with no charm or beauty anywhere, here! we could look like the huge swaths of tokyo or seoul with soul less 20 story towers and no charm or beauty. and why stop there? let’s raze every sf home on cap hill and montlake, even beacon hill, and coat all seattle with out boring 6 story boxy ugly crap buildings then we will have no more views of anything at all, just homogenous corporate sameness.
awesome billiant idea. let’s do it to paris and rome, too. then we won’t need to go there to stroll around charming hoods, you will have the same hoood right on your block: tiny sidewalks no public open space corporate bland colored panels for “architecture” boxy box bland buildings, like suburban office park buildings but jammed into seattle parcel building envelopes, no character, no charm, no human scale. let’s become a city of commoditized Dwelling Unit Products! and why stop there, let’s have Dwelling Units in Cargo Containers we could stack them up drop them in by helicopters and just get up to 40 stories high of Containerized Dwelling Units since obviously charm beauty neighborhoodness don’t matter. We can all live inside our space and look at pictures of old style bulidings with beauty and charm on our cell phones on the internet. why have them in real life? it’s so old fashioned, having a “real neighborhood” who needs it?
@28, ADUs aren’t rooming houses. They’re duplexes — two complete units. And there’re thousands of them around Seattle, often owned by older people who would like to rent out their currently-illegal basement apartment so they can afford to stay in their houses. They would be truly affordable units in contrast to the 200 sq ft rabbit warrens being built which ARE truly rooming houses because they don’t have real kitchens.
Unfortunately, legalizing an ADU with the City is so expensive and the process is so daunting that most people don’t even try.
At least people would be able to find a place to rest their head at night.
Fuck your charm. Fuck your beauty. People are trying to survive.