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No Cost Public Land Gives Seattle Affordable Housing Developers a Boost

The cost of land is a key factor for any developer deciding where to build. With downtown plots typically the priciest in U.S. cities, those focused on affordable housing have to consider that cost in the face of building homes centrally — connected to jobs, transit, healthcare and other services — for those who critically need such good access.

Now, in a rare deal, two Seattle affordable housing developers likely won’t have to choose between location and land cost. Earlier this month, board members of Sound Transit, the metro’s public transit agency, approved a motion for a “no cost land transfer” for two connecting properties valued at $8.6 million. The agency purchased them for construction staging in the dense, centrally located, very expensive First Hill neighborhood. Nonprofit affordable housing developers Bellwether Housing and Plymouth Housing will work jointly to build a 13-story building with 197 units for people earning 60 percent or less than area median income (AMI), 111 units for formerly homeless seniors earning 30 percent AMI or less, ground floor retail, and a community space.

The final board approval for the no cost transfer is contingent on Bellwether and Plymouth putting together about $39 million in public funding for the estimated $92 million project. If successful, it will help demonstrate the role that publicly owned surplus land can play in addressing affordable housing in expensive, booming cities.

“The quick answer is no, the project wouldn’t go forward if we had to pay for the land,” says Tim Parham, Plymouth’s real estate development director. “We might be able to work it out to a degree [if paying for the land], but the public benefit would be much less. We wouldn’t maximize development on site, wouldn’t be able to do a high-rise.”

The plan to maximize the site’s development capacity with affordable housing was a major factor in Sound Transit’s selection of the Plymouth/Bellwether proposal.

“Not many of the properties we own are zoned for high-rise,” says Brooke Belman, Sound Transit development director. “First Hill is one of the densest neighborhoods in the city. We wanted to see full zoning capacity used. Plus, we thought they had a really ambitious plan that spoke to community desires and to the intent of the state statute.”

The statute she mentions was created by the Washington state legislature in 2016 and requires Sound Transit to offer 80 percent of suitable surplus property to affordable housing developers that make at least 80 percent of units on site affordable to people earning 80 percent AMI or less. In those cases, the board has the authority to sell the property at a discount.

Parham says Plymouth has been working for many years to build housing for formerly homeless seniors on First Hill. The neighborhood is home to some of the best hospitals in the region, is transit dense, has lots of restaurants and shops accessible on foot. But, he says, “We’re just not able to compete in the marketplace. We can’t afford the land.”

He thinks discounted surplus public land and other creative public-private partnerships will be key for affordable housing developers in Seattle moving forward. “If we don’t do that,” he says, “then affordable housing is going to keep going further to the fringes of the city where we can buy land outright.”

Belman says it’s possible that there will be more no-cost land transfers in the future, but there’s no plan to do it every time. For one, Sound Transit’s budget assumes about $98.3 million recouped from surplus land sales, so giving it all away would leave them with a big deficit to make up. Belman says the no-cost transfer idea is still in its infancy, so it’s too early to say what the agency might do in the future. The First Hill deal is the first time Sound Transit has given its land to affordable housing developers for free.

At the November meeting where the deal was approved, the Sound Transit board approved motions allowing agency staff to negotiate on two slightly more typical affordable housing proposals. One is a few blocks away from First Hill near the Capitol Hill light-rail station. The other is in north Seattle next to the future Roosevelt light-rail station. In both cases, the board approved the agency to move forward on deeply discounted land sales to affordable housing nonprofits. Capitol Hill Housing plans to build around 78 units of affordable housing. Bellwether and Mercy Housing Northwest want to build 245 units of housing affordable to people earning 60 percent AMI or less next to Roosevelt Station.

If Plymouth and Bellwether can pull together funding to deliver their First Hill project as proposed, the no cost land transfer will go through and they hope to finish construction by 2021. If they can’t, the Sound Transit board will revisit the possibility of selling the nonprofits the land instead of giving it to them for free.