The Myth of Affordable Housing in Seattle: The Density Dilemma

I was touring some houses over the weekend looking for a Ron & Don client that wants to buy somewhat close to the University of Washington. I saw a brand new build, and went to take a look. I think this property is a perfect illustration of the myth of affordable housing that we have in the Seattle area right now. Let me explain.

We have a governmental “carrot and stick” approach to housing in the Pacific Northwest. The various City Councils will make changes in the zoning code to allow for more density or create policies that incentivize or punish developers around affordable housing units. After years of these tweaks, is there a correlation between density initiatives and affordable housing?

The short answer is “no.”

In recent years, government officials have championed policies aimed at increasing density to address the pressing issue of housing affordability. On the surface, this approach seems logical – more housing units should theoretically lead to lower prices, right? Unfortunately, the reality paints a starkly different picture.

Let’s use the house I toured this weekend as an example.

It’s a 2 Bed/ 2.25 Bath 1,079 square feet house selling for $798,000. It is brand new and I thought it was very nice. So I looked up what used to be on this lot. Well, there was a very old house and a big lot that sold a few years back for $750,000. That house was torn down, and four houses were built. More density! So that part of the equation actually worked, but how about the affordability part? The four houses that were build are now for sale:

4 Bed / 3.5 Bath  2,590 square feet  — $1,448,000

2 Bed / 2.25 Bath 1,079 square feet — $798,000

2 Bed / 2.25 Bath 1,079 square feet — $798,000

4 Bed / 3.5 Bath  2,590 square feet  — $1,448,000

$4,492,000 total retail cost.

Affordable? I’ll let you be the judge of that. It’s easy to blame the developers, but they are running a business that is trying to make a profit just like any other business. They acquire existing properties, demolish them, and erect new, often upscale developments in their place. This phenomenon, known as “teardown and build new,” displaces existing residents (who often get a big payday) but also drives up the overall cost of housing in the area. On the flip side, you now have 4 families living where there used to be one family.

Before you villainize the developers, remember that they take on all of the risk during the build. Developing new properties in prime locations comes with a hefty price tag – land acquisition, construction costs, and compliance with stringent regulations all contribute to cost and build time. Consequently, developers are compelled to target high-end markets to offset these costs and ensure a profitable return on investment more than the governmental incentives to create affordable units.

So, where does this leave us in our quest for affordable housing? It’s evident that the current approach of prioritizing density without safeguards to protect existing communities is fundamentally flawed. Instead of fostering true affordability, it inadvertently creates more housing units that also are more expensive.

As a real estate expert, I’m on the side of people owning real estate. There is nothing that can change the average family or individual’s lifetime wealth outlook more than owning real estate.

Are we going to get more affordable housing with this current model? I do not think so. 

In conclusion, the myth of affordable housing in the Seattle area is just that – a myth. If we really want a Pacific Northwest that has affordable housing interspersed in our neighborhoods, it’s time to rethink our approach.

Photos – what used to be there, and the new places…