Besides the developer, who monatarily benefits from big apt/condo complexes?

[MellyMel]

I have talked this over socially and no one I know can say for sure, so maybe folks here do.

Aside from the developer, who makes money from these/what incentives are there to okay these structures over more modest uses like single family homes, townhomes, or small complexes?

(I am assuming it to be money-related and not just an ideological stance on the virtues of density.)

I can see how an influx of people might make more consumers for surrounding businesses, but what else?

Does the city get better taxes from this kind of land use? County or state? What is the driving force?

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[transplantella]

All entities extracting property taxes will benefit from high density urban development based on the assessed value of the property.

You build one house per lot you get X amount of tax money.

You build 30 apartments on the same piece of land your tax revenue increases exponentially.

You assume correctly.

And then of course there is the lender. The bank lends on one piddly house per property or better, lends millions on the same multi-dwelling property reaping bountiful interest on a [probable] shorter term higher interest commercial loan.

Moneh, moneh, moneh.

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[Smitty]

As you mentioned, local area small and big businesses should benefit as well.

The more important point – and the one I find most ironic – is that West Seattleites complain about these complexes to no end, yet they fit the Seattle socialist mentality perfectly. High density means lower environmental impact per person than single family or townhouses. Typically walking distance to services and near mass transit – so again, environmentally friendly. Lower cost per unit rent due to scale, so affordable for the “people” and not just the “the man”.

You can’t just embrace the environmentally friendly things that YOU approve of or wish were NIMBY.

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[kgdlg]

MellyMel I am so glad you asked this question. While I think you are partially correct about the developer, it is more nuances than that. As I have commented before, real estate development is no longer a mom and pop business. While there still are the occasional local family doing large development (Capco Plaza for example), the majority of large development in this town is fueled by institutional investment (pension funds, Real estate investment trusts, union investment funds) So yes up front the developer makes a cash fee, but over the life of the building investors make a healthy profit off of the cash flow from the rents. Or they sell after a few years and make a profit on the appreciation (value) also tied to high rents. And the high rents are possible because of demand, constrained supply, and our very good job growth here compared to rest of country. All these new amazon employees need places to live and this demographic prefers city living to the typical single family American dream. I am not saying it is right or wrong, just that all these buildings are investment vehicles, usually for national or out of town investment vehicles. When you start viewing them in this way, it is no wonder they are popping up everywhere.

Sadly many don’t pay taxes for the first 12 years because of the multi fam tax exemption. This is a controversial program that provides a set aside for some units at 80 percent of Median income which is essentially market rents in many neighborhoods. But, the city knows that in the longterm all these properties will eventually pay lots of taxes, which of course they want more of.

I also work in pike pine where a great majority of this development is happening. I would definitely say that the local businesses benefit greatly, as that district is literally booming from all the people there all the time. But the trade off is parking is really hard.

Lastly, I think one of the benefits of these buildings that people fail to mention is jobs in the construction industry. As everyone knows, these tanked during the recession and they are a huge driver of the recovery. Whether we like it or not, real estate is a massive industry in the US.

This was intended to be more informative than editorial. My main concern as an affordable housing developer is that these buildings are not for the average low income worker. Please support the Seattle housing levy as a result, we need more housing for regular people in urban villages.

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[skeeter]

I’d like to know more about this “multi fam tax exemption.” I bought a new construction condo in 2007 and have been paying King County property tax every year since.

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[kgdlg]

Skeeter just google it. It is an exemption that goes direct to the owner of large multi fam buildings, not condos. It was intended to spur growth in urban villages. It obviously is working. But the city audited the program last year with mixed results.

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[skeeter]

I was surprised to see the prices at the new Youngstown apartments. Up to $2,496 for a two-bedroom apartment?

http://www.youngstownflats.com/the_homes_availability.php

But it is the customers who ultimately set the price I suppose.

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[skeeter]

Okay I googled it. At first glance I’m against it. The tenants get government services (school, fire, roads, parks, etc) but don’t have to pay for it for 12 years. Seems pretty unfair to me.

http://www.seattle.gov/housing/incentives/MFTE.htm

If there is a need for apartments then developers will build apartments – with or without a subsidy from other taxpayers.

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[Thistlemist]

One side benefit to the large amount of new inventory slated for the area that I have noticed, and granted, this is highly anecdotal, is that it has created a situation where owners of older buildings are starting to really address long term repair/maintenance issues. My buildings manager flat out told me that over the last few months he has been given far more leeway from the owners to invest in some much needed updates to the units, specifically because they have started loosing tenants at some of their other buildings on Capitol Hill to the newer complexes. Several of my friends have also said the exact same thing regarding their West Seattle apartments. I think the owners are taking note that if they want to keep charging at the current rent rate, they have to provide something in return to make moving to a new place a little less appealing. I know I certainly started weighting the cost/benefit of moving to a newer studio apartment with complex amenities like community decks, small gyms, or storage when my rent was raised this last renewal. Granted this only really works for tenants who may have some financial leeway to follow through on their threats of moving. If anything, I could see the exact opposite in many other cases were an owner/manager knows that rent rates at other places are such that their tenants probably cannot afford to move and will more likely put up with inadequate situations because they have to.

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[JanS]

skeeter…I checked the prices of Younstown Flats early on and was totally surprised. The cheapest apartment there, and very small, is $1288. Yes, it’s a nice building, yes, it has nice amenities. But…It’s in an area that no way others could command that rent, and it’s downwind of Nucor. The back of the building borders the parking lot where I do dialysis…now that’s some view. I will wave to the tenants who take those back units as I’m leaving Big D :D

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[cjboffoli]

Above all, I think the social benefits of density are often the most undersold. There was a really interesting chapter in Jonah Lehrer’s 2012 book “Imagine: How Creativity Works” that covered the way that cities tend to generate more creative ideas and produce more innovative things. Lehrer argued that the key to this process is density.

The book cited a number of examples, including the way the Pixar studios organized their headquarters in Emeryville, CA. Rather than put everybody together in departments, employee offices were scrambled. And the bathrooms were arranged so that people would have to walk a ways to get to them. The idea is that by mixing up people of disparate talents and specialities and then also providing them an additional opportunity to bump into people walking around, the outcome is that you get higher quality creative output.

Lehrer posits that cities work best when people have the potential to interact, to have their beliefs and ideas collide with one another, to have those things embraced or challenged, not when we’re all insulated by cars and suburban houses.

So often when I read about local reaction to denser development, the knee jerk response is based on preserving a status quo related to the predominance of cars and anachronistic ideas about one house per lot pseudo-suburban neighborhoods. But I always prefer to focus on the people who are coming to live here. As this is Seattle, more likely than not these new neighbors will be well-educated, probably may be from other places, and will be lending their talents and abilities not only to local companies, but to the civic infrastructure. While it might not be so easy or convenient to drive around in my private car by myself, in so many other ways I think many boats will rise with the tide of an influx of new people.

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[MellyMel]

Thanks kgdlg. Good info.

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The multi fam tax exemption is interesting in that it seems to remove local government’s financial incentive to approve the most density they can over requiring more modest density growth. At least, it doesn’t realize financial gains in the *near* term, which is all govt seems to be capable of dealing with.)

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Maybe local boards/officials feel pressure from the various private individuals who benefit even when they are not local voting constituents.

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I feel that somewhere in the long chain of city permits and approvals, money is the prime driver over shared beliefs about the virtues of high density housing. So, the no-immediate tax gains makes me wonder if there isn’t another way govt (financially) benefits . . .

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