Seattle Promotes the Rehabilitation of Affordable Dwellings

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Thousands of affordable housing units are lost each year as older buildings become dilapidated. In Seattle, Washington, one of the most expensive markets in the country, state and local governments are working together to promote housing rehabilitation and increase its cost effectiveness. The city has created solutions that address the economic, development, and construction obstacles to successful rehabilitation. This article discusses Seattle’s solutions, which receive special attention in a new HUD report, Best Practices for Effecting the Rehabilitation of Affordable Housing.

Best Practices for Effecting the Rehabilitation of Affordable Housing offers solutions developed by state and local governments in Seattle and elsewhere, as well as other information on housing rehabilitation.

Economic Constraints and Solutions

Many Seattle households simply can’t afford the area’s current housing costs, leading some families to look to subsidized housing, much of it rehabilitated. Although renovation is expensive, Seattle rehabbers often combine subsidies to underwrite restoration projects that will produce affordable housing, as demonstrated by the newly rehabilitated Pacific Hotel. This building, a transient hotel built in 1916, now has 112 affordable living units. The project was supported by combining low-income housing tax credits and historic rehabilitation tax credits with debt financing. The debt’s cost was reduced with subsidies from the Federal Home Loan Bank, the state’s Housing Trust Fund, the city, and HUD’s Section 8 Moderate Rehabilitation Single Room Occupancy Program for Homeless Individuals.

In addition to combining funds from multiple sources to make housing units more affordable, the state, county, and city promote coordination of resources with a common application form. Other tools used include property tax incentives, transfer of development rights, tax-exempt financing, bargain sales, and partnerships.

Development-Phase Barriers and Solutions

Acquiring properties to rehabilitate in Seattle is often difficult, because developers need up-front capital. The options available to developers include bridge loans and cooperative strategies. Seattle’s Office of Housing offers bridge loans with terms of up to three years, interest-only payments, and deferred repayment. Nonprofits may seek mutually beneficial approaches to acquisition by either trading properties or combining resources to purchase a larger property.

Using tax credits and debt financing, rehabilitation of the Pacific Hotel in Seattle, Washington produced 112 affordable living units.

Another obstacle to rehabilitation that commonly arises during development is the estimation of rehab costs, which rarely match those of new construction. To obtain the best estimates, Seattle rehabbers recommend having a knowledgeable cost estimator who works closely with contractors experienced in the types and areas of rehabilitation contemplated or underway. Another suggestion is that the city ease cost estimation difficulties by identifying rehabilitation costs for particular types of properties by neighborhood.

Land use requirements for sustainability, parking, and open space may also interfere with the rehabilitation of affordable housing. To eliminate some of the barriers created by these mandates, Seattle reduced parking space requirements from 1.5 to 1.3 spaces per housing unit. The city is further weighing the merits of supplementing auto with bicycle parking, surveying tenants for actual parking needs, granting shared parking allocations across housing complexes, and implementing car-sharing programs (such as Flexcar) to help alleviate the obstacles created by parking requirements.

Construction-Phase Barriers and Solutions

The transition to construction presents more challenges. Stringent retrofitting of rehabilitated buildings, required by the federal government under the Americans with Disabilities Act (ADA), is seen by some as one construction barrier to overcome. The state of Washington allows flexibility under certain circumstances so that Seattle, unlike many cities, can more judiciously evaluate modifications. Seattle’s Pacific Hotel project, for example, faced prohibitive costs if forced to comply with the strict ADA requirements. To satisfy the law and regulations while controlling expenses, the state approved a solution that included altering a doorway and window to meet accessibility requirements, while continuing to uphold the building’s historic integrity.

Volume 2 of Best Practices for Effecting the Rehabilitation of Affordable Housing offers technical analyses and case studies to assist rehabilitation professionals.

Although Seattle often provides financial incentives to encourage local historic preservation, historic regulations can also present obstacles to rehabilitation. Historic regulations, monitored by local historic preservation boards, may lengthen the approval process. In addition, developers applying for historic rehabilitation tax credits must comply with regulations from both the State Historic Preservation Office and the National Park Service (NPS). If standards for a project cannot be reconciled between the two agencies, meeting both sets of requirements significantly increases rehabilitation costs. To resolve differences between the NPS and local historic districts, rehabilitation professionals throughout Seattle suggest meeting early with these stakeholders to satisfy the interests of all parties. Seattle’s ability to produce a substantial number of rehabilitated historic properties to house low- and moderate-income families demonstrates how affordability and preservation objectives can often be complementary.

Rehabilitation projects are often costly and extremely difficult to complete. Seattle is home to many such enterprises, and the city is working to eliminate many of the obstacles to rehabilitating affordable housing. Best Practices for Effecting the Rehabilitation of Affordable Housing contains additional solutions crafted by state and local governments in Seattle and elsewhere, as well as other information on housing rehabilitation. The report is available free of charge online at www.huduser.org/publications/affhsg/bestpractices.html, or a print version is available for a nominal fee by calling 800.245.2691, option 1.