A Redmond nonprofit made a really good investment. In the early ‘90s, Together Center purchased a failing strip mall downtown for $1.6 million as office space for human services organizations. Thirty years later, that property was worth $18 million.
With those gains, Together Center wanted to give back.
“We were trying to figure out, how can we leverage this and make it the highest and best use for the community?” said Kim Sarnecki, chief executive officer of Together Center.
Their answer was affordable housing.
The Together Center demolished the strip mall and raised a new six-story facility that opened earlier this month. More than 20 nonprofits occupy office space on the ground floor. On top are 280 units for people who can’t afford Redmond’s exceptionally high cost of housing.
Housing experts say they haven’t seen this model before but they expect they increasingly will. Together Center could serve as a blueprint for affordable housing in King County as officials chase more density in a land-constrained environment with limited resources.
And nonprofits, churches and local governments that are sitting on excess or underutilized land are asking how they can emulate Together Center’s model.
A new model
In 2019, Together Center went to developers with a big request.
It wanted to create as much affordable housing as possible, build new office space for 22 nonprofits, find temporary homes for those organizations during construction and maintain complete ownership of the property. And it had no cash to make this happen.
Sarnecki said some developers laughed in their faces. But not all.
That’s because Together Center had a powerful bargaining chip. A prime 2.5-acre piece of property in downtown Redmond.
“The likelihood of us being able to afford a property like that or even finding a property like that is very slim,” said John Fisher, a developer at Inland Group.
Inland Group, a for-profit affordable housing developer, and Horizon Housing Alliance, a nonprofit housing provider, said they could make those constraints work under a creative deal.
The developers would finance the bulk of the $106 million project up front. In exchange, they could operate the housing units and collect rents for 50 years.
Two hundred units are “workforce housing” for households making less than 60% of the area median income. Redmond’s area median income for a household is $147,000. And 80 units are for households making less than 40%, three-quarters of which were set aside for people exiting homelessness.
Residents won’t pay more than 30% of those respective income limits for the next 50 years.
Inland Group could build more units of housing than a typical project because it didn’t have to spend money to purchase land. The Housing Development Consortium estimates land acquisition accounts for about 15% of the total project costs for new affordable housing.
And because the developers didn’t need to buy land, they could afford to pay for the nonprofits that were leasing office space at the existing strip mall to find temporary homes elsewhere during construction.
Benefits of the model
Together Center is home to physical and mental health clinics, education nonprofits, childcare services and more. Case managers also have offices on site for recently homeless individuals living in the building.
“It not only enhances the convenience for clients, but it really nurtures the collaboration amongst the nonprofit providers,” said Patience Malaba, executive director of the Housing Development Consortium, an affordable housing advocacy group based in Seattle.
Together Center staff say residents walk down to the ground floor to attend dentist appointments and drop off their kids at daycare. In addition, the organizations are able to refer clients to each other more easily, by walking them across the lobby to each other. Students at Lake Washington School District’s Transition Academy, a program for young adults with developmental disabilities located at Together Center, often volunteer with other nonprofits located onsite.
“I would jump at the chance to create investment in another project like this,” said Lindsay Masters, executive director of A Regional Coalition for Housing, which is a tenant at Together Center and also provided $2.75 million for the construction of the project.
Masters adds that it’s difficult for nonprofits to find affordable office space, especially in downtown areas where more people can access their services.
By pairing with a large housing development, Together Center can take costs that they would normally have to pay in full — like a roof, landscaping, security, insurance — and pay a small portion of it.
Together Center covers 15% of these costs while the housing operators pay the rest, determined by square footage.
In an environment where money to build affordable housing is scarce, projects like Together Center’s take those dollars further in a number of ways.
New affordable housing is not typically built in areas like downtown Redmond, the center of one of the fastest-growing cities in the state, where land is expensive. Median rent for a one-bedroom apartment in the city is $2,002, according to ApartmentList.com.
Together Center CEO Sarnecki said that’s precisely why the organizations wanted to build it there, where it’s close to transit hubs, human services and jobs.
“There is value in trying to preserve and build affordable housing in the heart of our communities and not way out where people have to commute many, many miles to try to get work. And so that the downtown can also be thriving and diverse and, and welcoming for everyone,” Sarnecki said.
State officials say they are increasingly directing affordable housing resources towards projects that look like Together Center.
The Washington State Housing Needs Assessment shows King County needs about 9,000 units of affordable housing for households making less than 50% of the area median income built every year for the next 20 years. King County’s area median income is currently $106,000.
But these projects are expensive and don’t necessarily make as much money as market-rate housing once built. Most affordable housing only gets built with large federal subsidies because the numbers don’t pencil out for developers without it.
Low-Income Housing Tax Credits, a federal tax subsidy, typically pays for 30% to 70% of the total cost of affordable housing projects. These credits paid for about $44 million or 41% of Together Center’s construction costs.
However, these dollars are limited and competitive.
Together Center’s partnership among 22 nonprofits and nonprofit ownership of the land helped its application for this funding because the Washington State Housing Finance Commission revised its application criteria a few years ago to prioritize these two features, said Lisa Vatske, who helps oversee the distribution of this funding.
Doing it again
Sarnecki, CEO of Together Center, said more than a dozen groups have reached out to Together Center to learn about the model and how they made it happen. While special circumstances made it possible, she said those conditions aren’t completely unique.
“Churches, nonprofits, cities, counties, state, they own land, right?” Sarnecki said.
Bothell United Methodist Church had been sitting on unused land for years. Church leaders sold it to essentially trade for property in downtown Bothell, which would be closer to transit, human services and employment opportunities.
They had learned about the growing homelessness crisis in the region through their meals program. But as they began the affordable housing project, they learned of another dire need in their community.
“Our area’s sort of a human services desert,” pastor Kristin Joyner said.
So Joyner and other church leaders decided to add human services offices, a restaurant that provides jobs training, and space for a community court on the ground floor.
“We wanted to do something about homelessness. And one thing we can do about homelessness is to help build more homes,” said Joyner.