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Seattle’s bid to replace downtown retail with housing triggers debate

By Heidi Groover, The Seattle Times
Published: September 26, 2023, 8:25am

SEATTLE — In hopes of reviving part of the city’s core by replacing boarded-up storefronts with market-rate apartments or condos, Seattle leaders are considering zoning changes along Third Avenue.

The changes would allow developers to build residential buildings up to 440 feet in a five-block area downtown near Third Avenue and Pine Street, where residential heights are today limited to 170 feet. The increase could draw the types of skinny 30- to 40-story residential towers with retail on the ground floor seen on nearby blocks in Belltown and Denny Triangle.

Supporters say redevelopment can boost activity in the city’s central business district, but not everyone is buying into that vision.

Some council members are skeptical that the potential redevelopment would generate enough of the affordable housing the city needs. And given the sluggish commercial real estate market, it’s not clear how much activity the rezone would spur, or how soon.

Seattle City Council members passed the zoning plan out of committee last week on a divided 3-2 vote and expect to take a final vote at the full council meeting Tuesday. The rezone area covers just 11 parcels, including three landmarked buildings.

“Retail is different today than when the zoning was created. We have more online shopping today and we also need to make our zoning code meet these changing demands,” Councilmember Dan Strauss, who is sponsoring the proposal, said during a recent council meeting. “We can improve the [downtown] vitality by increasing the amount of people and types of things that you can do on Third Avenue.”

“There’s no market”

Zoning changes are likely to increase the value of the 83-year-old art deco building at Third and Pike that currently houses Ross Dress for Less, and the owners may be open to selling, said co-owner Art Wahl. But finding a buyer is another question.

Although an influx of new apartments have hit the market in Seattle recently, permit applications for new apartment and condo buildings have fallen off as interest rates and construction costs remain high.

The upzone is “very forward-thinking on [the city’s] part, but there’s no market,” Wahl said.

Owners offered the 83,000-square-foot building for sale in 2019 and had a potential buyer who was likely to tear it down and seek an upzone to eventually redevelop the site, but that deal fell apart when COVID-19 hit, Wahl said. “There hasn’t been any real interest in anything on Third Avenue since the end of the first year of the pandemic.”

If the building sells, and Ross leaves, Wahl believes a new owner would likely tear it down because few retailers are interested in that much downtown retail space. “If they go, there’s no retail replacement. There just isn’t.”

A city survey has identified the Ross building as a potential future target for landmarking, which could restrict changes to the building.

Other property owners see an opportunity.

The owners of the Kress building, vacant since the IGA grocery store closed in 2020, believe the site “could support hundreds of new units” of housing, Stuart Tanz, CEO of Retail Opportunity Investments Corp., told council members.

Next door, the Low Income Housing Institute owns a three-story single-room occupancy building, providing affordable housing for people who were previously homeless. But the century-old Glen Hotel, with 37 rooms and shared bathrooms down the hall, is “not ideal long term in terms of the health issues and quality of life,” Executive Director Sharon Lee said in an interview.

With the rezone, LIHI could potentially sell the Glen to a developer and use the money to replace the housing with affordable but more spacious studio apartments on another site in or near downtown, Lee said. “We would be able to replace the housing and the housing would be so much better.”

LIHI had relied on commercial tenants in the building’s main floor to help subsidize rents in the building, but those tenants left amid drug activity and break-ins, Lee said. “We’re not just concerned about our residents, we’re concerned about the health of downtown,” Lee said.

Blocking sidewalks

Mayor Bruce Harrell’s administration proposed the zoning change as part of his plan to “activate” downtown. Business leaders have celebrated that plan, while some activists decried the plan for not doing enough to improve services for people who are living unsheltered.

Along with addressing the decline of brick-and-mortar retail and the need for more housing, the rezone is an attempt to “disrupt” street disorder on Third Avenue, according to a report from the Office of Planning and Community Development.

Construction can last years and block sidewalks.

“Significant new construction activity in the area would be one way to disrupt patterns of street disorder and illicit activity. Construction activity for major new development often spans one to two years,” the department wrote. “The disruptive effects of construction in key blocks could be a step towards resetting existing negative activity patterns in core blocks.”

But that may do little more than move people elsewhere downtown.

A boost in residential development would be a welcome addition downtown, and “I really hope we get a lot more of it,” said Daniel Malone, executive director of the Downtown Emergency Service Center. But while construction in that area “probably will displace a bunch of the illicit activity and other problematic activity, it won’t stop those behaviors. It will just move them,” Malone said.

Other city efforts emphasizing Third and Pike have simply pushed people to Third and Yesler near City Hall Park, Malone said.

Malone said he hopes to see “a really deliberate effort to try to meet the needs of the people, so they don’t just move somewhere else.”

Nonprofits and government agencies are working on an array of programs to address drug use and homelessness downtown, but housing and treatment resources are limited. Outreach workers patrol the area as part of an effort known as the Third Avenue Project but have dealt with a shortage of shelter. The Seattle Fire Department launched a new overdose response team focused on downtown, Belltown and Pioneer Square, but it faces a shortage of treatment options.

Blocking sidewalks can hamper access for pedestrians and transit users, particularly on downtown’s busiest transit corridor. Council members adopted an amendment to the zoning plan encouraging city departments to ensure sidewalk access is “not substantially restricted or impaired” for pedestrians and transit users during construction.

Split views

Ahead of Tuesday’s vote, council members split on the zoning proposal, with some raising concerns about whether it will deliver enough affordable housing.

In backing the plan, Strauss called downtown “the core not only of our city’s economic engine, it’s the core of our region’s economic engine.”

But Councilmember Tammy Morales said that while she agreed downtown needs more housing, she questioned whether the city’s existing regulations would generate enough affordable housing to justify the benefit the upzone would give private property owners.

Seattle’s mandatory housing affordability program requires developers who build new apartment and condo towers to either include some affordable housing on-site or pay a fee before they start building. Most developers opt to pay the fee.

City staff estimate the rezone is likely to attract two market-rate or high-end projects totaling between 600 and 1,200 homes over the next 20 years, resulting in between $4.2 million and $8.4 million for affordable housing. If developers opted to build on-site, that would result in 10 to 20 affordable homes, according to the Office of Planning and Community Development.

New apartments are likely to be expensive, and Morales said she worries some condos could sit empty as investments. “That empty unit, or even an occupied luxury one, won’t provide any benefit to working people — trickle down or otherwise,” Morales said in an email.

“We should be trying to transform downtown into a living, breathing, neighborhood accessible to people of all incomes, so that there is vibrancy all throughout the day and this change won’t do that,” she said, adding, “A continuation of a lack of housing affordable to people with low or no income will only continue [to] exacerbate the crisis of homelessness in our city.”

Councilmember Alex Pedersen also voted no in committee, saying he needed more time to consider “the financial benefits that City Hall would be granting to the for-profit owners of those buildings, the landowners, versus the public benefits that we hope to receive in return.”

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