Higher high-rise fee proposed

Developers could contribute more to affordable housing and still make a healthy profit on taller downtown buildings, according to a study commissioned by the Seattle City Council.

The study, released Wednesday, stirred up the debate over what the city should demand from developers in exchange for allowing taller buildings downtown. The council is expected to vote this spring on zoning changes that would allow buildings to go hundreds of feet higher, obliterating rules that have shaped Seattle's skyline since 1989.

Peter Steinbrueck, chairman of the council's urban planning committee, said the study is important because it provides figures about development costs and returns that decision-makers haven't had in the past.

But some developers, including nonprofit ones, criticized the report. "It is the ultimate folly to think you can encourage jobs and housing downtown by making [buildings] more expensive," said Richard Stevenson, president of Clise Properties.

Mayor Greg Nickels recommended that taller buildings be permitted as a way to spur more high-rise condos and apartments, and make Seattle more like Vancouver, B.C. By allowing taller buildings, Nickels hopes more people would live closer to their downtown jobs, curbing sprawl and reducing traffic.

To construct taller buildings, developers would have to pay into a pool for downtown affordable housing, under Nickels' proposal.

Steinbrueck wants to double the amount — to $20 per square foot — developers would contribute to affordable housing. He said it's fair to ask developers to replace some affordable housing that new buildings are likely to displace. "I think it's a good quid pro quo," he said.

The study was prepared by two Seattle-area real-estate experts — Matt Anderson of Heartland and Anthony Gibbons of Re• Solve — who often work for developers. It predicted that although Steinbrueck's proposal would trim projects' profits, it would allow a return of 32 percent on investment.

The mayor's proposal would provide a return of 42 percent, according to the study.

A project must have a return rate of at least 20 percent to be feasible, the report said. Gibbons compared a return rate to an interest rate, but said it is "designed to provide for sufficient profit while covering risk and inflation."

While Steinbrueck's proposal passed muster with the study's authors, it ran into some unlikely foes.

An influential nonprofit group, the Housing Development Consortium, opposes Steinbrueck's $20 per-square-foot fee. In a letter to the council, consortium leaders said they and developers agreed on a $10 per-square-foot fee after difficult negotiations.

Raising the fee might discourage new housing and provoke a legal challenge to the city's "bonus" program, which allows taller buildings in exchange for public amenities.

"Our agreement on this number reflects many years of negotiation and compromise on a variety of issues," said the letter signed by Carla Okigwe, the consortium's executive director, and several prominent developers, including Stevenson.

Okigwe said the council study's financial models could not emulate real risks and variables. But not all developers agree with Okigwe. Sharon Lee, executive director of the Low Income Housing Institute, said the fee should be higher than $20 per square foot. Downtown developer Martin Selig sent Steinbrueck a letter praising his "great plan."

Bob Young: 206-464-2174