City to help struggling apartment developers

Vacant lots awaiting construction crews like the future site of the ION 149th are a common sight in Shoreline - photo by Oliver Moffat

By Oliver Moffat

It’s tough times for the real estate investor. High interest rates, inflation and worker shortages are making it hard to secure financing. And with a recent surge of big apartments in the region, vacancy rates are rising.

At the City Council Meeting on January 29, 2024 the council held a public hearing on proposed ordinance 1003 which, if enacted by the city, would help developers by extending permit expiration dates. No one from the public spoke at the hearing and the council is set to approve the measure at the February 12 meeting without debate.

A graph from the UW WASHINGTON STATE APARTMENT MARKET REPORT shows increasing vacancy rates for rental apartments

According to the City, the last two years set a record for new apartments entering the market and the vacancy rate has hit a 15-year high. Apartment developers spend years and millions of dollars buying land, planning buildings and securing permits before they start digging. 

Once issued, permits normally expire after six months. Because of high interest rates, developers are contacting the city pleading for more time because although their projects are approved they haven’t secured the financing to get started.

Once expired developers must reapply for new permits and conform to any new zoning rules the city has recently put into place. The city granted extensions in 2020 and again in 2021 because of the global pandemic and stay-at-home orders. In August 2023, the city extended the permit expiration dates by six months and now is considering doing it again.

A graph from the King County Housing Needs Dashboard shows Shoreline needs 13,330 new homes by 2044; two-thirds of which must be affordable to people making less than 80% of the area’s median income.

The city needs more homes; a lot more homes. According to data from the King County Housing Needs Dashboard, Shoreline needs to build 13,330 new homes before 2044 to accommodate our rising population and more than two-thirds of those homes need to be affordable to people making less than 80% of the area’s median income.

Shoreline has seen a surge in large apartment developments thanks to zoning rules to allow greater density and tax breaks for investors who make some of their units affordable to people earning 70% or 80% of the area median income.

But, according to the city, there’s a problem: “despite the volume of residential units, Shoreline has not seen a correlating volume of commercial space in these areas that could provide retail services to the residents of those developments and would also contribute to the creation of a vibrant, walkable community. 

Currently commercial development is not as lucrative as residential, due to the competition for developable land. Without development regulations mandating commercial space, the City is losing a valuable opportunity to provide the services to residents of a growing city.”

And so, in December, the city passed the ground floor retail rule that requires big apartments to also have commercial space. Because the ground-floor retail rule is new, developers who get an extension under the proposed ordinance won’t be required to go back to the drawing board to add commercial space.

Tough times indeed.