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Friday, September 15, 2006

Affordable Housing Dispute

Posted by on September 15 at 16:01 PM

Wednesday night I joined a packed audience of neighborhood activists, Real Change vendors and affordable housing wonks down at City Hall to listen to forum billed as “Seattle brain trust of housing geeks” hash out the details of Seattle’s affordable housing situation.

The mood of the crowd was hot against condo-buying folks who are driving the market for Seattle’s condo conversion “epidemic” (in Steinbrueck’s words) — many see condo conversion as the primary factor in the loss of cheap apartments and other affordable housing in the city and the mayor’s pro-development stance as peddling to class issues. After hearing a lot of personal and impassioned stories of people who have been forced to move from their condo-doomed homes and several panelists’ worry about the changing demographics of Seattle (poor people! Move yeselves to Renton!), here’s what the experts know for sure:

Seattle needs more affordable housing.
We are, indeed, in the midst of a condo-conversion boom.

This leads Steinbrueck and Tom Rasmussen, as well as tenant advocates, to say the city put a cap or moratorium on condo conversion.

Seattle Department of Housing director Adrienne Quinn, however, had a different viewpoint. “It’s fiction to say we’re losing low income housing primarily because of condo conversion,” said Quinn, “Developers are going after the nicest buildings first, primarily the higher rent units… the city’s primary focus should not be on conversions or demolitions, but instead on building coalitions.” like with the business community.

Quinn and the other brain trust of housing geeks were also at odds over the answer to this deceivingly simple question:

Is there more affordable housing in Seattle now than there was two years ago?

Several months ago, housing advocates fought for $50,000 to do a study of housing losses in four neighborhoods downtown, Capitol Hill/Central District, U-District and SE Seattle. The Department of Housing hired housing statistics firm Dupre and Scott to do the study, but advocates stayed on board by forming a task force to structure the study.

So Wednesday night, Quinn dropped this statistical bomb: since 2004, Seattle has experienced a net increase in affordable housing, gaining 854 units.

Quinn prefaced that announcement by saying the numbers are just preliminary and the study won’t be finished until October or November.

Other experts on the panel found that number suspect, since the aforementioned (personal, impassioned) anecdotal evidence seems to indicate that affordable units are decreasing as apartments go condo across the city. Seattle Displacement Coalition head and vociferous activist John Fox called Quinn’s finding “absolutely ridiculous” and its release “politically motivated” by the city’s pro-development forces.

Mostly, he and other task force members were surprised that they didn’t get to review the study’s findings before its preliminary release. Says Fox: “We worked our butt off to get funding to do this low income housing study and now I fear that they’re simply trying to use this as a forum to trivialize the problem.” Thursday, Fox filed a public disclosure request to obtain whatever numbers and analyses the Department of Housing has.

Fox maintains that in total last year, there were 681 housing units demolished and, based on studies done in 1998, it’s safe to estimate that 80% of the units were low income. Of the demolished housing, 240 units were single family homes, 25% of which were rentals. Since so much low income housing is being demolished, says Fox, an increase in affordable units seems unlikely.

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Does anyone know how the amount of affordable housing in Seattle compare with other similarly-sized cities? I have never seen any data but it just seems to me there is a lot more here than other places I've lived.

John Fox and his Displacement Coaltion of One should shut his trap. He has been completely discredited thanks a very long history of distortions and lies. He never let facts get in the way of his agenda before, so why start now. Sorry the reality doesn't fit you conviction that the city is out to destroy affordable housing, John. There are hundred of thoughtful activists in this city. Can reporters please work just a little harder to get their voices in print and send John Fox to the crank file.

See, and I'd just build 100-story tall residential apartment buildings, inexpensive ones, in Wallingford, with green space around them, and have them all be split into low-income, studio, one-bedroom, and two-bedroom units, with a penthouse level. No parking. None. Except for bike racks and overnight guests.

Only idiots would pay rent instead of buying a condo. Rent is just money down the drain. Whaaaa! Whaaa...! I want the city to provide a drain to pour my money down!

If I were poor, I would rather be a starving renter in seattle than move to a backassed used car lot, strip mall, and office park infested area like renton.

Easy for you to say, Whiner. Go fuck yourself, you elitist prick.

um... rents are cheaper than mortgages in seattle. I pay 850 total for a 1000+ sqr foot 2br in first hill. there's no condo prices in this area for that size of a space that could come near that low in mortgage.

not everyone's just whiners pouring money down the drain. rent is very practical when the housing market is insane.

I was at that forum too, and as people there pointed out, Adrienne Quinn used that 854 number quite dishonestly. The fact is that there are only 854 more affordable units if you count the number of units that are set aside for people making 30% or less of the Area Median Income. The number is much less impressive when you realise that people making up to 80% of AMI (like teachers, nurses, public servants, non-profit workers, etc. etc.) ALSO need affordable housing, and THOSE homes are disappearing in great numbers. Quinn's numbers were totally disingenuous, and give only a tiny detail of a complicated and depressing picture.

I also need to point out that Steinbreuck and Rasmussen did NOT support a building moratorium. Quite the opposite in fact. Steinbreuck pointed out that such moratoriums are hard to come by in the first place, and are limited by law to only one year.

The really innovative proposal of the evenening came from Sharon Lee of Low Income Housing Institute and Michelle Thomas of the Tenants Union. They had the pretty amazing idea of setting up an affordable housing fund, funded by city tax dollars, that would help tenant's associations to buy their own buildings BEFORE they were demolished to build condos. It's a very progressive idea, and both Steinbreuck and Rasmussen seemed genuinely intrigues by the concept. Now THAT'S the kind of policy that the Stranger should be advocating for.

Of course you can rent more (space) for less, but you get none of the appreciation or value of the property other than your immediate use, so really, in the big picture your getting far less (value) at a greater expense (exchanging the value of the investment for the increase in floor space). Renters who rent because they can’t find a comparable property to purchase are really buying the luxury of more space at a hugely inflated price. They would do better to scale back their lifestyle, buy what they can afford and trade up as they can. (I went form renting a huge apartment to owning a tiny condo for about the same money, then 5 years later flipped it and bought a midsize house with the profit from the sale, all w/out moving to Renton.)

The apartment market works against the poor to keep them poor.

If we need more affordable housing, the push should be for more affordable condos, not rentals (which are horrendously expensive at any price over the long run). Renting is the equivalent to living in a hotel w/out room service… not very economical, but most just see the lower monthly cost for a larger space and think they are “saving” money. Ironically when you own, you are literally saving money, money you can use again later.

Remember, when you rent, you never get a dime of it back (it is throwing money down a hole). When you buy, you profit by the delta between your mortgage rate and the rate of appreciation of the value of the property. That means that in a rising market you are paid to live there, and in a falling market, it’s not a total bust (you will get something back when you sell, versus nothing when you end a lease).

Get the focus off the rental situation and put it on the entry level home buyers market.

Why additional government regulations? John Fox says the city is talking shite, why would we want new legislation if the facts on the ground are in dispute?

Should the city be setting the rules about how much of what kind of housing should be built?

Should the city be mandating 80% AMI housing be built, even if it's being built anyway?

The fantasy that housing only grows in value is exactly that- a fantasy. There are countless neighborhoods across the country, both urban and rural, in which the value of housing has gone down substantially over the years. Look at inner city Philadelphia, Detroit, Cleveland, dozens of major cities across the country. Years ago poor people were encouraged to develop their equity by investing in homes. And now? They've spent 20, 30, 50 years of their lives and money to keep up an asset that is now worth less than they paid for it.

No, investing in real estate is not an unqualified good, and people should stop talking as if it is. It's a myth, yo. Rental housing can be just as valuable.

Will, I have no idea what you're talking about. I suspect you don't either.

Agreed, YGBKM. The condo conversion boom is a fantastic thing. It means that instead of having to save $40,000, plus fees, to buy a median priced home in King County (bump that number up quite a bit if you wanna live in the city), you have to save $18-25k. Still a lot of money, but condos are appreciating at insane rates, and the equity you gain after a few years can be put into another condo conversion meaning a larger down payment and lower interest rates, or even to make a really large down payment on a house.

YGBKM (#10) - I agree with you about the benefits of owning versus renting, but it's really patronizing to chide renters for not becoming owners. Not everyone can scrape together a down payment - especially one sufficient enough to eliminate paying PMI, and to make monthly mortgage payments livable. When someone is in a position to get serious about saving for a down payment, they're most likely looking at a plan that will take years to develop. Calling them whiners for wanting decent affordable housing in the meantime is not helping.

Gurldoggie, I LOVE the idea of a fund to help tenants buy their own building. The last apartment building I lived in was sold, and my neighbors and I definitely would have bought it for ourselves if we'd been able to.

Renter: please do not feed the trolls.

Gurldoggie - my point is that until we actually start cranking out affordable housing, it's just going to keep getting less affordable. And condo conversions and townhouses won't make it affordable.

We need to build, not pretend nothing's changed.

Gurldoggie (12)
I never said the market only goes up. I did say... "in a falling market, it’s not a total bust (you will get something back when you sell, versus nothing when you end a lease)." Let's see... end a lease and maybe get your cleaning deposit back vs. sell (even at a loss) and get your equity back... tuff choice.

genevieve (14)
I did not mean to patronize or chide. Only point out that renting is a luxury purchase (often entered into unknowingly) where you pay much, much, much more for space and location, not an economization.

In case you dopes haven't heard, the housing market in the rest of the country is TANKING at the moment, and the market here is slowing fast -- we're at year 2000 inventory levels, and rising (meanwhile, sales have been consistently down, year-over-year for each of the last six months).

So ultimately, you can gloat about they "equity" you've "earned" by purchasing your condo, but you should realize that historically, housing appreciates in price at about the rate of inflation (that's 3-4%, kids). The 15%-a-year, can't-lose-in-real-estate mentality is nothing more than bubble psychology.

And gitai...what can I say? If you think that a $25k down payment is 30% on a Seattle condo, you're a damn fool. The only way that you can "afford" an in-city condo with that kind of down payment is to use "creative" financing...and that's going to be suicide, once the market tanks.

Enjoy your condos, kiddies...once you're underwater on that suicide mortage, you're going to be living in them for a looooong time....

Two examples came up at the forum of places where tenants had bonded together to buy units that were about to go on the open market. One was called 'Benson East,' in Kent, a section-8 project at which the tenants formed a non-profit corp, applied for grants and state capital, and bought the place outright. The other was the Frye Hotel in downtown Seattle, at which the tenants bonded with a non-profit developer to buy the building with the help of private funds.

I haven't looked into the projects any further, although I intend to. On the surface, they both seem like excellent examples of tenants taking control of their housing. I hope this becomes more of a political reality in the near future, as I also just love the idea.

Sorry if I sounded patronizing too. I suspect it's been a long week for all of us.

A Nony Mouse:

You're right. I'm wrong. Never buy anything. Always rent everything.

We are not talking about the rest of the country dumb ass. We are talking about downtown Seattle. Sure there is risk, but a long term investment allows you to ride out down markets, and historically, the trend is up.

But your right, I'm glad I didn't buy property down town 10 years ago (or 20, or 30, or 40) the losses would have been to much to bear.

And furhter more... a falling market is exactly the right time to buy.

"They've spent 20, 30, 50 years of their lives and money to keep up an asset that is now worth less than they paid for it."

Find me one place were housing prices are lower then they were 20 years ago. Save massive disasters or economic collapse housing prices go up. Its simple supply and demand. Fixed land and rising population. Factor in inflation and economic growth and you get rising prices. In order to compensate for yearly interest you only need an annual growth rate of around 3-5%, assuming you don't refinance and keep the same house. After 30 years you then have a valuable asset and close to free living. Seems rather sensible to me. not for everyone, but certainly not a bad decision.

Now the last few years are certainly an anomaly, however rising values are not. It is also a misnomer to say that housing prices are tanking across the country. See:
At worst what we are looking at is a minor correction. In the Seattle area we may just see a slowing of growth as there is simply no more room to build.

he best way to get affordable housing is 1) tax developers or require them to build affordable housing when building high end property, and 2) working to develop public-private partnerships to build condos and apartments in less desirable areas for low-income people to live. Look it would be nice if everyone could have a condo downtown with a nice view and lots of space. But that is not reality. Being poor means you don't get a nice of a house as someone who is rich. Sucks but is reality. Lets focus on how we can work with developers so we get more affordable housing. Kind of like the mayor is doing.

Oh and Fox is a self Righteous moron who would rather look good and pure then get shit done.

And FHA loans let you buy property for 3% down. So the whole idea that you need 20-30% is just false.

It's simpleminded to flat out say that new condos and conversions are having a catastrophic impact on affordability. Where are the people coming from who are buying these converted units? Typically from an existing affordable housing unit, which frees up that unit for someone else.

My situation is a perfect example. I bought a condo in Queen Anne for $340k (hardly affordable - and many of the comments on this board seem to be saying that this is the type of unit that is the problem). My fiance moved in with me and moved out of a $700/mo apartment in QA (so there's one affordable unit freed up by my new condo). I moved out of a condo in Fremont that I sold for $230k (that I bought a few years ago for $170k). My Fremont condo was bought by two sisters. One who had been renting a cheap apartment in Greenwood and one who had been renting a cheap apartment near UW.

My $340k condo ended up adding 3 affordable rentals back into the marketplace. To say that "condo-buying folks" are creating an affordable housing shortage is just plain stupid. If idiots like Steinbrueck and Rasmussen truly believe this we should vote them out of office the first chance we get.

YGBKM (17):
I understand what you're saying, but that view (that renting is a luxury purchase spread out over many years) is really only available to those who can afford to make a choice about whether they rent or own.

A Nony Mouse (18):
Sorry, I just can't be too worried about the falling rates. 3 units in my building were just snapped up - one before it was officially on sale, one within a day, and the third within 2 weeks. The last one took so long because there was a bidding war, and the final sale was $40K more than any unit here had been sold for prior to July '06. And this is an old building without any condo amenities and without huge energies put into maintaining an 'old world charm' atmosphere. I know things will eventually cool down, but I think the condo prices will continue to push upward unless in-city house prices start coming down significantly.

Their criteria for rents on affordable housing (30% of the median income, which is inflated) is fundamentally wrong, thus no, they are not doing what it takes to provide affordable housing, and that's the only thing that matters.

The city is failing the affordable housing needs of the working class.

"Find me one place were housing prices are lower then they were 20 years ago." (Giffy #20)

Easily done. South Broad neighborhood of Philadelphia. Median home prices (in constant 2000 dollars.) 1975: $49,000. 2000: $43,950

You want another? Buffalo-Niagara region. Median home prices (in constant 2000 dollars.) 1975: $79,000. 2000: $53,600.

I could keep going, but what's the point. Many regions of the country that were once very desirable housing markets have taken severe tumbles. Seattle is in a different category at the moment, but don't tell me it's an impossible path.

You Gotta Be Kidding Me:

"And furhter more... a falling market is exactly the right time to buy."

Ask some investors how the feel about investing into a fallng market (also: "furthermore" is one word, genius.)


"Find me one place were housing prices are lower then they were 20 years ago."

Nearly all of Japan.

"Its simple supply and demand. Fixed land and rising population. Factor in inflation and economic growth and you get rising prices."

Uhm...I hate to break it to you, but real (inflation-adjusted) wages are down nearly 8% in Seattle since 2000. That's negative economic growth. And before you say it...population in Seattle has been more or less constant since 2000 (perhaps up by 2%, depending on your source). Yet during the same period of time, median home prices have doubled.

Why? I'll tell you: anyone who can fog a mirror can get a loan. Moreover, banks have been handing out loans with incredibly risky terms -- interest-only, negative-amortization, adjustable-rate, and other suicide mortages. The national savings rate is negative -- with most of that money going into mortgage debt.

Make no mistake: this is a credit bubble, and it's going to end.


"I know things will eventually cool down, but I think the condo prices will continue to push upward unless in-city house prices start coming down significantly."

Based upon what? The fact that several condos in your building just sold?

There are always idiots who buy at the top of a bubble. It doesn't change the fact that the markets are slowing, that Seattle is one of the most over-leveraged markets in the country (over 15% of our outstanding mortgage debt is considered high risk), and that within the next 2-3 years, thousands of people are going to see their mortgage payments skyrocket, leading to skyrocketing foreclosure rates. Couple this trend with slowing sales and rising interest rates, and you have a recipe for economic disaster.

For the rest of you who continue to think that Seattle is somehow immune to the real estate bubble plaguing the rest of the country (esp. the west coast), go here.

How the hell can a 19-year-old buy a home?? All of YGBKM's arguments are predicated on the fact that someone is planning on settling down in one city and one neighborhood for at least a few years and has money for a down payment. Please. Most people younger than 25 need a place to live that isn't their parents' house, but they do not have the income to buy.

And people that age not only don't have the earning power to buy, but probably don't have their career path established enough to warrent sinking their money into a new home.

Nony, I never said the recent rises are sustainable. In fact they are leveling off. However the idea that owning property is a risky investment is jsut plain silly. You have to do something with your surpass money and real esate is historically less volital then stocks, cash, gold ,etc. Is it a get rich quick scheme, no. And anyone who treats it as such is going be sorrily disappointed.

I agree that what you call "incredibly risky" loans are troublesome. People who get them are foolish. Buy what you can afford. However there is no evidence that these loans will result in a substantial decrease in prices. Downward housing trends are notoriously sticky. You also have to remember that some who get high risk loans can afford them. For example people who's incomes is heavily based on year end bonus often get interest only, or option loans, but make huge payments at the end of the year. Plus foreclosures aren't universally bad. The houses are resold giving others an option at homeownership and recouping much of the banks outlay. the difference between real estate and other investments is fixed supply. Unlike stocks, property is fixed.

By the way Japan was a totally different situation with government imposed savings and other programs leading to rash speculation. While there has been dramatic increase in the past few years there is no evidence of similar circumstance to the Japan crash here. Stabilization or minor correction ,yes. Collapse no. not to mention that those of us smart of enough to stick with 30 year fixed loans, can simply ride out any temporary corrections.

First, the City of Seattle has a history of inflating its count of affordable housing units. Fox has been the only person that's consistently held the City accountable over such misrepresentations. Here's an example from late 2001, when the City basically presented an old study as new until Fox called bullshit:

Second, the government's definition of affordable, defined during an era when economic inequality was not as high in America (the 1960s war on poverty), is outmoded and useless, and now includes rent levels that are above-market in some neighborhoods. It is a joke to define affordable as 80 percent median, or to use the existence of such units to hide the disappearance of 60 percent and below units that are unsubsidized.

It's pretty amazing, and also disturbing, to see people use these kinds of misrepresentations to support trickle down fantasy (new condos reduce rent, unregulated new development increases affordable housing, etc). I prefer naked power plays to people dropping a wrecking ball on your rental house, putting up 8 condos in its place, and then telling you it's for your own good.

You know how I bought a house at 23? I bought a house in a neighborhood that many people wouldn't look at because it's majority black, and I rented out rooms. I pay less than $500/month out of my nearly $1,700 mortgage. I'm giving up privacy, but it's fine. I've been living with roommates since I was 17, and a few more years until I can afford to live on my own is well worth it.

A Nony Mouse - condo values will continue to appreciate until house prices start to fall because all those folks who are getting ready to buy can't afford in-city houses. These are folks who 10 (5?) years ago would've bought a house for their first home, but are now priced out, so they're starting with condos. I used my building as an example, but it's not just here.

And like Giffy, I'm not saying that condos will appreciate at this rate forever. But it makes sense to me that right now condos appreciate faster, and unless there are affordable houses in the city, the demand for condos will stay strong.

I will say that people who buy with interest-only loans or 3/5 year ARMs are quite foolish, unless they are incredibly savvy at managing their financial progress. People have been encouraged to buy more than they can really afford, and that will come back to bite a lot of them in the ass.

Poor me, move yeselves to Renton?

Tell us how you really feel, moneybags.

Speaking as someone who lost his downtown Seattle apartment to a condo conversion just a few months ago...

I think most of the low-income housing advocates have a very naive way of looking at the situation. They seem to be operating under the impression that they can prevent the yuppies from coming to Seattle. It's a hopeless strategy. When you have a free housing market, like we do, people who have more money will be able to displace the people with less money.

The fact is, Seattle has a growing economy, and the population of the area (city and suburbs) is growing much faster than the population of the city alone. While it is probably true that more people here want to live in the suburbs than want to live in the city, there is much more demand for housing in the city than there is supply.

The thing is, I don't think the housing situation is really that bad here. It just seems to be the case that Seattle has recently crossed some line where a lot of people are not comfortable anymore with the space/rent/distance tradeoffs that have to be made.

And it is a tradeoff - it's not the end of the world if you have to live in a 500 square foot apartment instead of a 1500 square foot house. Or if you have to spend an hour coming to work from Bremerton or Tacoma instead of 15 minutes from Wallingford.

But anyway if you want to slow the increase in housing prices here, you have to accelerate the increase in supply. If you want to actually lower housing prices here, the supply has to grow faster than the demand - which means it would have to increase much, much faster than it is now. Trying to prevent condo conversions won't do anything to lower the cost of housing.

BTW, the big housing price drop is not really going to take place in the city. It's going to happen in the suburbs, where they're actually building houses fast enough that they can outstrip demand. Go check out the newly developed areas of Thurston or Snohomish counties and you can see lots of newly built houses that are for sale by people who bought the houses months or weeks ago on adjustable rate mortgages, but can't make the payments now that the rates just went up. Most of these houses are probably going into default.

"Most" is quite an exaggeration there, Christopher, but the situation you describe is real. House-buying isn't like buying cigarettes; you are mostly buying interest on your loan, and you are totally at the mercy of your rate. Exploding rates can hit even ten or twenty years later if you bought at the wrong time; and they can bite you even when rates are falling if you bought at the wrong time. Those areas out in Marysville and beyond frequently belong to vunerable people, too -- young, first-time buyers, growing families, maximum extension, precarious employment. Bad things could happen.

Fifteen years ago, when I lived in Boston -- a thriving, high income city, but one coming out of an extended period of boom and bust, which makes predicting things difficult, there was just the sort of condo bust you describe. I worked with a lot of people who bought new city condos at the peak of the market who lost as much as FORTY PERCENT of their valuation in a year or two when the market crashed, due to oversupply, not a bad economy. They've recouped all of that value and much more today, if they were able to hang tight, but years of living with negative equity (amount owed on loan much higher than current sale value) is hard.

It wouldn't surprise me to see that happen here, with the current boom. Developers can only hold out so long before THEIR loans are a problem too.

Will, your 100-story idea doesn't make any sense, as there's no way to build that tall that permits the low rents you're asking for. Those would not be cheap housing, by definition. By definition, cheap housing is almost always OLD housing.

Here's something somewhat pertinent to the condo vs. affordable housing issue, though it be peripheral.

What's next for The Stranger?

In 5 years, when the Capitol Hill landscape is unrecognizable compared to today's Capitol Hill, how will The Stranger look.

Condotopia being less receptive to the current format will demand better articles on food and theatre, less emphasis on urban counter and pop culture and a more moderate practical view of local politics (don't marry your bicylce just yet). The music coverage will have to focus more on the national scene because there won't eb much here worth covering.

Seattle has always been viewed as a place that is highly condusive to creativity and the artistic temprament, but has ironically been regarded as anything but artist friendly (lack of live/work spaces, and as far as condo, msuicans in particular are not generally regarded as home buyers). It's no secret that writers, painters and musicians spend a good deal of their early carreers in poverty (if not their entire lives regardless of successes). It's not inherant nor is it necessary, it's more likely artists "drink the kool-aid" as people are so fond of saying these days. Regardless, that's just how it's been and will continue to be.

As Seattle becomes even less artist friendly by making it impossible for(at least) the up and comer to even live in the area so known to be fertile ground for ideas, local music and art will be coming from the all-ages sector and a handful of trusties and wealthy hobbyists. There is going to be a deficit of the facotrs that have always made Seattle a dynamic artistic spawning ground. None of your greatest creative minds descended form the ivory tour to make music for you. They came from your yellow collar sector and your lively night life.

The place that spawned Jimmy Hendrix, Tom Robbins, The Seattle sound in late 80s/early 90's rock and blah blah blah ad nauseum, is going to be a bit more arid than fertile in the years to come.

I'm anxious to see how much The Stranger has to retool it's editorial focus in order to remain viable and relevant in the new Capitol Hill. Where will it's advertising come from when the clubs who advertise are closed and demand for tranny hookers moves south? Where will it's political interests lie when it's has to win over a new readership who resents the idea of nightlife, small business, affordable housing and renters in the same square mile as the penthouses they own?

Like I said, it's not central to what's being discussed but I'm interested in hearing some thoughts on how this affects Seattle's arts & music communities and The Stranger.

If Capitol Hill is overrun by the yuppie contigent and their condos... the Stranger will likely just relocate to a more Urbanist friendly neighborhood, and continue the fight as before.

That's if it comes to that. It's a distinct possibility but not a guarantee just yet.

I Guess,

Why do you presuppose that some fantasy class of "penthouse owners" is going to take over the cultural/political zeitgeist of this city in five years time? Or that this suddenly wealthy new class in this new "condotopia" is going to demand that the local alternative media resemble 'Seattle' magazine?
Yes, we must pave the way for a more moderate, practical stance that discourages cycling or alternate means of transportation (global warming clearly won't be as much of a concern), affordable places to live, any musical artists and venues that host them not fitting into an adult contemporary clear channel-friendly format, etc. Yes, I can just see the letters to the editor in five years: No more nightlife! Banish renting! By god, banish small business altogether! Bring in the WalMarts! You better get wise Stranger.

God, I love the completely unthinking rent vs. own argument going on in this forum. Home/condo ownership is one investment among many other possible investments in the world. My friend's crappy 1200 sq foot rambler has property tax (money that he's throwing away?) equivalent to 6 months of my rent. Add that to the fact that 90%+ of his mortgage payment is, in fact, interest, and he's "throwing away" nearly double the money I pay in rent every year. Moreover, if this home were a condo, he'd be throwing away additional thousands of dollars in condo association dues and assessments every year. Sure, he's realizing the capital gains from the appreciation of his property values...oh wait, no he isn't. One doesn't realize those gains until the time of sale.

Now, consider the $700/month that I save by renting. Each month, that money goes into a mutual fund. Since the stock market is, historically, the highest return investment one can make, who is throwing money away and who is occupying a spacious living area while best positioning themselves for future wealth?

Affordable housing is important for those who truly need it, but it is also important for those of us who want to diversify our investments and not sink all of our money into a single tangible asset that could disappear with a snap of Mother Nature's fingers (see New Orleans).

Don't get me wrong. I'm all for home ownership for those who want it, but let's not dismiss those who rent as frivolous fools. Some of us have actually thought through our options and made a conscious investment choice which doesn’t tie our entire financial futures to a pile of concrete, wood and asbestos.

Your friend also gets to take a massive chunk off his income tax every year that you don't.

Yippee...potentially, he gets up to 28% of the interest he's paid throughout the course of the year returned to him (actually, when compared to what one would get with a standard deduction, it's probably closer to 20%, but we'll pretend there's no other way to deduct from your taxes for argument's sake). With that, he only "throws away" 172%+ of the money I pay on rent for his singular investment. Touche, Fnarf.

No he doesn't, FNARF.

At best, he can deduct 30% of his interest payments and property taxes from his federal income tax. He can't deduct insurance costs, homeowners association dues or maintenance costs.

Right now, the discount for renting in Seattle is somewhere around $700 a month. Most people aren't getting that much back from mortgage interest deductions.

In reality, many people are losing money in the short term, because they think that 15% appreciation rates are historic and inevitable. They believe that they are building "equity" simply by owning, and that this magical growth will bail them out of whatever toxic mortgage they use to buy a home. There are thousands of people out there who are hoping to refinance their adjustable-rate mortgages in a few years, using the Magic Equity (tm) of the bubble housing market.

Problem is, now that appreciation is halting, there are going to be a lot of people who can't stomach the monthly losses on their "investments." The ones who can afford it will sell into the falling market. Just like the morons who borrowed money to buy stock in 1998, these rest are going to lose their asses in a speculative game -- only this time, it will take a lot longer to crash, and the victims will be in debt for a lot more money.

Yeah...I didn't even want to get in to the speculative environment in the current real estate market or compare it to the stock market just a few years prior to the Great Depression, but...

WaMu reports negative ammortization loans have risen by more than 400% in the last 5 years (or something like that). And, this is WaMu...not some fly-by-night savings and loan. When interest rates start to creep up and all these NAMs and ARMs come due, the bubble is gonna burst in a major way...once that happens, there will be plenty of affordable housing when the market is flooded with foreclosures.

Re Snoino: Negative amortization loans, or option loans as they are often called, are not a universal bad. They can be a great choice for people with fluctuating incomes. For example commissioned sales people. They are only bad if you only make the minimum. Unfortunately while we know how many people take them out, we don't know how many only make the minimum.

Renting is certainly a good option for many people. Especially those that are less stable and move more, or that are capable of making better investments with their money. Like everything, there is no one answer for everyone. Personally I love the fact that I own my own house. I know that every month I ma paying down my loan and that I am building equity. I also plan to live here for at least five years and would have no problem staying longer.

It is also important to realize that real estate is not just an investment it is a place to live. As long as your mortgage payment is management there is no need to sell, even if the market downturns. Hell, even ARMS only become unmanageable if interest rates rise dramatically, something the fed is unlikely to do if it would cause mass foreclosures. It is also likely that banks, not wanting to foreclose on a bunch of houses, will work with buyers to refinance or make payments manageable.

ARMs also have caps on the maximum rate they can ever carry during the life of the loan. So, if you finance a 5/1 ARM at 6% tomorrow, with a 6% cap on top of that, and for some reason 20 years from now, rates are back in the 15-20% range as they were in the 70s-80s, you'll still be ahead of the game. I doubt we'll see the return of 10%+ interest rates anytime soon would take a massive economic contraction, coupled with a crash in housing prices. Lenders are offsetting the low rates with the overall high prices.

Also, Fnarf, the guy's friend also has to pay hundreds of dollars in additional taxes and fees that the other guy doesn't. All so he can take another giant loan out using his home as collateral if he wishes... oh sorry, we call that equity.

Also, Giffy, though you technically own the home, you don't REALLY own it until that loan is paid off in 25-30 years. Until then, the bank owns it, and if you can't pay for any reason, they will seize that shit.

I guess the home vs rent discussion is a Pandora's Box worth opening. Homeowning in 2006 is very, very overrated, a financial ball and chain posing as the American Dream.

Gomez, The bank does not own it, they only have a mortgage interest in the property. Theres a huge difference.

Also, while my property may be encumbered I don't have to worry about my monthly housing cost going up because a landlord raises the rent, or my house being turned into condos. Plus I could never afford a an apartment as nice as my house. At least not a close to the city as I am.

Semantics. You don't have $300K, so the bank buys it on the condition that you pay them back. So really, no matter what the semantics say, it's theirs until you give them the $300K they loaned you. Home loans, save for all the hype ERRRRR terms and conditions, and the whole being able to take out a loan on your home/loan-with-bank that they call equity, really aren't that much different from any other line of credit.

Foreclosures would be impossible if it were REALLY yours, since an entity can't seize something that belongs to you. But they can... because it doesn't really belong to you, because it's the bank's until you pay off the loan they gave you, with the option to take another loan on the portion of the loan you paid. Any other terms are happy-funny things they tell you to make you feel empowered.

It's a giant racket that everyone in America believes in, much like Christianity. You can't convince most people otherwise.

seriously, people in who have to relocate out of seattle to find affordable rents don't have it that bad. Seattle, sizewise is not as large as many other cities. what that means is that, even if a person has to move all the way to federal way to find affordable housing, it only takes 35-40 minutes to reach seattle. I have lived in california and LA is HUGE. Many people have to find affordable housing 3 hours from where they work and have to fight the most god awful traffic to get there. What I like about seattle is that even living in the suburbs feels like you are still a part of the city. I mean I live in Kent and it takes me only 20 minutes to get to seattle.

A mortgage is not a giant racket if you know what area to buy in and at what time to buy. For example,
I purchased a condo 4 years ago for 150000. that condo is now valued at 260000 market price mainly due to the fact that Seattle is getting pricey and people are moving to the suburbs causing a spike in demand which is driving up the price of my condo. I put only 15000 down on this condo. Granted, the values of all other houses have also increased in proportion to mine, but still, if anything goes wrong in my life, I can sell my condo and pocket close to 110000 minus taxes of course. What other investment can net you 110000 in 4 years? So I would like to thank all of the condo developers who are driving up prices in Seattle. GOOD JOB! =P

I think that it is stupid and small-minded to make this into a "poor artistic hipsters" versus the "rich condo owners" issue. I AM one of those artistic types who lived in the city for almost 8 years. Eventually I raised about $15000 or so to buy a condo which has almost doubled in value. Now with that equity, if I wanted, I could buy one of those condos in Downtown (they would be smaller than my current place of course). Does that make me a "yuppie condo owner"? No it just means that I was smart enough to stop whining about how "those people" are all making money while "poor artistic types" like me don't. It takes a very small downpayment to start a chain-reaction to get equity.

Giffy - Except for your positive comments regarding negative amortization loans, I agree with most of what you've written in response to my original and subsequent posts. I was just annoyed with the people who were, in essence, writing, "buy good. rent bad." It's an unthinking argument based on, most likely, something these people's parents told them when they got out of college. These are the same people who vote for the candidates that their parents support, simply 'cause "momma says"...

Your position is well thought out and it appears that you are making the best choices for yourself. I still think, however, that NAMs should only be used by the elderly who might need to eat away at their equity in the final years of their life to support themselves/supplement their pension/retirement accounts.

Plus, it's fun to rag on fnarf. I'm not sure if he/she is an idiot, but he/she plays one in multiple comment sections in the slog...

Gomez, you really don't understand how this all works. The bank loans me the money and I buy the house. I sign a document (there are a different types) that essentially put the house up as collateral on the loan. The bank has no ownership interest in the property and cannot use it or compel me to do anything with it (with a few exceptions). Just a like a car loan, a secured credit card, or many other types of debt. It is also in some ways similar to a leasing out a place. When you lease an apartment you gain an interest in called a leasehold interest. Now the apartment owner still owns it, but has choose to encumber the property with a lease in exchange for the payment of rent. For the term of the lease the owners ability to use the apartment is diminished (even more so then a mortgage interest), but still exists.

By the way, entities can always seize things that belong to you, especially if you use them as security instruments for loans. Hell even you personal property can be seized to satisfy debts you fail to pay. Thats what happens in a bankruptcy proceeding. By your logic the government owns all the property since if you don't pay your property taxes the state can seize it. Hell they can even get it though eminent domain regardless of what encumbrances or liens you have.

All of that, Giffy, is middleman stuff. Whose money buys the house? It sure isn't yours, or else you'd bypass the bank and just buy it.

I agree with some of Will's comments earlier here, before the rent vs own issue stole the show.

The city should start developing affordable housing itself, whether to rent or to own - along with more parking garages like Pacific Place.

Private developers, left to their own devices, won't do it.

And by affordable, I don't mean housing that you have to prove you're poor to occupy.

I mean 1500 sq ft, 2 bd/2ba apartments or condos in nice big towers, like Vancouver, only city developed.

Priced at the current equivalent of $1,000 a month or the ownership equivalent.

Open to all, awarded by lottery.

That's how to make housing affordable - make the developers compete with that.

Or actually, not the city - they'd screw it up, and dedicate whatever they built to the needs of wet hobos only - but some new nonprofit like habitat for humanity - but without the religious overtones, and dedicated to urban rather than suburban housing.

As for the city, require them to donate decommissioned school, monorail, etc property to this urban home building nonprofit.

With free land and non need to make a profit - plus some volunteer help - they should be able to rent/sell large apartments for much cheaper than for-profit developers.

That's the only way you're going to get more condos downtown that don't start at $1 million for a 1bd.

"Some new nonprofit" -- because there are so many nonprofits just sitting around twiddling their thumbs with nothing to do. And so much spare money just lying around loose on the ground to do it with. After all, cheap apartments are the most pressing problem this country faces, right? Especially cheap apartments for people who can afford more expensive ones, but just don't WANT to, gosh darn it.

Oh, I forgot you were a developer, FNARF - as well as an opinionated blowhard. Sorry.

Actually, a nonprofit development corporation might be easy to start, on the same model as savings and loans originally began: funded by the people who want an apartment when the building is finally done.

You give them $100 a month - or more - for a place in line to get an condo - and all your money is used in the purchase when the time comes.

But you're right about non profits in general: there are way too many of them out there, sucking up all the loose change people have so those running them can live large.

(offered in hopes of forestalling a Fnarf flame)

My main point is: what there isn't enough of out there is housing that's affordable - not just to the lower 50% of wage earners - but to the lower *90%* of wage earners even - if we're talking about owning, not renting, and owning something family sized.

When it comes to housing, obviously the market has failed us, in particular when it comes to the downtowns of major cities like Seattle (San Francisco, New York Boston etc), and their near-in suburbs.

Everything that's getting built downtown is for the luxury market. And that's a shame - and a potential death knell for the revival of the downtown area.

Unless you want it to be totally yuppified down there, the Beverly Hills of Seattle.

Now we all know there's a huge pent up market for housing out there. Why isn't it getting built?

Maybe it's time citizens started to take things in their own hands, and stopped waiting for working class identified developers to emerge in this gilded age.

The last time such dinosaurs did walk the earth, was the Levittown post WW2 years.

I own a car and a condo in Seattl. Both are cheap in Seattle. Back in Manhattan owning a car was much, much more expensive. Seattle is a very affordable city already. There's no need to subsidize marginal types who refuse to suck it up and buy a condo. If people want to throw their money away, there's plenty of other towns that'll rent you and apartment. It's easy to buy a home or condo in Seattle if you are a productive member of society. I'd just like some better Manhattan style nice restaurants here. The food in Seattle is too cheap and bad.



Oh Seattle people are provincial too! Anything different or new is opposed. It's sad that these small minds drag Seattle down. But enough Manhattan people are moving here downtown is becomming beautiful and cultural life is bubbling. Seattle is exciting and getting better every day.

Seattle is just lovely. The food really isn't so bad. If you think dining is cheap and bad today, you should have seen Capitol Hill ten years ago. Vashon Island is a lot like the Hamptons. It's so cheap here, I'm going to buy a place on Vashon in addition to my Downtown condo. I can't understand how anyone could complain about our wonderful town.

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