Why Seattle builds apartments, but Vancouver, British Columbia, builds condos
It's the economy (again). That's the conclusion a think tank made after examining why Seattle builds apartments and Vancouver, British Columbia, builds condos.
"In Vancouver, apartments are saddled with an unfavorable tax code, making condos the more lucrative multi-family housing investment even despite high rental demand," wrote Margaret Morales, senior research associate at Sightline Institute. "In Seattle's skyrocketing rental market, one that's climbed even faster than the condo market in recent years, apartment buildings are much more financially attractive, while condos come with bigger risks and, typically, lower returns," she explained, noting Seattle's demanding quality assurance standards are also a deterrent.
In 2016 nearly 60 percent of new housing starts in the city of Vancouver were condominiums while Seattle saw no new condo buildings open. That mix is not expected to change in the near future since under 10 percent of all building slated for downtown Seattle in the next three years will be condos.
The outlook isn't entirely bleak, according to the Sightline analysis.
Morales found a few projects in the pipeline, but overall, only about 4 percent of all new residential units built in the Emerald City during the past five years have been condos. Apartments account for more than 80 percent with the remaining units made up of single-family homes and townhomes.
Contrasting sharply with the trends in Seattle is the construction activity north of the border where 11,000 new condo and townhouse units will be offered in Vancouver's pre-sale market. Rental units accounted for less than 25 percent of that city's housing starts between 2012 and 2016, with condos representing more than half the starts. Townhomes and single-family homes made up the balance.
In the decade between 1996 and 2006, condos accounted for "a full half" of the increase in owner-occupied dwellings in greater Vancouver, according to Sightline's research. By 2011, one-third of households lived in condos.
Sightline also compared who lives in condos based on age, race and ethnic diversity.
In the U.S., condos tend to appeal to buyers at two ends of the housing spectrum: first-time buyers, and seniors looking to downsize for health or family reasons. "Seattle's condominium buyers are largely of the latter sort," Morales wrote. About two-thirds of condos in metro Seattle are owner-occupied, and two of every three of these residents are aged 65 or older.
Sightline found condos are a cheaper ownership option for homebuyers in both Seattle and Vancouver. In the city of Vancouver, most condos were between one-fifth and one-third the price of typical single-family homes, based on prices reported for April 2017. The difference is smaller in Seattle. Morales reported the average condo was about two-thirds the price of the typical single-family home. She attributes the smaller gap to the limited selection and the fact that condos in the city skew toward luxury units.
Sightline researchers also looked at what's fueling Vancouver's red-hot condo development and the barriers to building condos in Seattle. Skyrocketing rents and the Washington Condominium Act (WCA) were identified as the primary disincentives.
Several reforms could boost Seattle's condo development, the Sightline team suggests. Along with various amendments to the Condo Act, Morales listed four policy reforms to encourage condo construction:
- Cap attorney fees
- Binding arbitration (for dispute resolutions)
- Right to repairs only (for claimed defects)
- Government of HOAs
The complete report, which includes several charts and graphs, may be viewed online.
In addition to its research on housing and urbanism, Sightline dedicates resources to research, commentary and analysis on climate & energy, democracy, transportation & transit, sustainable living, economy & jobs, and other topics.
The independent, nonprofit research and communications center was founded by Alan Durning in 1993 to equip Northwest citizens and decision-makers with tools to address the region's most significant challenges. Its goal is to "promote smart policy ideas and monitor the region's progress towards sustainability."