Escalating rents for apartments in Seattle are anticipated as developers seek fewer permits, and shift their focus to other jurisdictions, according to a report last month in the Puget Sound Business Journal. Seattle’s strict energy code is cited as a reason for a steep drop in permits.
The Seattle Energy Code is updated every three years. The city claims its 2021 update and amendments make its 2018 commercial energy code “one of the strongest on climate in the nation.” A Council resolution requires the city’s energy code to remain 20% better than the national standard.
Developers say requirements can add more than $25,000 to the cost of each apartment unit, thereby making Seattle a less competitive place to build.
During the first quarter of 2021, developers sought permits to build over 5,800 rental units in Seattle. That plunged to around 500 for the May-to-July 2021 timeframe when updates to the municipal energy code took effect. During the past 27 months, there has been only one three-month period when there were more than 2,250 units in the permit pipeline, according to the PSBJ report.
Once again, Seattle is in the process of updating its code but some suggest the city could declare a two-year hiatus and use state rules, which are also stringent. There is no requirement for Seattle to exceed state requirements, although a city spokesperson said Seattle’s code is often about 10% better than the state’s requirements.
“The minimal theoretical extra energy savings from using the tighter city code are more than offset by the fact that the city’s more expensive code compliance requirements will push demand outside Seattle, which will result in much higher transportation emissions,” said A-P Hurd, president of SkipStone, a Seattle-based real estate development consultancy.
Hurd told the PSBJ reporter it would be smarter to focus more on funneling development into dense, transit-rich and walkable neighborhoods.
The city’s initial July 1st target implementation date for an amended code has been delayed to no sooner than October 2nd.
The last update which requires heat pump water heating, has been incorporated into the latest state code. It essentially eliminates the use of natural gas and propane and makes Washington the first state in the U.S. to require all-electric heating in new buildings. A coalition of businesses, homeowners, trade associations and labor groups has asked the courts to invalidate the code changes.
The Building Industry Association of Washington (BIAW) said the legal challenge is not anti-environment but is instead about housing equity because the new rules reduce access to home ownership by more working families. The mandate to use electric heat pumps would increase the cost of a new home by at least $9,200, according to a BIAW survey of its members.
Shortly after the lawsuit was filed, the State Building Code Council voted to delay the effective date of the code until October 29th, allowing more time for city officials and builders to discuss potential increases in construction costs.