Seattle’s Housing Crisis: Why Multifamily Permits Are Declining When We Need More Homes

Seattle is growing—fast. With a booming tech sector, a vibrant cultural scene, and breathtaking natural surroundings, it’s no wonder more people are calling the Emerald City home. But this growth has come with a steep price: housing. The demand for homes is surging, and affordability is slipping further out of reach for many. Multifamily housing—apartments, townhomes, and condos—is critical to addressing this crisis, but troubling trends show a sharp decline in permits for these developments. So, why are permits falling when the need for homes has never been greater?

The Numbers Don’t Lie

Between 2021 and 2023, the number of multifamily housing permits in Washington State fell from around 30,000 annually to just 19,000. In Seattle and the Puget Sound region, where demand for housing is highest, the trend is just as concerning. This drop has come at a time when the city is experiencing an unprecedented housing crunch, leaving many residents with fewer affordable options.

What’s Causing the Decline?

1. Rising Interest Rates: Financing new housing developments has become increasingly expensive due to rising interest rates. Since 2021, the rate for a 30-year fixed mortgage has soared from record lows to over 7% in 2024. Higher borrowing costs mean thinner profit margins for developers, which discourages new projects.
2. Skyrocketing Construction Costs: Supply chain disruptions during the pandemic sent construction costs soaring, and while they have stabilized somewhat, they remain much higher than pre-pandemic levels. These costs are eating into budgets for new multifamily housing, making some projects financially unfeasible.
3. Regulatory Hurdles: Despite recent efforts to streamline permitting processes, developers still face a maze of regulatory challenges. Design reviews, zoning restrictions, and community opposition can add delays and uncertainty, further complicating the path to new multifamily housing.
4. Economic Uncertainty: Post-pandemic economic uncertainty is causing developers to tread carefully. Questions about future demand, return on investment, and market conditions lead many to delay or cancel projects.

Why Multifamily Housing Matters

Seattle’s housing crisis isn’t just about numbers—it’s about people. Multifamily housing plays a key role in providing affordable options for renters and first-time homebuyers. These developments are often located near transit hubs, reducing commutes and promoting sustainable living. They also allow more people to live in dense urban areas, alleviating pressure on suburban sprawl and the transportation infrastructure.

What Can Be Done?

To reverse this trend, Seattle and Washington State need bold action:

1. Streamline Permitting: Legislation like HB 1293, which aims to simplify the permitting and design review process, is a step in the right direction. However, more must be done to cut red tape and expedite approvals for multifamily projects.
2. Incentivize Development: Offering tax breaks for multifamily developments, particularly affordable units, can help offset rising construction and financing costs. Programs like the Multifamily Property Tax Exemption (MFTE) are good examples but could be expanded.
3. Support Affordable Housing: The state’s recent push to legalize Accessory Dwelling Units (ADUs) and encourage “middle housing” is promising. However, more subsidies and incentives are needed to ensure the lowest-income households can access housing.
4. Address Construction Costs: Investments in local manufacturing and supply chain resilience could help reduce the cost of building materials, making projects more viable.
5. Encourage Innovation: Policies that promote innovative housing models, like co-housing or modular construction, can help deliver more units faster and at lower costs.

A Call to Action

Seattle’s housing crisis is a complex problem, but the solution begins with a commitment to building more homes. Multifamily housing is essential to this equation, yet the current trends are deeply concerning. Rising interest rates, high construction costs, and regulatory delays are significant hurdles, but they are not insurmountable.

For Seattle to remain a thriving, inclusive city, policymakers, developers, and the community must work together to address these challenges. The stakes are high, but the rewards—a more affordable and equitable city—are well worth the effort.

It’s time to turn the tide on declining multifamily permits and ensure that Seattle builds the housing it so desperately needs.

Source: “State of the States Housing 2024,” Washington Center for Real Estate Research, University of Washington.