I’m a little late picking this up, but both the New York Times and the Seattle Timeshave now run stories on what’s supposedly a hot new trend in Seattle:  adding luxury condo units to downtown hotels.  Condo-owners get the benefits of hotel amenities, such as room service, room cleaners, valet parking, and a concierge. Plus, at least one of the proposed hotel/condo plans would be bundled with a mix of stores and services, such as a grocery and a bank.  But residents pay a pretty penny for all the amenities, as the properties are largely aimed at the very high end of the real estate market.

I don’t quite know what to make of the hoopla, since I don’t imagine that this is really a major housing trend.  There are just four hotel/condo projects underway in downtown Seattle, and one in Bellevue, which makes this kind of development more of a niche than a major market segment.  But the condo units are apparently selling like hotcakes, which does signal something positive:  that the market for an active and vibrant downtown lifestyle seems to be taking off. 

And in terms of curbing suburban sprawl, high-end downtown development is a good thing.  To some extent, the folks to whom this sort of development is marketed are the same folks who’d have the money for big McMansions.  Providing attractive opportunities for them downtown helps pull development inward, thereby reducing development pressure on farmland and open space on the urban fringe. 

Plus, people who live downtown, and within walking distance of services and jobs, tend to drive a lot less—which is good for the climate, the economy, public safety, etc. etc.

The only problem, though, is the optics.  One of the big raps against downtown development is that it’s all about gentrification—and that it raises the cost of downtown housing for the poor and middle class.  To the extent that there’s a lot of press attention focused on a few developments that cater to the ultra-rich, it can help foster the impression that ordinary people are being priced out of the market.

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  • Of course, all things being equal, increasing the supply of downtown housing should make housing more affordable, not less.  (At least, that’s what my high school economics teacher would have said.)  But all else isn’t equal—if you create a hip, livable neighborhood, more people are going to want to live there.  And if you don’t have to drive as much to live there—and maybe don’t even need a car at all—you can put some of your transportation costs towards your rent or mortgage.  Those forces tend to increase the demand for downtown housing. And higher demand means higher prices.

    Which points to the real challenge:  if you make a neighborhood a better, more attractive place to live, then people are willing to pay more to live there.  That’s what the developers are counting on—and rightly so. But it does create some financial strains. 

    In the end, though, it seems that there are only two long-term solutions to maintaining some affordable housing options near downtown.  The first is to make downtown living really, really unattractive:  don’t add stores, schools, or amenities, let the infrastructure degrade, and encourage what few residents are left to move out of downtown. (Think of this as "The Detroit Option"—where a once vibrant city has turned, over time, into a hollowed out core.) People won’t want to live downtown, which keeps real estate surprisingly affordable.

    And the second option is to increase the supply of downtown housing to the point that supply meets demand at a price point that lots of people can afford.  Someday, I hope we can call that The Seattle Option.