Seattle’s median home price has skyrocketed to $777,000 — the highest ever, according to the Northwest Multiple Listing Service. The average rent for a one-bedroom apartment has increased 35 percent over five years.
According to The Office of Housing, renters in Seattle make up over half of the residents in the city.
Though the city has benefitted from an increase of nearly 75,000 jobs between 2012 and 2016 and has seen a population increase of 87,000 people in the past five years — thanks in part to Amazon and other tech giants — affordable housing can be hard to come by.
Thach Nguyen is a private, for-profit real estate developer, investor, and philanthropist. In 1975, he and his family (dad, pregnant mom, sister, and four brothers) fled Saigon during the end of the Vietnam War. They packed everything into one suitcase and arrived in the United States with $100, and spent six months in a refugee shelter.
This would set the stage for a lifetime spent focused on the importance of having a place to call home. A man named Charles Zettler sponsored Nguyen’s family to leave the shelter.
“If it wasn’t for people [like Zettler] who helped our family when we got here, we wouldn’t be where we are today,” said Nguyen. “Zettler’s family shared their Sumner home with all eight of my family members for over a year, while we got on our feet. They contributed to us without any expectations or agenda — just to make the world a better place for others.”
Throughout his childhood, his family had very little money, yet Nguyen made his first million by age 27.
As owner of the Thach Real Estate Group (TREG) and co-founder of Springboard to Wealth, an education and coaching company, Nguyen’s passion today is to inspire others to increase their income and build wealth for tomorrow by harnessing the power of real estate.
It’s his way of paying it forward.
Some of the core values of TREG are a commitment to that same spirit of contribution and serving the diverse cultures and communities throughout Seattle. This inspired Nguyen to point his real estate expertise toward those struggling with being able to afford to have a roof over their head.
Private and nonprofit partnerships
Several low-income families live in new homes at Nhon’s Place in Seattle’s Rainier Valley — named in honor of Nguyen’s late father. Nguyen owns the land, and he had originally planned to build the homes to sell. Then First Place, a Seattle nonprofit agency for children and families in crisis, approached him, asking if he had any housing units for low-income families.
A light bulb went off.
Nguyen and First Place then approached the Seattle Housing Authority (SHA) and asked if they could get a project-based voucher if the homes were built specifically for low-income families. SHA said yes, and with help of a construction loan from Foundation Bank, Nguyen started building.
In June 2012, the first family at risk of being homeless moved into one of the seven brand new homes at Nhon’s Place. Each home is 1,500 square feet with three bedrooms, two bathrooms, and a one-car garage.
First Place finds families and places them in one of the Nhon’s Place homes. Their rent is subsidized through Section 8 vouchers. Each unit generates cash flow, meaning after all expenses are paid, there is money left over. It was a win-win-win situation.
However, given the escalating prices of the current market, this kind of project is not feasible today.
Nguyen said that short of finding land for free, a project like Nhon’s Place would be nearly impossible to duplicate today.
Another private-nonprofit project is in the works right now between InterIm Community Development Association and the Chan family, which owns the Four Seas property at 714 South King Street. The partnership came about a couple of years ago when King County had a Request for Proposal seeking funding for transit-oriented developments that provided affordable housing.
Evan Chan told the Northwest Asian Weekly his family chose to partner with InterIm because of its long history of providing successful affordable housing in the International District.
“Our family has been in the neighborhood since 1935 and thought this would be a great opportunity to provide affordable housing and to remain in the neighborhood for many years to come,” said Chan.
The $35 million projects, named “Uncle Bob’s Place” in honor of the late Chinatown leader Bob Santos, will have approximately 104 low-income/affordable housing units, ranging from studios to three bedrooms.
The cost of development
“The cost of construction is so high [that] in order for [a developer] to break even on a mortgage, you have to have 50 percent equity,” said Nguyen.
Earlier in the decade, it cost roughly $140 per square foot to build.
Today, Nguyen said a similar townhome would cost $225-$250 per square foot because of rising labor costs, permits, and the increased time it takes to secure permits.
To build a 1,500-square-foot townhouse: $337,500 (at $225/square foot) +$162,500 (cost of lot) ————- $500,000
The mortgage on a $500,000 loan is approximately $2,500. Add in taxes and insurance, the monthly expense is now closer to $3,000. Market rent for a 1,500-square-foot townhouse in a neighborhood similar to Nhon’s Place is $2,700. After setting money aside for vacancies, maintenance, and repairs, owners are barely breaking even. That is why rent is so high.
“That’s why typically the only people who can do affordable housing are nonprofits like Plymouth Housing and Low Income Housing Institute,” said Nguyen. “They get to raise money from fundraisers and endowments, grants from the federal and state government, to buy land and build units.”
Nguyen said he hopes to see more partnerships between private developers and nonprofits, to lift some of the constraints on the building.
Developers rely on loans and other sources to fund construction before people move in and start paying rent. But developers can only get those loans if they can show that their property will produce enough revenue to pay back the loans and pay returns to investors.
The gap between the amount a building is expected to produce from rents and the amount developers will need to pay lenders and investors can stop affordable housing development before it even begins, leaving few options for the millions of low-income families looking for safe, affordable homes.
“With the current market constraints, micro-apartments may be the only way for [a for-profit developer] to help create affordable housing,” said Nguyen. “Shrink down the square footage, get more units, and help more people.”
According to Nguyen, people will sacrifice square footage any day for a lower price point, to live in Seattle.
Roger Valdez, the director of Seattle For Growth, a developer advocacy group, said in an interview with thelens.news last November that it’s common sense economics. “We’ve created an environment where it’s hard to build, difficult to produce the product, and so there are high prices.”
Nguyen owns another development in Seatac which is a mix of market-rate and affordable housing, one in West Seattle which are micro-units for affordable housing clients, and more projects in the pipeline in the Seattle area, as well as California. This is in addition to the single-family homes he owns that he rents out to low-income residents.
Nguyen wants to connect with landowners who share his vision of providing more affordable housing.
“Someone who sees the value of projects like Nhon’s Place and likes it, and would see it as part of their legacy to partner with us with their land, on the condition that we build affordable housing. I will gladly do it.”
In many Washington communities, the cost of land has a significant impact on the ability to create homes affordable to people with low incomes. This is especially true in high-cost areas like the Puget Sound region. Earlier this month, the State Legislature passed House Bill 2382 which would make it easier to transfer underutilized public property so it can be used for affordable homes. It is awaiting Gov. Jay Inslee’s signature.
For Nguyen, it’s all about doing for others what Zettler did for Nguyen’s family decades ago.
“I feel good every day that I’m making a difference. I provide subsidized housing, affordable housing.
I mentor and inspire others to make more money so they, too, can make a difference.”