Big money backs new Judkins Park housing project

Wealthy investors get a federal tax break for investing in so-called Opportunity Zones, such as the one near the Judkins Park light rail station in Seattle's Central Area.

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ostco founder and billionaire Jim Sinegal was in South Seattle this week to celebrate construction progress on an affordable housing project there. He said he loves the project's mission.

"If you think about what it’s providing, with the affordable housing, that’s a significant move right there,” he told KUOW. “And then the fact that it’s tied into the light rail, which means there’s less cars on the road. So it has a lot of advantages, but it's also the kind of project that in the long-term is gonna be very fruitful."

Does he mean the project will also earn him a profit?

“Well, we would certainly hope so,” he laughed. “I mean, that’s obviously part of the allure.”

This dual motivation to build good projects in needy neighborhoods while earning investors profits is part of how the federal "Opportunity Zone" program works: It spurs investment by high-wealth individuals in low-income communities by giving investors a place to put earnings, such as those made from a stock sale, before they are taxed as capital gains. The investors earn additional tax breaks if they keep their money in a project for 10 years.

Investors like Sinegal are collected by companies like Pinnacle Partners that specialize in developing projects in Opportunity Zones. But critics say the Opportunity Zone program doesn't create new investment — it just gives tax breaks for investments that would have happened anyway.

An example of this happened in Portland. In a 2019 Bloomberg investigation called "Welcome to Tax Breaklandia," the news service found that much of downtown Portland was designated an Opportunity Zone, allowing investors to get tax breaks for building luxury apartments there.

Governors play a key role in deciding which 25% of eligible neighborhoods will be selected as Opportunity Zones. In Washington state, it was Governor Jay Inslee who selected the Judkins Park neighborhood in Seattle.

For King County Councilmember Girmay Zahilay, that was a good decision.

"I think having residents coming back to this area is going to help a hard-hit neighborhood that was really impacted by the pandemic," Zahilay said. "If you look around this whole neighborhood, you'll see burned down buildings, you'll see businesses that have left, you'll see all kinds of construction sites without much movement, and that creates a dearth of foot traffic and lack of lighting, lack of activity, more pedestrian lack of safety. So I think having more homes and bringing back commercial activity to this area will be very good."

The 900 Rainier project will target people earning low and modest incomes. The most deeply affordable units are subsidized through another tax break, administered through the state of Washington's "Multifamily Tax Exemption Program," or are "performing" affordable units required by the City of Seattle's Mandatory Housing Affordability Program.

The remaining 80% of units are market-rate "workforce" affordable apartments. They're able to be affordable, according to project managers, because the building was not required to build an underground parking garage, and because the units are modestly sized. However, those market-rate affordable units are not guaranteed affordable, and their rents could rise over time.