Puget Sound Business Journal: Room to Grow

By Shawna De La Rosa | Puget Sound Business Journal on March 9, 2023

From Tacoma’s Stadium neighborhood to its Brewery District, the city’s small retail buildings, single-family homes and empty lots are being replaced by hundreds of apartment units that city leaders hope will absorb the population boom that is expected over the next two decades.

Since 2021, approximately 1,550 multifamily units have hit the market that were developed through Tacoma’s Multifamily Tax Exemption (MFTE) program. Properties developed using the program are eligible for tax breaks on improvements made to the property for eight or 12 years, depending on whether or not affordable housing is included in the development.

There have been a total of 7,426 apartment units, both market rate and affordable, developed since 2019, the most recent data available.

There are no signs that the interest in multifamily developments around Tacoma is waning. In February, there were 11 multifamily projects in various stages of development in the city of Tacoma’s permit system, which only shows activity over the last 30 days.

Tacoma is trying to make it easy for apartment developers by streamlining the permitting process and reducing the construction timeline. Stakeholders routinely compliment those efforts, saying staff goes out of its way to be cooperative and makes efforts to find solutions to the most difficult construction hurdles.

So far, that strategy seems to be working, but questions loom — specifically, how much housing will the city need.

A panel of commercial real estate experts at a recent Business Journal event at the Tacoma Convention Center addressed the future of the South Sound and the economic drivers that will shape its growth.

Too much too soon? Paul Del Vecchio, president of Ethos Development in Portland, doesn’t think the city’s apartment market is in danger of becoming overbuilt anytime soon.

With two multifamily developments under construction and another planned, he expects the units will be absorbed, citing population growth projections that estimate nearly 127,000 additional people in the city by 2040.

Tacoma accounts for the bulk of Pierce County’s housing demand. A recent report by the Washington State Department of Commerce says Pierce County will need approximately 136,000 additional housing units by the year 2044. (The report did not break down housing needs by city.)

“I don’t think there’s a fundamental problem with too many units being built here, or really, anywhere in Washington. Actually, we could extend it to the entire country, (except for) parts of the Midwest,” he said.

The city’s Home in Tacoma initiative, now in its final planning stage, will allow for up to four units to be built on most residential lots. It also expands areas in the city where midsize multifamily developments (up to 20 units) and large developments (more than 20 units) can be built. Those larger unit zoning changes are taking place near the commercial hubs and transit corridors.

Even with those zoning changes in place, Del Vecchio said, Tacoma will need more residential units. While the Home in Tacoma zoning changes will help to add housing units to the city’s stock, those backyard “onesies and twosies” units aren’t going to meet the demand, he said.

“There is a 10,000-unit deficit for affordable housing only,” he said. “I imagine it’s much more for housing in general.”

Economic drivers One of the reasons behind the anticipated population boom is the economic development taking place around the University of Washington Tacoma, said Mandy McGill, business development manager of Abbott Construction.

While UWT works closely with Tacoma-area stakeholders, McGill hopes the university’s Seattle-area decision-makers will make more investments in Tacoma, especially in terms of on-campus student housing.

“I would argue that people who live on campus create relationships that last a long time,” she said.

Though off-campus housing is necessary, McGill and Jacques Colon, chief strategic officer for the city of Tacoma, say more on-campus housing that includes student programming to build community would help the city better retain its graduates.

“When you look at housing development across the country, especially over the course of the past several decades, there has been a real decrease in public investment in development,” Colon said. “Having a public university system as the main economic driver can be a really useful thing for a community’s continued development.”

Colon added that climate change might trigger migratory trends that drive Tacoma’s population growth.

“While our region may not see the most extreme issues related to climate change, we will see the mobility in terms of population growth from those coming here from hotter regions of the country,” he said. “Puget Sound happens to be one of the most well-protected and well set-up regions to withstand the impacts of climate change.”

Both Del Vecchio and McGill say the city’s additional economic development efforts should be focused on attracting the types of retail, restaurant and entertainment services that the thousands of new downtown residents will be seeking.

During the pandemic, much of downtown Tacoma’s entertainment-based service industry closed. How the city plans to revive that sector might hinge on workers returning to downtown offices and new employers moving into Tacoma.

“Getting people back to the downtown (offices) provides a reason for people to be there and frequent the businesses,” he said. “It also bolsters the idea of living where you work. That’s why apartments are being built in the downtown area.”

Whether or not office spaces fill up, the city can plan on population growth, Colon said. Tacoma is one of the top three regions that are expected to see the highest population gain over the next 15 to 20 years.

“No. 1, you think about people that are moving for economic opportunity,” he said. “Our region is one that has gravity to it. We already know that folks are coming from Seattle to South King County to Pierce County, so there is the intraregional movement.”