National Development Council completes unreinforced masonry retrofit funding report

A long-awaited report assessing funding options for retrofitting unreinforced masonry buildings should the Seattle City Council decide to make such upgrades mandatory is now complete. While the number of URMs in the city is lower than previously reported, the total cost of seismically upgrading around 944 private buildings in Seattle is estimated at $1.28 billion.

A Technical Advisory Committee was formed in 2008, and a URM Policy Committee was convened in 2012, to explore the issue and come up with recommendations to the city council based on concerns about structural safety in the event of a major earthquake, which experts now predict could occur within the next 50 years. The committee was reconvened in 2016, after an inventory of more than 1,000 URMs was compiled. The city council passed a statement of legislative intent in the 2018 budget to address URM buildings where seismic retrofits are most critically needed, including reaching out to the public and mitigating the financial impacts. A full report was expected by March at that time, according to the SLI.

“Retrofit policies must be mandatory and clearly defined,” according to the Funding URM Retrofit report from the National Development Council. “In the peer cities reviewed, successful policies limited ambiguity by providing clear retrofit guidelines and a compliance period that was enforced. This finding reaffirms what was found by the URM Policy Committee during their process. Even the successful cities had to adjust incentives and develop new solutions to account for the costs that mandatory policies impose on private building owners. Without a mandatory policy, however, there would be limited attempts at ingenuity and creativity needed to fully address this critical issue.”

The report recommends providing building owners with third-party design and engineering resources, and to expedite reviews and permitting within the Seattle Department of Construction and Inspections by creating a separate internal team to handle URMs.

The 944 unreinforced masonry buildings identified in the report represent 10,401 residential units housing 22,050 people. Around 51 percent were identified as requiring a full seismic retrofit while 28 percent would be required to meet a minimum “Bolts +” retrofit that entails bracing the exterior masonry walls to the floors and roof.

Thirty-seven buildings provide 1,559 designated affordable housing units, while many older URMs are naturally affordable.

The city council has previously expressed concerns about a seismic retrofit mandate impacting property owners to the point that they sell their buildings for redevelopment, causing further displacement at a time when housing affordability and homelessness are heavily in the public spotlight. If these buildings are not reinforced, however, a high-magnitude earthquake would result in displacement and casualties.

A hypothetical three-story, 22,000-square-foot mixed-use building in the report was estimated to cost $642,000 to retrofit to meet the Bolts + standard. Eighty-nine percent of buildings in Seattle’s URM inventory are four stories or less. Nearly 25 percent are one-story buildings in need of a “Bolts ++ Frame” retrofit, which is at a level between a Bolts + upgrade and full retrofit.

“Seismic retrofits do not, in and of themselves, increase the economic value of buildings,” the report states. “The fundamental objective of a mandatory retrofit program is improved public health and safety during a catastrophic event. In general, building improvements increase value and that increased value could off-set the costs for the retrofit. In our research, however, we have not found evidence that retrofitted buildings currently command higher rental rates in the rental market.”

The report also recommends extending the special valuation program, where landmark buildings are assessed with rehabilitation costs subtracted for up to 10 years. Extending the program to a 12-year deferral program, the same duration as the Multi-Family Tax Exemption program, would require legislative approval. The report also recommends counting additional costs outside construction in making reduced valuations.

URMs owned by nonprofits will need public funding, according to the report, particularly affordable housing buildings that are limited in revenue to support additional debt through private financing.

One way retrofits could be funded is by “retuning” Seattle’s Transfer of Development Rights program to allow property owners to sell unused development capacity. There are 210 URM buildings identified in the report with capacity to transfer roughly 2.6 million square feet “or 14% of the current program capacity.” That potential fluctuates, however, and the program also competes with other less costly development incentives, according to the report.

The National Development Council’s report also recommends using federal funds for large public infrastructure projects to identify landmark buildings and districts that may be impacted by that work and include mitigation and retrofit assistance. Nearly 30 percent of the URM inventory captured in the report is within a landmark district or are landmark buildings.

“There is limited interest from national philanthropy to fund seismic retrofits. While many are active in resilience and climate change investments, they do not yet view earthquake preparedness as part of their resilience strategy,” the report states. “This may change as more cities expand their collaboration with philanthropy and capital markets and promote seismic retrofits as a resiliency issue.”

While there are many options available for mitigating some costs, the report expects more action to be taken once a complete financing strategy that includes public, nonprofit and private resources is actualized.

“In the longterm, building owners and tenants benefit from greater safety and potentially lower recovery costs for a retrofitted building, and the greater public benefits from increased safety and resilience in the event of an earthquake,” the report states. “The immediate financial cost, however, largely falls onto private building owners who, at least in the short term, do not receive significant economic benefits from seismic retrofits.”

Seattle Department of Construction and Inspections spokesperson Bryan Stevens said SDCI will use the report to come up with policy options to be reviewed by Mayor Jenny Durkan. Those options are expected to be delivered to the mayor’s office by the end of the year. The department will also revisit work by the technical committee and its recommendations in 2011, making adjustments based on existing building codes.

SDCI will explore local tools that could be used, such as the transfer of development rights, though it’s difficult to settle on a fixed market price that could be applied to a policy, Stevens said, and then there needs to be developers willing to buy those rights.