With Othello Square, a Rainier Valley community gets some help in the battle against gentrification

For anyone familiar with the housing market in Southeast Seattle, next week’s groundbreaking ceremony for Othello Square, a sprawling $235-million mixed-use housing development next to the light-rail station, might seem like a case of civic overconfidence.

Since the 1990s, neighborhood residents have watched various attempts to turn this 3.2-acre parcel into an economic catalyst for an area that is home to large African American and immigrant communities. And for nearly as long, residents have watched those efforts fail, most recently in 2015, when the would-be developer was charged with federal securities fraud.

But this time will be different, proponents say.

Thanks to a novel mix of partnerships, community involvement, and targeted philanthropy — including an $8 million contribution from Seattle Children’s — this long-vacant piece of land at the corner of South Othello Street and Martin Luther King Way South has become the centerpiece in an aggressive battle against the economic forces that are gentrifying the neighborhood.

By 2023, if all goes well, this weedy, dog-legged parcel will feature a community clinic, a public charter school, plus affordable spaces for local businesses and nonprofits. Most important, Othello Square will have 436 units of co-op housing and apartments, much of it “workforce housing” for residents who earn too much for subsidized housing but can’t afford a market-rate home or apartment.

This is housing for “the missing middle,” says Tony To, who is leading the Othello Square project for Homesight, a local nonprofit that develops affordable homes. The chance to put so much of that housing in a neighborhood like Othello, right next to a transit hub, represents “a once-in-a lifetime opportunity,” he says.

To be sure, the project, which breaks ground this fall, would barely dent the city’s deficit of affordable housing. But that’s precisely the point, backers say. If Othello Square succeeds, its underlying model could be “replicated both locally and nationally” in other communities struggling with affordability and gentrification, says Jake McKinstry, a principal at Seattle-based Spectrum Development Solutions, which is building one of four buildings on the site with local real estate investment firm Laird Norton Properties.

That would be a fitting end for a piece of property that has epitomized Southeast Seattle’s decades-long struggle to participate with the rest of the city’s economic success.

The parcel was part of the NewHolly redevelopment, a mid-1990s initiative by the Seattle Housing Authority to replace aging public housing projects with mixed-income housing. Though housing advocates feared the initiative would displace low-income residents, neighborhood organizations and business groups in Othello and elsewhere largely welcomed the shift to mixed-income housing projects, which they hoped would encourage more economic diversity.

Developers weren’t convinced. Incomes in the Othello neighborhood were simply too low to support the rents needed to make market-rate housing profitable for developers and attractive to investors and banks. For years, the neighborhood knew the parcel mainly as the location of a fast-food restaurant.

Investors’ reluctance faded in the years leading up to the opening of the Othello light-rail station, in 2009. Lured by a new vision of Othello as a bedroom community for high-earning downtown workers, investors and developers flocked to the neighborhood to buy property around the station and along Martin Luther King Way South.

But that was a mixed blessing for the neighborhood’s current residents. As the building rush drove up both land prices and construction costs — by factors of two and three, respectively, since 2012, To says — upscale apartments increasingly became the only way for developers to recover their costs.

Rents in many of the shiny new apartment buildings that have sprung up near the light rail station along MLK Way are more than double what a resident earning the area median income can afford, To says.

As residents have been pushed out — often going farther south to Burien, White Center or Kent — their departure has hurt many local businesses, churches and other cultural “anchors,” particularly among the area’s African American and immigrant communities.

Many smaller shops “kind of bellied up,” says Nikita Mathis, who owns a clothing business a few blocks north of Othello Street and is a board member of the MLK Business Association.

Mohamud Yussuf, a Somali American journalist who has lived in the Othello neighborhood for 17 years, says that since the train station opened, many in the local Somali American community have moved farther south, and much of the local Somali American culture has gone with them.

“I feel like a stranger here,” says Yussuf, who publishes Runta, an online newspaper. “I’m feeling, ‘what am I doing here?'”

Ironically, the forces of gentrification also created a chance for the community to slow those forces down. Among the developers drawn by the light rail station was Lobsang Dargey, who’d built a multimillion-dollar empire around a federal program, known as EB5, that encouraged wealthy foreigners to invest in U.S. business. In 2012, Dargey persuaded Seattle Housing Authority to sell the Othello parcel for $7.5 million so he could build a 536-unit mixed-use apartment project.

Although the project died with Dargey’s 2015 arrest for securities fraud, Homesight and other neighborhood groups decided they would try to take over as site developer. It was an audacious move for a bunch of nonprofits and neighborhood groups: Even an experienced housing player like Homesight had never taken on anything close to this large.

To pull it off, proponents knew they needed two things.

The first was ironclad buy-in in the neighborhood, which proponents laboriously cultivated through exhaustive surveys, community meetings and other outreach, along with a lot of lobbying of city and county officials.

“What’s so cool about this project is that it’s from the inside,” says Susan Davis, executive director of the Rainier Chamber of Commerce. “It wasn’t an out-of-state-developer coming in and putting in his ‘product’ — it’s really people who are here and understand what this community is that are building it.”

Second, proponents needed “equity” partners who could provide the massive project with enough seed capital and financial credibility that banks would offer construction loans, government agencies would offer grants, and the Seattle Housing Authority would sell the parcel at a discount.

An early partner was Green Dot, a Los Angeles-based charter school that will open a college-preparatory program in the first of four buildings on the Othello site. Although Green Dot’s arrival was controversial among some local politicians, its financial heft helped build credibility with SHA, which eventually agreed to sell the parcel for around $14 million, or around two-thirds of its assessed value, To said.

But the tipping point didn’t come until 2018, when the Odessa Brown Children’s Clinic chose Othello Square for a second location. The clinic will own the bottom two floors of a 7-story mixed-used apartment building and share its space with a Tiny Tots early-learning facility.

Part of Seattle Children’s, the Odessa Brown clinic has served lower-income and ethnically diverse communities from its East Yesler Way location since 1970, and saw Othello Square as a way to reach clients who had been squeezed out of the Central District into Southeast Seattle and South King County, which suffer a shortage of health facilities.

As important, by locating at Othello Square, the Odessa Brown clinic essentially became the commercial anchor for a mixed-use project that would feature 176 rental units priced for households making between 65% and 120% of the Seattle area median income (AMI), or anywhere from roughly $49,400 to $91,200 for a single individual.

Better still, because Seattle Children’s has just committed up to $8 million in philanthropic funds for the residential piece of the project, Spectrum can now double the number of apartment units, to 72, of “workforce” housing for incomes of 80% or less of AMI, which is anywhere from $56,000 to $80,250, depending on household size. (As an example, a three-bedroom unit that would normally rent for $3,000 a month would go instead for $1,200.)

Without Seattle Children’s “impact equity,” says McKinstry “we would not be able to support the debt from the construction loan on this project because we are reducing rental revenue by increasing the affordability.”

And, critically, that extra affordability in turn will allow Odessa Brown to minimize its own contribution to gentrification at Othello. “What you don’t want over the long term is that the community [the clinic is serving] can’t stay there because they can’t afford the housing,” says Dr. Jeff Sperring, Children’s CEO.

As the project has gained financial momentum, it has gotten easier to attract more capital and grants. Homesight, for example, has lined up around $15 million in grants for a third building, a $30-million project with 68 condo-like coop units that will be priced from between $250,000 and $400,000.

There are still hurdles to cross. A fourth and final building — an “opportunity center” with affordable space for nonprofits and local businesses underneath 192 units of affordable apartments — remains in the fundraising stage. Some city construction permits are pending, and portions of the parcel need treatment for contamination from an old gas station.

But for community members who have been eyeing this parcel for years and even decades, there is a strong sense of being in the final stretch.

For some, it cannot come too soon. Sahra Farah is director of Somali Community Services Of Seattle, whose current location in nearby Rainier Beach was recently put on the market. Space at Othello Square may allow the social services nonprofit to remain in South Seattle.

For others, the project’s success will be bittersweet. Yussuf, the publisher, says that although the project will benefit residents still in the community, it comes too late for many, including many of his fellow Somali Americans. “By the time it is finished, the community is already displaced,” he says.

Homesight’s To says the project has even those people in mind.

Marketing for the project’s housing units will “focus on people that either currently live here or want to come back,” To says, adding that Homesight and other neighborhood groups are trying remain in touch with residents who have been displaced, and will encourage them to apply for space in the project.

“We’re giving them a way to come back,” To says.

CORRECTION: The Odessa Brown Children’s clinic is located on East Yesler Way, not in Yesler Terrace, as an earlier version of this story reported.