Real Estate: The Central Question

It took a mixture of luck and dogged persistence for hairstylist De Charlene Williams to secure a small-business loan. It was 1968 and Boeing was about to begin the infamous round of layoffs that would slash its workforce from 142,000 to 56,000. Local banks were therefore willing to give loans to almost anybody who could promise some cash flow.

That situation gave Williams an opening but not a guarantee; guarantees for African-American women were nonexistent. So, the 25-year-old entrepreneur started calling on lenders. Five banks said no. Then 10. Then 25.

After 29 rejections, Williams got creative. She used only her first initials on an application to Metropolitan Federal Savings and Loan. [The underwriters] didnt know if I was a woman or a man, but the bank manager gave me a break because Boeing just had a big layoff.

On that day at least, gender anonymity and a $7,500 down payment made Williams the owner of a hair salon.

Even with financing in hand, life didnt get much easier. Williams opened De Charlene Beauty Shop & Boutique on the day Martin Luther King Jr. was assassinated in Memphis. Shortly after opening, her windows and glass doors were smashed. Still, Williams embarked on a mission to stabilize the lives of her black neighbors in the Central District.

I wanted to help all the other black women in the area, she recalls, help them get out of the kitchens, get on their feet and do something productive. Williams works solo these days, but at one point, she employed 13 people.

Williams opened her shop during a period of intense racial tension, both nationally and in Seattle. Today, her shop is a landmark in yet another instance of race-related tumult: the gentrification of urban areas traditionally populated by people of color. Williams is one of the few remaining black business owners in the neighborhood and her single-story salon is surrounded by construction equipment and boxy, six-story apartment buildings. Redevelopment has long been a thorny subject in the area, which was once three-quarters black, but the rhetoric has intensified. Such is the case when Seattles most prominent developer enters the market.

A knock at the door interrupts a conversation with Michael Moss in his office at the Promenade Red Apple, the anchor tenant in a shopping area at 23rd Avenue South and South Jackson Street. He opens the door to a young man, maybe early 20s, in a crisp black ball cap and T-shirt, jeans and bright white sneakers. He wants a job. Moss delivers the bad news: Were going to be closing down soon.

In February 2016, Vulcan Real Estate paid $30.9 million for the Red Apple parcel and one across the street. If all goes according to plan, construction on a new mixed-use apartment complex will begin early next year.

Moss isnt a typical grocery-store manager. An ordained minister, hes as concerned with community outreach and the fate of the neighborhoods mentally ill as he is with SKU performance and margins.

My boss, when he hired me, he said, We want somebody to run the store whos part of the community, who looks like the community and we want to be a supporter of the community, Moss recalls.

He organizes backpack giveaways, community barbecues and coat drives. The store has developed a loyal following among a customer base that has been consistently declining. In 1970, some 40,000 black people comprising 73 percent of the neighborhood occupied the single-family dwellings in the Central District. Theyd make routine trips to the Red Apple, stocking up on ingredients like collard greens and smoked turkey necks that were all but impossible to find elsewhere in Seattle. Today, census estimates suggest about 5,000 black people live in the area roughly 14 percent of the population.

Michael Moss, left, manages the Promenade Red Apple Market, which may or may not survive as part of Vulcan’s planned apartment/retail complex at 23rd Avenue South and South Jackson Street, right.

Black people didnt settle in the Central District willingly. Discriminatory lending practices, known as redlining, meant racial minorities could only find housing in the most blighted neighborhoods of big cities. In the 1930s, the Home Owners Loan Corporation, a government-sponsored product of the New Deal, graded neighborhoods on an A-to-D scale; lenders used the grades to gauge risk. Seattles Central District received a D grade; the reasoning was summed up in one sentence: This is the Negro area of Seattle.

Mortgages were hard to come by in the area. And when they were granted, they came with high interest rates.

To offset the lack of capital, the Central District became a hub of community experimentation. The local Black Panthers chapter sponsored a community health clinic. A fleet of 12-passenger buses shuttled folks around for a dime per trip. Local residents were providing urban services before the city thought to arrange any for them. And, as has been the case in redlined areas across the United States, the pragmatism of the Central District also yielded a creative benefit. The neighborhood had a booming jazz scene in the 1920s and 1930s. Rock guitar virtuoso Jimi Hendrix called the Central District home. Resident Anthony Ray would eventually dub himself Sir Mix-a-Lot and spark a hip-hop movement that continues today.

After World War II, the white middle class lived in suburban neighborhoods. But the children and grandchildren of these white flight participants wanted something else: to live and play near their downtown workplaces. So, beginning in earnest during the 1990s, white Seattleites started looking at the Central District, where they found affordable starter homes.

These homes were inexpensive because banks wouldnt issue home-improvement loans in the Central District. So, as Euro Americans received a bonus from institutional racism, Seattle University law professor Henry McGee Jr. wrote in a 2006 analysis of the neighborhoods changing demographics, African Americans were presented with an escape hatch to less expensive, far more desirable housing than they had experienced when they were redlined in areas now open to them as racial attitudes changed. An urban-suburban flip ensued: White people moved to Seattle; black people left for places like Renton and Kent.

The Great Recession further soured residents fortunes, and then they couldnt keep up with property-tax and rent increases after the recession. In 2009, homes in the Central District fetched a median price of $385,000, according to the Northwest Multiple Listing Service. Through April of this year, the median sale price was nearing $700,000 as opportunistic developers stoked the trend.

Many paint Amazon.com as Seattles greatest gentrifier, but its Vulcan Real Estate that erected many of the buildings those backpack-clad tech workers scurry into and out of in South Lake Union and downtown. No commercial entity has played a larger role in the revamping of Seattles new hub of tech activity. In the companys eyes, Vulcan replaced a warehouse wasteland with the skeletons that support thousands of jobs and dwellings.

When we started [in South Lake Union], we had the great pleasure of owning a strip club, a porn shop and a Hooters, says Lori Mason Curran, Vulcans investment strategy director. Id argue theres been an improvement.

In 2014, Vulcan expanded from South Lake Union by signing on to a $200 million redevelopment of Yesler Terrace, the nations first racially integrated public housing development, which opened in the 1940s. Vulcan plans to build 650 units of both market-rate and discount units on the site, which is situated between the Central District and downtown Seattle. Seattle Housing Authority (SHA), which operates the public housing at Yesler, partnered with private developers to help finance the $1.5 billion project, which is expected to last a decade. The result, developers and SHA say, will be a mixed-income, diverse neighborhood that provides better opportunities for low-income residents rather than separating them away from an economically advantaged neighborhood.

Vulcan sees the property at 23rd Avenue and South Jackson Street, a mile east of Yesler Terrace, through a similar lens. Single-story shops and a huge parking lot are considered inefficient uses of space in a growing urban center. When construction begins, likely in early 2018, Vulcan will clear the parcel and erect two buildings encompassing 46,000 square feet of retail space topped by 532 apartments, 106 of them to be offered at a lower price point. For example, a two-bedroom unit for a family of four with an $80,000 annual income would cost about $1,800 a month, according to Vulcan Vice President of Real Estate Ada Healey.

Vulcan officials have sought community buy-in through numerous stakeholder meetings. One of our goals with new projects … is to be really good listeners and to be mindful of the context and the history and the aspirations of the people who are currently in the neighborhood, Healey says.

Some design elements have emerged from those meetings. The Vulcan development will include a grocery store Red Apple is in the running as well as a pedestrian corridor between South King and South Jackson streets and space dedicated to small retail operations. (The dedicated space itself is tiny: about 1,700 square feet, which may be divvied up among as many as 12 tenants.)

Vulcan has a history of targeting local businesses it wants as tenants, so its unclear if Central District mainstays will be tapped. Vulcan wants 20 percent of construction costs to be devoted to minority-owned contractors, but there are no incentives for minority-owned retailers in the works. Nevertheless, some in the business community have hailed Vulcans outreach.

Ice Dean’s Cortona Cafe, left, is a Central District favorite for its quirkiness and community-friendly space. Fat’s Chicken and Waffles, which opened last year in the iconic Catfish Corner space, is considered by some an example of “gentrification done right.”

Theyve been nice, and theyve listened, says Williams, who also serves as president of the Central Area Chamber of Commerce. Thats why theyre putting micro-retail in there, because they listened to me.

Economic development in the Central District hasnt necessarily yielded greater economic opportunity for its black residents; as money has poured in, theyve poured out. Does a developer have an obligation to those who are displaced?

Obligation is a strong word, Healey says. I think for us and the work we do, [community engagement] is the right thing to do. Were not obligated to build affordable housing, but we do because we think its the right thing to do. Were not obligated to work really hard to incorporate women- and minority-owned businesses in our construction, but we think its the right thing to do. We aspire to be good community members.

There are two coffee shops on East Union Street between 24th and 25th avenues, and they might be bellwethers of the neighborhoods small-business future. Cortona Cafe, run by Isolynn Ice Dean, is a small shop enlivened by big windows, bright yellow accent walls and inventive use of available space. On the west end of the block is Union Coffee. Zack Reinig, whose spouse, Molly Moon Neitzel, runs the eponymous ice-cream-shop empire, opened last year. Union epitomizes the style of new coffee shops in Seattle: concrete floor, white-tile backsplash, high ceiling. The neighboring shops illustrate a collision that happens in gentrifying neighborhoods, one that often produces a single winner. The difference is capital. These [new] shops … have enough money to make it appeal to the new people moving in here, says Dean, who is black.

Wealthy incoming residents seek businesses theyre familiar with, and wealthy entrepreneurs can cater to that demographic. Meanwhile, existing retailers must reinvent as demographics change, which is a capital-intensive process. Furthering the divide, people of color usually have a fraction of the net worth of white Americans, thanks in no small part to the discriminatory lending practices of past decades. Even today, white people have been shown to receive preferential lending terms.

New money means new opportunity for business owners like Williams and Dean, but they have historical burdens to shrug that their new competitors often dont.

Some are attempting to level the playing field before its too late. In June, developer Lake Union Partners partnered with the conservation organization Forterra and the Central District activist group Africatown to set aside for affordable housing nearly half of a new development at 23rd Avenue and East Union Street, the former site of Liberty Bank, Seattles first black-owned bank.

Bold partnerships like this are necessary if Seattle is to truly mitigate displacement, nurture diversity, and create lasting business and residential affordability, Africatown board member Andrea Caupain said in a statement announcing the deal.

The collaboration will help cash-strapped residents some units will rent for as little as $720 a month but its just one project, and its reliant on nonprofit funding. What remains unknown is whether the private sector can preserve some of the Central Districts intrinsic character.

Unless somebody is coming in and investing in black-owned businesses, people-of-color businesses, were going to completely fade out, predicts Dean, whose Cortona Cafe is in the next block. She argues that new businesses and developers should recognize what theyre displacing and should invest accordingly.

There should be some presence, Dean asserts. This wasnt all shiny and bright and, excuse me, white before you moved into this neighborhood.

Making the Grades

Neighborhood grades given by the government-funded Home Owners Loan Corporation (HOLC) in the 1930s created decades of legal discrimination in the real estate market. Mapping Inequality, a project by researchers in Maryland and Virginia, overlays the HOLC grades on city maps and provides the HOLCs justifications for the grades, which ranged from A (best) to D (hazardous). Here are some samples from Seattle:

Central District (D): This is the Negro area of Seattle.

Beacon Hill (D): This district is composed of various mixed nationalities. Homes are occupied by tenants in a vast majority. Homes generally old and obsolete in need of extensive repairs.

Montlake (A): The locality has enjoyed a very favorable impression with prospective home owners. … All the properties are well maintained. This district is populated by white-collar workers and professional people.

Mount Baker (A): This locality is the choicest part of the Mount Baker Park district. … The district is composed or [sic] residents of a high social standard. … The typography [sic] of the property is extremely favorable, having a good view of Lake Washington and the Cascade Mountains.

The Roots of Gentrification

The Central District is but one example of economic development resulting in residential displacement. Researchers commonly put the onus of gentrification on shifting norms around inner cities. After the 1960s and 70s, when the United States government and many American cities passed laws banning discrimination in home lending, inner cities were still seen as low-income areas that middle- and upper-class whites ignored. Redlining may have been banned, but its effects lingered for decades.

Beginning in the late 1990s, attitudes started to shift. Longer work hours and an increased appetite for urban amenities drove working professionals, particularly young ones, to reside closer to central business districts. Thus, proximity kick-started gentrification in neighborhoods across the country.

Public policy experts grapple with the fact that gentrification isnt a rising tide that lifts all boats. In theory, wealthy residents moving into central cities would spark racial and financial integration that benefits all residents. But, often, newcomers take over political institutions and advocate for amenities and services that fit their definition of community improvement, writes Derek Hyra, director of American Universitys Metropolitan Policy Center.

The mere presence of wealth doesnt improve the fortunes of those living in low-income neighborhoods. Social scientists have found that interactions whether conversations on the bus or a new business hiring a local contractor drive economic improvement across classes. If newcomers interact only with other newcomers, longtime residents get left behind.

This lack of assimilation often changes a communitys character. In his 2006 analysis of the Central District, Seattle University scholar Henry McGee Jr. interviewed residents about the changing neighborhood. He quoted one man as being just amazed [that], at all hours, there are white people out jogging and walking around.

More than a decade later, that sentiment persists. There are babies and dogs everywhere, says Central District business owner Isolynn Dean. Five, six years ago, you wouldnt see anybody running around with babies and dogs. Now, theyre everywhere.