Dan Duffus' Crowded Houses

A developer's rampant exploitation of an obscure zoning loophole has Seattleites screaming "Not in your backyard!"

Last November, photographer Glen Rudolph finally sold the Tangletown bungalow he had purchased in 1977 for $38,000. It seemed to Rudolph that the neighborhood, named after the "tangle" of angled streets that lie between Wallingford and Green Lake and once the no-frills domain of blue-collar families, had lost its flavor after an influx of tech money and home remodels. He yearned for a simpler place, setting his sights on Roslyn. Still, he hoped the buyer would preserve his 1909 house, which he sold for nearly $340,000 more than he paid for it.

Some neighbors hoped for the same. "The worst-case scenario in my mind was that a developer might knock it down and build something bigger," says Peter Krause, who lives a couple doors over on Kensington Place North.

Krause and his neighbors sensed that something was happening in the months ahead. A big clue was the bulldozers that showed up and, as Krause puts it, "started mowing down trees" in what had been Rudolph's lush backyard—really more of a little forest, with overgrown bushes and fruit trees. Even a neighbor's tree—an expansive flowering plum that had arched over Rudolph's yard—was summarily chopped back to the property line. And a funny little fenced-in walkway appeared, traveling from the street to the yard.

Hearing that a developer had purchased the property, one of the neighbors took it upon herself to go to the city's Department of Planning and Development office and look up the plans.

"We were shocked," Krause says. Not only was a new house in the works, but it was to be built in the backyard, right behind the existing house. Worse yet, the new house was to be, as Krause and his neighbors saw it, "a monstrosity: a three-story, ultra-modern house" that would tower over everything around it, eradicate sunlight and privacy in everybody else's backyard, and mess with the neighborhood's historic character.

Construction started in May. "As I saw each story go up, it made me more livid," says Ruth Vega, who lives next door to the project. Like many Seattleites, she's worked hard to turn her yard into a bucolic oasis, complete with immaculately landscaped perennials and a pond which she filled with plump, brilliantly colored goldfish. Now she can't gaze at the pond without seeing the giant block that is the half-completed house, looming just across the fence. The effect is not helped by the current soundtrack of hammering and drilling.

Neighbors wondered how this could happen. The property appeared to have been subdivided without public notice. What's more, their neighborhood, like most zoned for single-family housing, calls for new houses to be built on 5,000-square-foot lots. Yet this house was going up on a 1,050-square-foot sliver of land.

Dark rumors began to circulate about Dan Duffus, the developer behind the project. On the website of his company, Soleil, he boasts of being a former Seattle chair of the Master Builders Association and a frequent participant in city focus groups. The claim made neighbors wonder whether his seeming coziness with the city was giving him an end run around zoning regulations—regulations that Mayor Mike McGinn has already proposed loosening for multifamily housing.

It did not help when neighbors found out that Duffus, along with an array of builders he works with, was taking advantage of a zoning loophole that allows building on certain undersized lots whose existence can only be discovered in historical documents. Nor were neighbors appeased by Duffus' presentation of himself as a green developer creating something the city says it wants: urban density.

Tangletown residents became even more incensed when they discovered that the developer was building towering backyard homes all over the city. From Queen Anne to Montlake, the same type of controversy was playing out, with neighbors beside themselves with rage. Their fury found the ear of City Council member Richard Conlin, who says he intends to do something about it—driving Duffus to lament that the city will be chasing away desperately needed housing in a growing city.

 

On Queen Anne last fall, a retired couple sold their turn-of-the-century craftsman to Duffus' brother Andy, a builder who works in close collaboration with the developer. Next-door neighbors Jonathan Drezner and wife Heidi Gray were curious what was afoot, so they looked up the plans with DPD. There they discovered that a modern, three-story, 2,700-square-foot house was going to be built behind the craftsman, in a yard formerly featuring ginkgo and plum trees.

They contacted the Duffus brothers. Andy came out and met with Drezner and his wife and walked into their backyard. "We pleaded with him," Drezner recalls. "We said, 'You guys are building for profit. This is our lives.' "

Andy, according to Drezner, said "I'm sorry. This is what I do. This is my livelihood."

Drezner and his wife, dealing with both Andy and his brother, subsequently offered to buy the property. The offer, substantially below what Andy paid, was rebuffed. Drezner and Gray asked if Andy could build two stories instead of three. Yes, the Duffuses said, for a price: $100,000. Drezner and his wife refused.

Instead, in October, they took the Duffus brothers and the city to court, filing a land-use petition that challenges DPD's designation of the 2,200-foot lot as a building site. The Queen Anne couple says that lot has been considered part and parcel of the larger property for almost 100 years, even if older historical documents show a separate lot.

Despite the court petition, Andy built the three-story edifice anyway. It's a work of spare, angular design that rises dramatically from a narrow side street (West Wheeler Street). If they win, Drezner and Gray plan to ask for an order compelling the Duffuses to demolish the house.

Meanwhile, a block of Montlake has incorporated itself into a nonprofit group—the Blaine Street Preservation Committee, complete with its own Facebook page—to fight a three-story house that is planned for a backyard there after the deck on the existing house was chopped off to make room for it. The group has barraged DPD with complaints, but has been told that the building permit was not subject to public notice or appeal.

"It is just unfathomable to me that this can happen under our noses and we don't have any say in it," says Erin Miller. After her group requested a list of DPD building permits issued for sites less than half the size of a normal single-family lot, and found out that Duffus had obtained 10 of the 15 such permits between 2008 and 2010, Blaine Street became even rifer with conspiracy theories than Tangletown.

"The question is, 'Whose campaign does he contribute to?' " Miller asks, referring to Duffus. Her suspicions center on the mayor, who she feels is "too close to developers," as evidenced by his builder-friendly regulatory reform package.

According to city Ethics and Elections Commission records, however, McGinn hasn't received any campaign money from Duffus, although City Councilmember Sally Clark—until early this year the head of the Planning, Land Use, and Sustainability Committee—has taken $700 from the developer over the past couple of years.

City officials, however, say it's not bribery that's getting Duffus his permits, but a quirk of zoning regulations. And to understand that quirk, you have to understand Seattle's development history.

 

In the late 1800s, when many of Seattle's first residents laid claim to property, there were no zoning regulations at all, explains Bill Mills, a DPD land-use planner. Lots didn't have to be a certain size or shape, yards were optional, and there was no such thing as a setback from the street.

As historic neighborhoods like Queen Anne and Wallingford were divided up, houses were built on lots that we would now consider exceptionally small—often 2,500 or 3,000 square feet. Even today you can see that legacy in the density of those neighborhoods, whose gracious homes often abut postage-stamp front yards.

Zoning regulations went into effect during the first half of the 20th century. A milestone, in the 1950s, was the creation of a minimum-sized lot: Developers of a new single-family home would need 5,000 square feet of land apiece.

"At that time, there was a protest," Mills says. Some residents had property that was designated, technically, as two or three little lots. They planned to build on the extra lots, or sell them. But if they were going to be held to a 5,000-square-foot standard, those lots would lose their value. So the city granted an exception for lots platted prior to 1957.

In 1988, the City Council decided that it wanted denser development in neighborhoods that it felt could accommodate more residents, according to Mills. So the council extended the exception. Homes could be built not just on lots delineated in historical platting maps, but in old tax records and various other government documents as well.

This is exactly what happened in the Queen Anne case. Back around 1905, the couple who owned the house sold a sliver of the property to the wife's brother. "My personal theory is that they did it for tax purposes," says Steve Gillespie, the lawyer representing Drezner and Gray. As the lawyer's thinking goes, the couple wanted the land out of their names. But, he reasons, that doesn't mean the brother ever intended to build anything on the site. And that is crucial to his argument.

In the petition filed for Drezner and Gray, Gillespie claims that the city is incorrectly interpreting its code, which refers to both "lots" and "building sites." "So they can't mean the same thing," the lawyer says. His position is that the historical documents may legitimize a "lot" for tax or other reasons, but that an extra burden is needed to show that it was at one time viewed as a building site—say a building permit from a long time ago, or a letter expressing the owner's intent to construct something on it.

In the Queen Anne case, nothing like that exists. Both "lots" were treated as one on a 1919 application to build a detached garage, according to Gillespie, and the overall property had one owner from the 1930s on.

Nevertheless, Gillespie and his clients may still face an uphill battle, suggests land-use attorney Duana Koloušková. When there is some ambiguity, judges generally defer to a city's interpretation of its own code. And, she speculates, a judge may view an order to tear down a house as exacting too great a price on the developer, who after all had been authorized to build by the city.

Yet even the city admits that a historical lot should not necessarily qualify for a building permit. "There is a judgment call to be made, certainly," says Mills. Before signing off on a development, DPD reviews not just past documents but other zoning standards, like whether the site can accommodate back and side yards.

DPD will also help developers figure out the puzzle. Before they buy, developers can submit the documents they've found—and a $1,000 fee—for an opinion on whether a property contains a valid, historical lot and whether that lot could qualify for a building permit. Sometimes, as in the Queen Anne case, DPD will suggest ways of making a project work, or even an alternate lot on the same property that can be validated through past records.

Seattle's push toward urban density coincided with a similar statewide movement. In 1990, legislators passed the Growth Management Act, aimed at curbing suburban sprawl and preventing forest land from being cleared for development. But 20 years on, the amount of available land in designated growth areas is ever smaller. "Trying to find vacant land within the [Act's designated growth] boundaries is becoming significantly more challenging," says Todd Britsch, president of the Bothell real-estate research firm New Home Trends.

This land shortage is acute enough—nowhere more so than in built-out Seattle—that Britsch senses a market opportunity. He says his company is about to unveil a software tool that will let developers search for buildable properties. One of its features will identify historical lots that qualify for building permits through Seattle's zoning loophole.

Britsch may have to tinker with his software, however. Conlin, the current head of the City Council's land-use committee, says he intends to introduce legislation that will put an end to this zoning oddity.

In just a few months, Conlin has received plaintive e-mails from citizens who live near Duffus projects in Tangletown, Montlake, and Ballard. They have convinced him that something needs to be done about "very large houses being built on very small lots."

At the very least, he says, such projects need "a more formal review process." Right now, the loophole does not trigger public comment; if a parcel qualifies, a builder permit is treated as a matter of right, explains Mills. The only hope for stopping a project is—as the Queen Anne couple is doing— to challenge a building permit in Superior Court. And that can only be done within a 21-day window, which is tricky since the lack of public notice means neighbors may not know what's in the works until too late.

Conlin says he favors a tighter regulation that will only allow development on an exceptionally small lot if a home has at one time existed on it. And if there's one man that zoning change would undercut, it's Dan Duffus.

 

Duffus shows up for coffee one morning at Zoka in Tangletown, around the corner from his Kensington project, seeming more affable than the devious executive he's been painted as. A young-looking 45, the developer is wearing jeans and an untucked plaid shirt. He explains how he got his start after moving to Seattle in 1987 from the Bay Area, where his dad was a building contractor. He followed his dad into the real-estate business, but carved his own niche by starting a title-insurance company. In so doing, he learned about the intricacies of property records. On the side, he remodeled houses.

He says he developed a reputation among real-estate agents: Not only might he be interested in buying old homes to remodel, but he could appreciate that a property had what he calls on his website "hidden land value." When a realtor came to him with a property that boasted an extra mini-lot, he says, "I knew what I was seeing."

Duffus was not the only one. Over the years, many developers have utilized the city's small-lot loophole, according to Mills. But perhaps none have done so as adroitly as Duffus. The Montlake neighbors thought they were onto something when they found 10 loophole projects by Duffus. The Tangletown crowd later compiled a list of 43 additional Duffus-related projects with an "Aha!" sense of triumph. Duffus himself estimates that he's developed some 100 homes on small lots—about one-tenth of the projects he's developed overall, which also include condominiums and town homes.

"Hidden land value" is, by definition, hard to find. Homeowners often don't know they have an extra little lot on their property, and many of the relevant records are tucked away in archives at Bellevue Community College. The records are so old that anyone who handles them is required to wear plastic gloves. Duffus says he doesn't do that himself, instead relying on a stable of real-estate agents who specialize in that sort of detective work, reaping the rewards when they sell the lots to developers.

While Duffus might remodel a property's existing home himself, he also often serves as a kind of broker, matching parcels that agents have brought him with builders whom he works with. As with the Tangletown site, one builder might renovate and flip the existing house while another might commandeer a back or side yard for new construction. Duffus helps smooth the way by applying for building permits and helping to figure out the jigsaw-like logistics that are often involved. A side yard may become a backyard, for instance, or a triangular-shaped extra lot (harkening again back to Tangletown) may need a boundary adjustment that takes some land from the main lot to create a suitable building site.

Duffus also finances the builders he works with. In 2009, he and Mark Knoll founded Blueprint Capital, which provides loans to some 40 "builder members." Duffus says the company is "exploding right now," in large part because other forms of financing for small builders have dried up in the wake of the housing bust. Last year, Blueprint financed 32 percent of the new homes in Seattle priced between $400,000 and $1 million. Says the company's website: "Today when you see a new home under construction in Seattle, the chances are good it's by a Blueprint member builder."

"In Seattle" is the operative phrase—it's the only place Duffus says he develops. "We believe in infill," he says, calling it the "greenest kind of development there is. We're not tearing down the forest in Issaquah." He boosts his green credentials by having his projects rated by Built Green, an environmentally friendly program started by the Master Builders Association of King and Snohomish counties.

He also says he's not interested in making Seattle look like Bellevue, with sweeping suburban lawns. "We believe homes should not be on big lots," he says. To illustrate why, he hops in his car and offers a tour of the neighborhood around Zoka. He stops first in front of a development he had nothing to do with: twin homes built on full-sized lots. Each sold for $1.3 million. That's the thing about 5,000-square-foot lots, he says: They're expensive.

He then drives around the corner to one of his projects, a blocky gray-and-brown three-story, packed tightly onto a 2,400-square-foot lot on Northeast 60th Street. It sold last year for $665,000. That's far from cheap, but as Duffus describes it, it's a bargain for new construction, all because there was less land to buy.

"People always bitch about something," he says, referring to neighbors' complaints. But when it comes to buyers, he says "there's a huge demand" for his homes. Most are presold. And so, he warns: "If Richard Conlin is successful, these types of homes won't be available to anybody, and $1.3-million homes might be all that's available."

In January, the City Council passed an ordinance that limits the height of new houses on small lots. Whereas the height limit had been between 25 and 30 feet, depending on the lot's width, it is now 22 feet—basically two stories. DPD, which requested the ordinance, used a couple of Duffus projects in a report to the Council that explained why the ordinance was needed.

Some of the projects now causing neighborhood furor, including those in Tangletown and on Queen Anne, cleared DPD before the ordinance went into effect this spring. Now that it is in effect, Duffus argues that the purported problem "is fixed."

Yet the Council drew the ordinance so narrowly that it still leaves room for potentially explosive projects. The new regulations apply only to lots under 2,500 feet, so backyard parcels way under the 5,000-foot minimum could still qualify for building permits. Projects can also escape the restrictions if they're on lots wider than 30 feet—like Duffus' Montlake project.

Conlin's proposal would take the restrictions one step further. "I believe in infill development," Conlin says. "But it needs to be in character with the neighborhood."

Clark, the councilmember who sponsored that ordinance—she says she's been "yelled at plenty" by constituents over Duffus' projects—is more equivocal. Voicing support for infill "if it's done well," she says she'd have to see how many projects Conlin's proposal would affect before supporting it. And she says a new house shouldn't have to look like everything around it. In other words, she suggests, just because "fashion and economics" created a bunch of one-story bungalows 100 years ago doesn't mean that builders have to fall into line now.

Recognizing the anger of neighbors, however, Clark also indicates that she'd be willing to consider further regulations that make the size of a house proportional to the size of its lot.

 

One might be tempted to see this debate as a Seattle thing. Residents here cling to their charmingly old-fashioned single-family neighborhoods and idyllic yards, a lifestyle scarcely found in major cities like New York and Chicago. Yet Genevieve Giuliano, a professor of urban planning at USC, thinks Seattleites are being perfectly reasonable. She says the kind of development Duffus does is not the way cities normally increase density, which happens at a more gradual pace.

A city might, for instance, create zoning regulations that allow detached mother-in-law units throughout single-family neighborhoods (as Seattle did a few years ago), or it might green-light duplexes and triplexes in a given area. Similarly, a neighborhood with two-story apartment buildings might get the go-ahead to build four- or six-story ones.

Giuliano adds that allowing the piecemeal creation of houses that are radically different from everything around them undermines the "existing fabric" of a neighborhood. Just as important, she says, it makes people mad—a losing game for planners. "It gives density a bad name," she says.

McGinn, though a spokesperson, declined to offer his point of view. An ardent environmentalist, he pushes density, but has focused on multifamily and commercial development. Still, the Duffus affair carries echoes of the push-back McGinn has experienced on Capitol Hill, where earlier this year he came under fire for proposing zoning changes to allow businesses on residential streets in a neighborhood already among the city's densest.

Similarly, Montlake's Miller points out that her neighborhood is already dense. "We are not like Broadmoor," she says. "We don't have big yards and pools." Indeed, her portrait of the neighborhood suggests that it fights suburban sprawl. Full of kids, Miller says Montlake offers a family-friendly feel "without being in suburbia or having McMansions."

Ironically, Steele Granger, the builder to whom Duffus handed off the new-construction part of the Tangletown project, suggests that suburbia is where such families might belong. "If people want [less density]," he says, "then they've got to move out of the city." At the same time, he sounds genuinely pained by the uproar he's caused. "I'm a good person," he says imploringly. The son of longtime builder Pete Granger, with four siblings in the construction business, Steele adds that his "whole family can't believe what's happening with this."

What makes the controversy particularly personal is that Granger says he plans to move into the new house himself. It's an economic decision. Hit by the recession, he says he can no longer afford the Kirkland house he built in better times, and has, at 28, moved in with his parents.

The Tangletown home will be cheaper in part because of the tiny lot, which cost him $100,000 instead of the $250,000 to $300,000 he says he would have had to pay for a regular parcel. And though the home's height has enraged neighbors, it is skinny, resulting in surprisingly little square footage of living space—only 1,200. "This is honestly all I can afford," says Granger.

In light of the hostility he's generated, he says he's nervous about moving into the neighborhood. He's hoping that the look of the house, once done, will help matters. While neighbors think it's going to be a modern monstrosity, he says it will really be more a "Northwest contemporary," using shingle siding rather than the hard, flat panels popular in modern design. "I'm excited for everyone to see it," he says.

But he's not exactly counting on a warm welcome. In fact, he's not sure he can stomach living there himself. He knows that neighbors think he's lying about his plans, believing that he's just trying to make money off the project. "If I freak out in five months and move out, I don't want everyone to say this was just a hoax."

Responds Krause: "People are pissed off, but it's also a very friendly neighborhood." He predicts Granger won't have a problem.

It's the bigger issue Krause says neighbors intend to keep agitating about. In early July, residents of Tangletown, Montlake, Fremont, and Laurelhurst—all affected by Duffus projects—got together. Krause likens the gathering to a support group. People shared their own stories and commiserated, then started talking about what they could do to prevent future developments in other people's backyards. They haven't settled on a tactic, Krause says, except that whatever they do, they intend to do together.

nshapiro@seattleweekly.com

 
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