Is Seattle too easy on condo developers?

The PI had a front page article today on, Is Seattle too easy on developers?

Highrise housing 1130 Is Seattle too easy on condo developers?

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Matt , Urbnlivn's publisher, has a love for lofts, floating homes and mid-century moderns.

For years Matt resisted becoming a real estate agent preferring to be an executive in the startup world but he recently caved in the spring of 2014 and became an agent.

You can also find Matt on Twitter or skiing.

  • Downtown Guy

    I feel the numbers speak for themselves. As I’ve been saying, Seattle is behind the times when compared to other cities. Its time developers be held responsible and begin giving back to the downtown core of Seattle. Creating a more diversified community is to the benefit of all. A more dynamic and interesting lifestyle can be gained, adding to the goal of creating a truly “world-class” city. Great article!

  • Downtown Guy

    I feel the numbers speak for themselves. As I’ve been saying, Seattle is behind the times when compared to other cities. Its time developers be held responsible and begin giving back to the downtown core of Seattle. Creating a more diversified community is to the benefit of all. A more dynamic and interesting lifestyle can be gained, adding to the goal of creating a truly “world-class” city. Great article!

  • mhays

    Supporting low-income housing should be the job of every property owner, not just the few in new highrises. I don’t like these fees.

    In fact, this type of fee significantly adds to housing costs and puts highrise housing out of reach for more people, also acting as a disincentive to new projects. How odd given its affordability goal, and Seattle’s goal of growing up not out.

    We should enlarge the housing levy. Rather than $16,000,000 per year we should do 20%-something. By law this money is used for people earning less than 80% of median, and it’s built or preserved thousands of units by supporting our array of great non-profits like LIHI, HRG, CHIIP, PHG, etc.

    We should also keep addressing the 80-120% of median crowd that everyone worries about but the City can’t subsidize. Reducing parking requirements was a big help. But the biggest help is simply new housing, which frees up the older housing to be affordable.

    Even more fundamentally, it’s strange that everyone agrees we Downtown housing is inherently beneficial, reducing sprawl, invigorating Downtown, encouraging walking and transit use, etc. So why are we putting a special tax disincentive on it? We should be thanking them for benefits like reducing volume of cars on the road.

  • mhays

    Supporting low-income housing should be the job of every property owner, not just the few in new highrises. I don’t like these fees.

    In fact, this type of fee significantly adds to housing costs and puts highrise housing out of reach for more people, also acting as a disincentive to new projects. How odd given its affordability goal, and Seattle’s goal of growing up not out.

    We should enlarge the housing levy. Rather than $16,000,000 per year we should do 20%-something. By law this money is used for people earning less than 80% of median, and it’s built or preserved thousands of units by supporting our array of great non-profits like LIHI, HRG, CHIIP, PHG, etc.

    We should also keep addressing the 80-120% of median crowd that everyone worries about but the City can’t subsidize. Reducing parking requirements was a big help. But the biggest help is simply new housing, which frees up the older housing to be affordable.

    Even more fundamentally, it’s strange that everyone agrees we Downtown housing is inherently beneficial, reducing sprawl, invigorating Downtown, encouraging walking and transit use, etc. So why are we putting a special tax disincentive on it? We should be thanking them for benefits like reducing volume of cars on the road.

  • mhays

    Oops, I mean the levy should be $20 million something, not 20%.

  • mhays

    Oops, I mean the levy should be $20 million something, not 20%.

  • christiangustafson

    As bearish as I am about housing and especially about condos, I am solidly on the side of the developers for this one.

    Developers have no responsibility whatsoever to provide “affordable housing” to the hoi polloi, none whatsoever. The market will show who can afford to live here, and if that prices some out, too bad, move to Federal Way. But there is no obligation on the part of the producers to provide sub-market housing for parasites.

    “Giving back to the community” is a sham and a silly cliche. It’s just another tick on the backs of the few productive elements in our society.

  • christiangustafson

    As bearish as I am about housing and especially about condos, I am solidly on the side of the developers for this one.

    Developers have no responsibility whatsoever to provide “affordable housing” to the hoi polloi, none whatsoever. The market will show who can afford to live here, and if that prices some out, too bad, move to Federal Way. But there is no obligation on the part of the producers to provide sub-market housing for parasites.

    “Giving back to the community” is a sham and a silly cliche. It’s just another tick on the backs of the few productive elements in our society.

  • seattle67

    Balancing our need for open space, affordable housing, density, and transportation is the big challenge facing this city. And since I’m a firm believer that ‘incentives drive behavior’, if the city’s able to put out enough carrots that make building affordable housing attractive to developers, we’ll start to see more of it.

    However, I do agree with mhays that this program should be expanded beyond downtown high rise developers, it’s not fair to put this requirement solely on their back since plans for affordable housing are sorely needed in other neighborhoods throughout the city.

    And christiangustafson, did you actually read the PI article? Because reading your comments within that context leads one to believe that you are really saying that, ‘creating apartments and condos affordable to teachers, firefighters and other moderate-income workers’ is catering to ‘parasites’.

  • seattle67

    Balancing our need for open space, affordable housing, density, and transportation is the big challenge facing this city. And since I’m a firm believer that ‘incentives drive behavior’, if the city’s able to put out enough carrots that make building affordable housing attractive to developers, we’ll start to see more of it.

    However, I do agree with mhays that this program should be expanded beyond downtown high rise developers, it’s not fair to put this requirement solely on their back since plans for affordable housing are sorely needed in other neighborhoods throughout the city.

    And christiangustafson, did you actually read the PI article? Because reading your comments within that context leads one to believe that you are really saying that, ‘creating apartments and condos affordable to teachers, firefighters and other moderate-income workers’ is catering to ‘parasites’.

  • old timer

    Mine. It’s all mine.
    You can’t have any.

    It’s always refreshing to hear the viewpoint of a person
    who’s world extends as far as his arm can reach.

    Enjoy the Ivory Palace while it lasts.

  • old timer

    Mine. It’s all mine.
    You can’t have any.

    It’s always refreshing to hear the viewpoint of a person
    who’s world extends as far as his arm can reach.

    Enjoy the Ivory Palace while it lasts.

  • christiangustafson

    No, I didn’t read the article, and I don’t care if those people are priced out of our market. If the developers want to build gold-plated condos and fantasy hi-rises all day, fine. If the market isn’t there to support it, they and their investors will suffer, and there will be cheap apartments left over by someone who buys the RE from bankruptcy.

    Here’s the rub. Why is it that downtown condos of the kind we’re seeing today — Olive8, Trio, that shiny thing on Madison — did not come about until the last few years? It is not that we are all suddenly so prosperous. The whole wave has been fueled by loose lending and credit, so they have built a boatload of “luxury” residences, all priced out of orbit. None of this would have existed.

    People think $500K is a bargain, and they’ll sign an IO loan to get in on the action. Hey, sold to you! Too funny!

    What’s a good example of high-end RE development pre-bubble? Harbor Steps. Yes. Apartments. With a killer view, but apartments, and probably very humble compared to the glossy finishes and furnishings on new construction today.

    Olive8 is absurd. It is a huge disaster waiting to happen. The fools buying here won’t even have a view. My office looks out on the construction site, and each day I have this sense of dread in seeing them add another floor of sweet luxury condotel goodness.

    Teachers, cops, even lowly programmers (me) should be patient, rent, save cash, and pick something up for cheap from the ashes. 2.5x income, baby!

  • christiangustafson

    No, I didn’t read the article, and I don’t care if those people are priced out of our market. If the developers want to build gold-plated condos and fantasy hi-rises all day, fine. If the market isn’t there to support it, they and their investors will suffer, and there will be cheap apartments left over by someone who buys the RE from bankruptcy.

    Here’s the rub. Why is it that downtown condos of the kind we’re seeing today — Olive8, Trio, that shiny thing on Madison — did not come about until the last few years? It is not that we are all suddenly so prosperous. The whole wave has been fueled by loose lending and credit, so they have built a boatload of “luxury” residences, all priced out of orbit. None of this would have existed.

    People think $500K is a bargain, and they’ll sign an IO loan to get in on the action. Hey, sold to you! Too funny!

    What’s a good example of high-end RE development pre-bubble? Harbor Steps. Yes. Apartments. With a killer view, but apartments, and probably very humble compared to the glossy finishes and furnishings on new construction today.

    Olive8 is absurd. It is a huge disaster waiting to happen. The fools buying here won’t even have a view. My office looks out on the construction site, and each day I have this sense of dread in seeing them add another floor of sweet luxury condotel goodness.

    Teachers, cops, even lowly programmers (me) should be patient, rent, save cash, and pick something up for cheap from the ashes. 2.5x income, baby!

  • mhays

    Looks like I’m a centrist on this one. I want this city to have a mix of income levels, including subsidies at the low end, but I’d put the cost on all of us, not just a few condo buyers.

    In fact, EVERYONE who lives in Seattle contributes to our housing prices. If you buy a house, you make houses more expensive. If you rent an apartment, you make apartments more expensive. That’s how the supply/demand equation works.

    So tax everybody a little, rather than a few people a lot.

  • mhays

    Looks like I’m a centrist on this one. I want this city to have a mix of income levels, including subsidies at the low end, but I’d put the cost on all of us, not just a few condo buyers.

    In fact, EVERYONE who lives in Seattle contributes to our housing prices. If you buy a house, you make houses more expensive. If you rent an apartment, you make apartments more expensive. That’s how the supply/demand equation works.

    So tax everybody a little, rather than a few people a lot.

  • Downtown Guy

    Ugh! I hate to say it, but mhays is absolutely right on this one! I do not believe in unfair taxation. Taxing only the rich to make the situation right for every one else is simply not the right answer. Its like “punishing” those that have done well for themselves, and this is not the fundamental basis for which our society was created. In a sense, it would be like de-incentivizing people to do well. Ultimately, it will create an environment of hostility from all sides, and that is something we do not want for our downtown. Additionally, taxing only a few (in this case the upper income demographic) would contribute to the notion of social classes and dictate it is the “richies”” problem to make better. Well, this is a social challenge by which everyone should be involved as this is does affect all parties. As such, the taxation should be equally distributed to all parties involved – rich, middle class, and low income.

  • Downtown Guy

    Ugh! I hate to say it, but mhays is absolutely right on this one! I do not believe in unfair taxation. Taxing only the rich to make the situation right for every one else is simply not the right answer. Its like “punishing” those that have done well for themselves, and this is not the fundamental basis for which our society was created. In a sense, it would be like de-incentivizing people to do well. Ultimately, it will create an environment of hostility from all sides, and that is something we do not want for our downtown. Additionally, taxing only a few (in this case the upper income demographic) would contribute to the notion of social classes and dictate it is the “richies”” problem to make better. Well, this is a social challenge by which everyone should be involved as this is does affect all parties. As such, the taxation should be equally distributed to all parties involved – rich, middle class, and low income.

  • mhays

    Well, I’m up to 88 posts on the tally…that’s bound to produce something we can agree on.

    Though some Downtown towers are for the rich, others aren’t. Some are going for the upper-middle demographic, at least with their smallest units. More to the point, some projects going for the new heights elsewhere in town would too.

    The new zoning and fees would presumably apply to a lot of smaller units priced in the 300s as well as above. Those people would be paying the tax just like the rich people.

  • mhays

    Well, I’m up to 88 posts on the tally…that’s bound to produce something we can agree on.

    Though some Downtown towers are for the rich, others aren’t. Some are going for the upper-middle demographic, at least with their smallest units. More to the point, some projects going for the new heights elsewhere in town would too.

    The new zoning and fees would presumably apply to a lot of smaller units priced in the 300s as well as above. Those people would be paying the tax just like the rich people.

  • Downtown Guy

    I think this sounds reasonable. No objections here.

  • Downtown Guy

    I think this sounds reasonable. No objections here.

  • EconE

    I agree…property taxation should be equal in my mind. If they want to add an additional tax for subsidizing housing solely on the backs of the people that live in the neighborhood it would create a disincentive to actually move there IMO. Correct me if I’m wrong but don’t property taxes fund schools? Aren’t most of the DT residents DINKs and SINKs? Why should we have to pay for a gas guzzling SUV driving suburban soccer moms childrens education? I think that they should tax McMansions instead! Then…when the DINKs have kids and the SINKs get married and have kids…they can move to suburbia (or exurbia if they choose) and pay the taxes themselves.

  • EconE

    I agree…property taxation should be equal in my mind. If they want to add an additional tax for subsidizing housing solely on the backs of the people that live in the neighborhood it would create a disincentive to actually move there IMO. Correct me if I’m wrong but don’t property taxes fund schools? Aren’t most of the DT residents DINKs and SINKs? Why should we have to pay for a gas guzzling SUV driving suburban soccer moms childrens education? I think that they should tax McMansions instead! Then…when the DINKs have kids and the SINKs get married and have kids…they can move to suburbia (or exurbia if they choose) and pay the taxes themselves.

  • EconE

    A couple thoughts about affordable housing downtown (or wherever)…

    1. Could builders put out a product that cuts back on the finishing costs (in both cost of materials and labor) such as carpet and vinyl instead of hardwoods and tile and even go so far as to not include appliances (thereby allowing people to shop used if they so desire in order to accomodate their budget) and even perhaps…in the case of a two bedroom condo…leave one bathroom unfinished so it is essentially a 2br/1ba with the piping in place but the rest is left for a later date when the occupants feel the need and have the funds to complete the project.

    2. As much as I’m for affordable housing for people that don’t make enough IMO …Civil Servants such as Teachers, Firemen and Police Officers…how many of them actually want to live downtown? Are their lifestyles the same as an “urbanite” who chooses to live in close proximity to their office downtown?

    just food for thought

  • EconE

    A couple thoughts about affordable housing downtown (or wherever)…

    1. Could builders put out a product that cuts back on the finishing costs (in both cost of materials and labor) such as carpet and vinyl instead of hardwoods and tile and even go so far as to not include appliances (thereby allowing people to shop used if they so desire in order to accomodate their budget) and even perhaps…in the case of a two bedroom condo…leave one bathroom unfinished so it is essentially a 2br/1ba with the piping in place but the rest is left for a later date when the occupants feel the need and have the funds to complete the project.

    2. As much as I’m for affordable housing for people that don’t make enough IMO …Civil Servants such as Teachers, Firemen and Police Officers…how many of them actually want to live downtown? Are their lifestyles the same as an “urbanite” who chooses to live in close proximity to their office downtown?

    just food for thought

  • mhays

    Those are good ideas, but most of the cost is spent long before finishes, fixtures, and appliances. If the math was easy for cheaper product (i.e. profitable), developers would be all over it. But the math isn’t easy.

    The appliance idea would be difficult. First, developers get great deals because they’re buying 200 of everything. Second, are there really that many used refrigerators? Third, the logistics of move-ins are already bad enough…accommodating a dishwasher, washer/dryer, stove, fridge, and microwave for each unit would bring the move-in process to nightmarish proportions, and require significant additional time for the process. Fourth, I know I wouldn’t want to deal with buying and transporting appliances when I’m already slammed with buying, moving, selling, etc. Fifth, installations by homeowners would put the building at huge risk for water damage.

  • mhays

    Those are good ideas, but most of the cost is spent long before finishes, fixtures, and appliances. If the math was easy for cheaper product (i.e. profitable), developers would be all over it. But the math isn’t easy.

    The appliance idea would be difficult. First, developers get great deals because they’re buying 200 of everything. Second, are there really that many used refrigerators? Third, the logistics of move-ins are already bad enough…accommodating a dishwasher, washer/dryer, stove, fridge, and microwave for each unit would bring the move-in process to nightmarish proportions, and require significant additional time for the process. Fourth, I know I wouldn’t want to deal with buying and transporting appliances when I’m already slammed with buying, moving, selling, etc. Fifth, installations by homeowners would put the building at huge risk for water damage.

  • mhays

    Regarding the sale of units with empty shell spaces such as spare bedroom shells…

    The two main issues are:

    1. I’m not sure you can get a Certificate of Occupancy permit. I’m no expert, but I think CofO is awarded only for space that’s completely built out and ready to be occupied. Buildings can be broken into occupyable and non-occupyable sections that are permitted separately, but a single condo can’t be separated like that.

    2. Very little savings would be achieved. All you’re saving is floorcovering, paint, fixtures, etc., which cost money but not much percentage-wise. All of that would have been bought at near wholesale and built with “assembly line” efficiency.

    Another point on the appliances: I’d hate to live in a building where 200 homeowners are tying into gas lines on their own! The building would need to require professional installation…which would cost hundreds of dollars per unit, and wouldn’t have the efficiencies of the main project’s “assembly line” labor and quality control.

  • mhays

    Regarding the sale of units with empty shell spaces such as spare bedroom shells…

    The two main issues are:

    1. I’m not sure you can get a Certificate of Occupancy permit. I’m no expert, but I think CofO is awarded only for space that’s completely built out and ready to be occupied. Buildings can be broken into occupyable and non-occupyable sections that are permitted separately, but a single condo can’t be separated like that.

    2. Very little savings would be achieved. All you’re saving is floorcovering, paint, fixtures, etc., which cost money but not much percentage-wise. All of that would have been bought at near wholesale and built with “assembly line” efficiency.

    Another point on the appliances: I’d hate to live in a building where 200 homeowners are tying into gas lines on their own! The building would need to require professional installation…which would cost hundreds of dollars per unit, and wouldn’t have the efficiencies of the main project’s “assembly line” labor and quality control.

  • stew

    Very interesting discussion. In other cities, required range of incomes per floor (sometimes maybe 1 or 2) and a family size requirement (i.e. one family size unit mkt rate or not) are not disincentives. I don’t think there should be unfair burden to anyone, but developers are interested in developing downtown because of either existing potential or future potential depending on when, what they are building and based on that the amount of $$ they can make.. Can’t blame ‘em for that, that is the purpose of what they do. So have additional reasons in terms of community,etc. But let’s say $$ are the baseline for all of them.

    Now this issue of developers “paying” for affordable housing. It seems that whenever this issue comes up its like it some sort of taxation or punishment for those doing well or something. Again, in other cities its more across the board. But its hardly a “punishment”
    And we are hardly talking about these “low-income units” going to people on Section 8 or something… Please.

    It’s like a market approach goes out the window if we are talking a “city”.If Seattle is just another market (which it really is to some of the larger scale developers) why shouldn’t it charge a premium to enter it, the premium being income/size requirements. Other cities do it with success. It certainly has the demand to justify it and a short supply of developable space. Why should it not do it for its most premium supply, downtown? Again, other cities have clued into this. I’m not advocating going overboard and gouging developers – and there are certainly various types of incentive programs for them. It just seems Seattle doesn’t “deal” or rather “negotiate” with developers on anything. Its very much a “whatever” attitude and gee, mr./ms. developer, we don’t want to piss you off. Developers are used to deals and negotiation; again that’s what they do.

    And because the city is whatever, it sometimes plays both sides of the fence. Remember how the city tried to blame a developer for not developing affordable housing in the arctic building? the city and council got all mush mouthed when asked “well, was it in the agreement?” um, well, um no. I felt bad for the developer because he didn’t do anything wrong, he simply changed his mind on a project that was in early development, really an idea. And EconE, not to call you out, but what you are saying about DINKs and soccer moms etc. is a bit 90s but I might be inclined to agree if Seattle or the region had sound transportation and infrastructure planning and development. It doesn’t.

    And trust me, I have teacher/firemen friends who like living in their cities’ downtowns and would frankly not like Seattle’s downtown because its so “sleepy” and as I’ve been told “closes way early”

  • stew

    Very interesting discussion. In other cities, required range of incomes per floor (sometimes maybe 1 or 2) and a family size requirement (i.e. one family size unit mkt rate or not) are not disincentives. I don’t think there should be unfair burden to anyone, but developers are interested in developing downtown because of either existing potential or future potential depending on when, what they are building and based on that the amount of $$ they can make.. Can’t blame ‘em for that, that is the purpose of what they do. So have additional reasons in terms of community,etc. But let’s say $$ are the baseline for all of them.

    Now this issue of developers “paying” for affordable housing. It seems that whenever this issue comes up its like it some sort of taxation or punishment for those doing well or something. Again, in other cities its more across the board. But its hardly a “punishment”
    And we are hardly talking about these “low-income units” going to people on Section 8 or something… Please.

    It’s like a market approach goes out the window if we are talking a “city”.If Seattle is just another market (which it really is to some of the larger scale developers) why shouldn’t it charge a premium to enter it, the premium being income/size requirements. Other cities do it with success. It certainly has the demand to justify it and a short supply of developable space. Why should it not do it for its most premium supply, downtown? Again, other cities have clued into this. I’m not advocating going overboard and gouging developers – and there are certainly various types of incentive programs for them. It just seems Seattle doesn’t “deal” or rather “negotiate” with developers on anything. Its very much a “whatever” attitude and gee, mr./ms. developer, we don’t want to piss you off. Developers are used to deals and negotiation; again that’s what they do.

    And because the city is whatever, it sometimes plays both sides of the fence. Remember how the city tried to blame a developer for not developing affordable housing in the arctic building? the city and council got all mush mouthed when asked “well, was it in the agreement?” um, well, um no. I felt bad for the developer because he didn’t do anything wrong, he simply changed his mind on a project that was in early development, really an idea. And EconE, not to call you out, but what you are saying about DINKs and soccer moms etc. is a bit 90s but I might be inclined to agree if Seattle or the region had sound transportation and infrastructure planning and development. It doesn’t.

    And trust me, I have teacher/firemen friends who like living in their cities’ downtowns and would frankly not like Seattle’s downtown because its so “sleepy” and as I’ve been told “closes way early”

  • Chris

    Another one for thought- theoretically, land values are residual of what can be built on them (value less cost and profit margin = land value). Therefore, so long as the developer is purchasing land from an owner, and isn’t the land owner at the time of development, the affordability requirement should not make projects more difficult to pencil, but instead should lower land values, if all other factors including profit margin are held constant.

    If margins are squeezed to the point developers will no longer do the project, the land values shoould drop to compensate over time. This is not apparent now, because rezoning just occurred within the last couple years and the market has been white hot, which has driven market values.

  • Chris

    Another one for thought- theoretically, land values are residual of what can be built on them (value less cost and profit margin = land value). Therefore, so long as the developer is purchasing land from an owner, and isn’t the land owner at the time of development, the affordability requirement should not make projects more difficult to pencil, but instead should lower land values, if all other factors including profit margin are held constant.

    If margins are squeezed to the point developers will no longer do the project, the land values shoould drop to compensate over time. This is not apparent now, because rezoning just occurred within the last couple years and the market has been white hot, which has driven market values.

  • Eric K

    It makes sense that developers who want to build higher than the current height limits allows should have to set aside some units for lower-income housing. As the article states, developers are getting a windfall from the upzone, and the city should only accept the negative effect of tall boxy buildings if it will create more housing for people whose jobs are essential to the city but can’t afford to pay for market rate housing.

    Developers are probably pretty receptive to it, since they can put the cheap units on the lowest floors and the market rate units on the floors that are above the old height limit. It will probably work better for apartments than condos, but I bet most of the lots that are currently zoned for 8 stories will be finished as apartments.

  • Eric K

    It makes sense that developers who want to build higher than the current height limits allows should have to set aside some units for lower-income housing. As the article states, developers are getting a windfall from the upzone, and the city should only accept the negative effect of tall boxy buildings if it will create more housing for people whose jobs are essential to the city but can’t afford to pay for market rate housing.

    Developers are probably pretty receptive to it, since they can put the cheap units on the lowest floors and the market rate units on the floors that are above the old height limit. It will probably work better for apartments than condos, but I bet most of the lots that are currently zoned for 8 stories will be finished as apartments.

  • mhays

    What about the positive effect of tall buildings? Less stress on roadways, busier sidewalks, less sprawl…

    As some people know I work for a general contractor. But this doesn’t so much affect how MUCH our industry builds, as where. How much “out” vs. “up”.

  • mhays

    What about the positive effect of tall buildings? Less stress on roadways, busier sidewalks, less sprawl…

    As some people know I work for a general contractor. But this doesn’t so much affect how MUCH our industry builds, as where. How much “out” vs. “up”.

  • Eric K

    I’m all for tall buildings that have an approachable base. Tall slender towers (for example the towers in Vancouver that have a base of townhomes) are different from 16 story buildings that are built out to the lot line (as a commercial building would be).

    My point was just that it’s reasonable for the city to make the upzone a quid-pro-quo. Double the height limits, yet developers only have to make a small (relative) increase in the number of below-market units.

  • Eric K

    I’m all for tall buildings that have an approachable base. Tall slender towers (for example the towers in Vancouver that have a base of townhomes) are different from 16 story buildings that are built out to the lot line (as a commercial building would be).

    My point was just that it’s reasonable for the city to make the upzone a quid-pro-quo. Double the height limits, yet developers only have to make a small (relative) increase in the number of below-market units.