Alan Gossett is trying to sell his blue Craftsman house, on a slope overlooking Madison Valley, for $875,000. But he fears the value of his home—and every other property on the block—is about to plummet. From the corner of Gossett's rear deck, he points to the plywood edge of a construction project that, he says, is "going to be a magnet for very sketchy people."

The project is unusual, for sure. In January, the city's Department of Planning and Development (DPD) issued a permit for two buildings near the intersection of 23rd Avenue and East John Street containing six town houses between them. However, inside each town house are eight tiny apartments (each with its own bathroom, apartment number, and door that locks) that share a common kitchen. So in the lot where Gossett expected 6 to 12 new neighbors, he is now bracing for 48.

The city code classifies this sort of arrangement as "congregate housing," but only if it houses nine or more people per unit—like the group boarding houses near the University of Washington. But because each "town house" has just eight units, the developer does not have to go through public review or notify neighbors.

Inside, the rooms are extremely small—ranging from 110 to 160 square feet—but when the building is complete in mid-July, the rents will be incredibly affordable: an average of $550 a month, including utilities, cable, and high-speed internet service.

"All I'm trying to do is provide housing that is affordable to people who need it," says developer Dirk Mulhair, 37, a partner at Calhoun Properties. Calhoun owns six completed projects and is building another 30-unit building in the University District. Some of those rooms (all including utilities) rent for as little as $400 a month. Although he acknowledges that run-down boarding houses are common near the university, he says his properties are different because they are not old houses that have been converted into apartments. Mulhair insists his tenants aren't "sketchy," either, but a mix of middle-class workers and students who simply want to keep their housing costs down and still live in the city.

Margaret Ryan, 55, a marketer for nonprofits, moved into one of Mulhair's properties a few blocks south of the construction site after separating from her husband in February. With just $500 a month to spend on rent, "I couldn't afford a conventional apartment," Ryan says. "This is the only thing that offered privacy and utilities at that price." Mulhair "runs the place right," she adds.

But neighbors behind the construction site, including one woman who asked not to be named, fear that the influx of new tenants will use up the neighborhood's limited parking, and they expressed concerns that this "town house" project could be the first in a wave of low-rent, high-density construction.

"Anyone who can scrape up enough money for month-to-month rent can live there," says Gossett. "I don't think most people want to live next to a boarding house with itinerant people living in it." He believes the city should ban the kind of housing that Mulhair builds.

DPD spokesman Bryan Stevens says the project complies with the city's rules for town houses, which don't always require public notice. "This project is unique in the sense that it's renting rooms within a town-house development," says Stevens.

Nonetheless, the project has raised eyebrows at City Hall.

"This ends up being a little bit of a surprise," says city council member Sally Clark, chair of the council's land-use committee. "It is more people than we envisioned living in this land area. That may or may not be okay." Clark's committee is currently revising the city's zoning rules for town houses, apartments, condos, and multiplexes—and on June 11, her committee will consider legislation that would change rules for congregate housing (an idea Mulhair opposes).

In a city where truly affordable housing is scarce—and where Mayor Greg Nickels recently proposed a $145 million levy to build more affordable housing—it's remarkable that Mulhair has found a way to build affordable apartments without any incentives or assistance at all. Unlike the luxury "four-pack" town houses that have been vilified for gentrifying once-affordable neighborhoods, Mulhair's projects enable lower-income people to stay in the city.

Mulhair says: "People want big, beautiful houses with white picket fences, but the reality is people like Margaret, who have a limited amount of money to spend. Why should she be forced to live in Bothell or South Seattle?" recommended