Average Seattle incomes aren't keeping up with rising housing costs and home ownership and rental opportunities are moving beyond the reach of wageworkers.

That fact prompted Mayor Greg Nickels to unveil his new housing program last week, which aims to put more homes within reach of Seattle's working class. Nickels' proposal, called "Seattle Homes Within Reach," will expand an existing multifamily tax exemption program for developers and landlords to more neighborhoods.

"We want to make our city a wonderful and compelling place to live, work and raise a family, and that starts by creating opportunities for people of all income levels to find decent and affordable housing," Nickels said in a statement. "Whether you are a police officer, a grocery worker, or a nurse, if you work in Seattle, you should be able to live in Seattle."

The city defines "affordable" as being "something that meets an individuals needs," said Rick Hooper, policy director for the city's Office of Housing. In general, a homeowner should be spending no more than 40 percent of their monthly income on housing costs, and for renters, no more than 30 percent.

The median income in King County is about $50,000 for a single person household, according to Adrienne Quinn, director of the housing office.

The city looks at providing housing at all levels of the workforce, Quinn said, but by law, subsidies stop at about 80 percent of median income, or around $40,000. Under the state constitution, no government entity can gift or lend money to anyone with the exception of the "poor and infirmed," a law Quinn called "archaic."

The housing department spends about two-thirds of its budget on housing for people making $20,000 a year or less. About one-third is targeted to the $22,000 to 42,000 income levels.

Someone making 80 percent of median could afford a $1,090 unit or purchase a home in the low $100's, said Hooper. But in general new construction prices are much more than that.

New condo construction went up 15 percent to17 percent since the first of the year. Hooper said an individual would have to be earning about 120 percent of median income, or $65,000 to $75,000, to buy a medium sized condo in today's market.

Rents have increased by about 14 percent in the last two years, consistent with year's prior, said Hooper. One-bedrooms in Ballard rent at an average of $790 and two-bedrooms go for about $850, according to realtors here.

"We are fast moving toward $1,100 a month studios," Hooper said at a recent Seattle City Council forum on affordable housing. Several major developers in Seattle were invited to discuss how they could make new homes and rentals less expensive.

"It's one of the biggest issues the city is dealing with now," said City Council member Tom Rasmussen. Rasmussen, who chairs the housing, human services and health committee, asked developers what the biggest challenge was in creating affordable homes.

Overwhelmingly, developers said escalating construction costs, high land prices and building parking stalls were the largest contributors to the rising cost of new housing.

Hal Ferris, a partner of Lorig Associates, said land prices have increased by 75 percent during the last few years. One-bedroom apartments that used to rent for $1,100 are now $1,600, also thanks to a dramatic rise in building costs.

"The market has gone past the income level substantially," he said.

It costs on average between $35,000 and $45,000 to build one parking stall. Reducing the number required for new development would have a "huge impact" on reducing the cost of units, Ferris said.

The city approved a plan last year that made providing parking spaces optional for new development in denser areas of the city, excluding residential neighborhoods.

Maria Barrientos, principal of Barrientos Real Estate Development, said developers get a bad rap for being greedy, but in reality most would rather units be more affordable because it makes them easier to sell.

"The majority of developers care about affordable housing, communities and doing the right thing..." Barrientos said.

The mayor's new housing incentive plan, which still needs council approval, would provide a 12-year tax exemption on the residential portion of new apartment buildings in which 20 to 25 percent of the units are priced for people earning up to $49,000 or families who earn around $62,000.

The monthly rent for an individual under the plan would be no more than about $1,170, between $50 and $250 below market rate, according the mayor's office. Only single-person households earning up to about $38,000 qualify for the current program.

Condo developers can be eligible by offering units affordable to individuals and families earning up to $74,760 a year for a two-person household. The income limits vary according to household size.

The Seattle Displacement Coalition, a housing advocacy group, called the mayor's plan "outrageous," saying it doesn't address the real housing problem in Seattle - low income. Instead, the mayor's program would provide millions in tax breaks to developers who set aside a small portion of units for those earning above what the average income tenant can afford, according to the coalition.

The group reports that vacancy rates are at an all time low and apartment-to-condo conversions have eaten up 4,700 rentals since 2005, contributing to a 3 percent net decline of low-income rentals.

But Quinn said the Seattle Housing Levy and existing incentive program have so far created thousands of residential units for those earning between zero and $45,000 a year.

The current tax-break program isn't currently available to developers building here, but Nickels plan would expand the new program to downtown Ballard, as well as to all urban villages.

"It should be everywhere where development is happening," Quinn said.

However, Ferris said the current program has been a "negative incentive" for developers. The amount of revenue given up is more than received, "so very few developers take advantage of that tool today," he said.

Liz Dunn, principal of Dunn and Hobbs, said the incentive has "never penciled out" for her projects either. She suggested that some such programs "have more political value than functional value."

"I don't want to have to charge the rent I'm charging..." Dunn said. "It's important that we do the math so that it works."

Rebekah Schilperoort may be reached at rebekahs@robinsonnews.com or 783.1244.