No permitting fees for affordable housing developers in Olympia? Officials discuss proposal
City of Olympia staff are working on a proposal that would dedicate funding to exempt affordable housing developers from permitting and impact fees related to construction.
But first they need to resolve concerns about big developers depleting a program that could make the biggest difference for a nonprofit’s chances of providing affordable housing.
On Monday, City Manager Jay Burney provided the city Finance Committee with context for why staff are working on this proposal.
He said, according to 2021 Thurston Regional Planning Council data, there were more than 34,000 Thurston County households identified as being housing-cost burdened. He said of those, about 14,000 are severely cost burdened — and more than half of those severely cost burdened are Olympia residents.
“We need about just short of 6,000 units of housing for households below AMI by 2045, so there’s a big need to build affordable housing here in Olympia,” Burney said.
AMI, or Area Median Income, represents the median household income for a specific geographic area, meaning half the households in that area earn more than the AMI, and half earn less. Governments use AMI to determine eligibility for affordable housing programs.
Burney said what spurred the conversations among city staff was hearing from local nonprofit housing developers who said Olympia’s permitting and development standards increase construction costs significantly, making it more difficult to increase the supply of affordable and low-income housing.
The Olympia City Council passed an emergency ordinance in December declaring an affordable housing emergency. The ordinance outlined a number of strategies for the city to take to address the lack of affordable housing.
It prioritized affordable and middle housing in the city’s permitting process. Burney said as those projects come forward, they make their way to the top of the permitting queue if they meet an 80% AMI threshold.
The ordinance also gives the assistant to the City Manager the authority to waive, postpone or exempt city processes for affordable housing development.
There’s also a 1033 Tax Exchange transaction opportunity for willing property owners. Burney said it basically allows property owners to go through a process that would guarantee a property is held for affordable housing.
Burney said the city has dedicated staff to help developers navigate the permitting process and make sure they have access to all the incentives the city has to offer.
There were two grant programs included in the ordinance, one involving infrastructure investments and the other involving permits and impact fees. Burney said the infrastructure investments program was baked into this year’s water and sewer budget as an additional 1% rate increase, which will help offset infrastructure costs for affordable housing projects.
He said an example would be an affordable housing project that needs to extend sewer and water systems. Those types of infrastructure issues have costs that can entirely outweigh the housing project itself. Grant funding can help offset these types of project barriers.
Funding to help exempt affordable housing developers from all or some permit costs and other fees hasn’t been identified yet.
Burney said the proposal that will go in front of City Council is to seed a permit fee grant program with $500,000 from the Economic Development Fund’s $1.2 million fund balance. After that, he proposed keeping the grant fund in the range of $500,000 to $700,000 a year.
Burney said that’s enough money to pay for one large project’s fees, or several small- or medium-sized projects. He said an example of a large project would be the Lansdale Pointe project, which is a proposed 162 units of affordable housing.
The program would stay funded either through the sale of city property or just as needed. Burney said the first 10% of the sale of any city property could be dedicated to the fund unless the fund is within its established target funding range.
“So, for example, if the fund already has $700,000 in it, you may not need to dedicate the full 10% of any sale to this fund,” Burney said. “You could also just say, ‘We want to keep that 10% going into this fund in perpetuity, regardless of what the amount is.’”
He said the city doesn’t sell property all the time, and it sometimes sells properties for $1 to make affordable housing projects happen.
The city could also monitor the program and add funding through its normal budget process.
Burney said there may be some criteria for receiving funds to fully cover fees, or just part of them. This may help some larger projects and smaller ones at the same time. Staff also might consider implementing a loan system for larger developers that are probably able to take advantage of other funding sources.
Jacinda Steltjes, Affordable Housing Program manager, said she worries that if the program has too many facets to it, it may slow the building process down rather than speed it up as intended.
She said the projects that really need this funding the most are smaller ones, typically backed by local nonprofits.
“They’re typically looking at some sort of middle housing. The permit fees are the thing that could kind of make or break it,” she said. “So certainly, if we open it up to everyone, I’m sure larger projects like Lansdale will want to take advantage of it. So I think maybe Jay and I have some more work to do to try to figure out, how do we get this to those that need it most?”
City Council member Clark Gilman said he recently pulled ADU permit applications from last year, and there were only seven.
Susan McLaughlin, community planning and economic development director, said the city could have dedicated staff to help expedite the permitting process so smaller developers are less likely to fall behind due to bureaucracy.
Gilman said once staff draft some guiding principles for establishing the new program, it will go to the City Council for approval.
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