Olympia’s ‘Missing Middle’ campaign is missing the point

The city of Olympia adopted the “Missing Middle” ordinance in November 2018. The ordinance would allow greater flexibility for adding housing units through more units per area and the ability to add “accessory dwelling units” or ADUs.

But a State Growth Management Hearings Board decision ruled that the city improperly adopted the ordinance. This delay in implementation gives the city time to reconsider this ordinance to more effectively address the issue of in-filling.

The concept of in-filling makes sense in a variety of ways. Centralizing development to the core urban areas lessens the impact of expanding infrastructures caused by sprawling growth. Sprawl is inefficient and expensive. For example, transportation systems must develop and maintain miles of additional roadway to serve a widespread population.

Nearly 40 years ago, facing double-digit population growth, empowered by the Growth Management Act and adoption of a “growth must pay for growth” policy, Olympia increased development regulations and imposed significant impact fees and other governmental costs. Today, impact fees are as high as $14,000 per dwelling unit in Olympia. Other mitigation and regulatory costs add to that. Unfortunately, these costs and regulations discouraged building in Olympia.

Is the “Missing Middle” really a crisis? Does the pending ordinance provide a real solution? Is there a better way to provide affordable housing without putting the character of neighborhoods at risk?

The University of Washington Runstad Center for Real Estate Studies has developed a Housing Affordability Index. This index tracks the ability of a middle-income family to carry the mortgage payments on a median-price home. The affordability is a function of three main data points: average family earnings, median house price and interest rates. Affordability changes through the inevitable cycle of these economic forces.

At the peak of the housing bubble in 2007, increasing prices resulted in much lower affordability. As a result of the Great Recession, prices declined with decreased demand and affordability rose. Since 2013, with rising prices, affordability has declined. Concerning? Yes. A crisis? No.

According to the Runstad Affordability Index, Thurston County remains more affordable than the counties associated with the Seattle/Tacoma/Everett metropolitan area (King, Kitsap, Pierce, and Snohomish) and has become slightly more affordable than Lewis County.

Nor will the Missing Middle ordinance solve the affordable housing issue. First, Olympia remains the most expensive area to develop new housing in the county. Land is more expensive and the regulatory system and government costs are higher than other cities and the unincorporated county. Only affordable development can sustain affordable housing.

Second, the ordinance is limited to only small incremental housing additions. While the ordinance may provide opportunity for a few successful additions of affordable housing (a few houses on empty lots, multi-family units replacing single-family homes and backyard ADUs), the impact will not be sustainable and may irreparably impact the character of established neighborhoods.

Much of the limited supply of housing is the City Council’s own doing. Pushed by residents, the city purchased the LBA Woods from D.R. Horton, a national home builder. D.R. Horton had proposed the creation of a 400-home development there. Had those 400 homes been allowed to reach the market, housing affordability would have significantly increased. While this is a dramatic instance of lost housing opportunity, it is by no means the only example.

The city needs to embrace and encourage in-fill development on the raw land within its urban area. The city should provide reasonable regulations and charge reasonable fees for development. These costs need to be ratcheted down to allow the construction of affordable housing. High-cost development cannot produce low-cost housing.