Olympia committee reviews a $500K grant program to boost affordable housing 

The Olympia Finance Committee is tackling an affordable housing shortage with plans to introduce a $500,000 grant program and potentially prioritize the permitting process for such units.

City Manager Jay Burney presented a proposal to address the city's affordable housing crisis during a meeting on Monday, March 17.  

According to the 2021 Thurston Regional Planning Council housing needs assessment, 34,650 households in the county are housing cost-burdened, with 13,900 classified as severely cost-burdened. More than 7,000 of the affected people are Olympia residents.  

Burney said Olympia needs 5,800 housing units for households below the area median income (AMI) by 2045.  

Burney said local nonprofit housing developers, including Homes First and Habitat for Humanity, have consistently highlighted how Olympia's permitting and development standards significantly increase development costs, increasing barriers to producing affordable housing for low-income populations.  

The developers expressed their challenges at previous city council meetings, requesting assistance in navigating the complex permit process. Their advocacy prompted the city to develop an emergency ordinance, which the city council declared through Ordinance 7414 in December 2024.

The ordinance introduced strategic approaches to support affordable housing, primarily prioritizing affordable and middle housing projects in the city's permitting process.

Under the new guidelines, qualifying projects that meet the 80% AMI threshold will be expedited, moving to the top of the permitting queue and potentially reducing delay and associated costs for developers.  

Other strategies include: 

• Dedicate specialized Community Plan and Economic Development (CPED) staff to affordable and middle housing projects.  

• Give the city manager or designee authority (the CPED director) the ability to waive, postpone or exempt city processes for affordable housing.  

• Participate in 1033 Tax Exchange transactions with willing property owners to make guarantees for affordable housing.  

• A grant program for infrastructure investments. Burney explained that the city approved a rate increase of 1% for water and sewer utilities last year. This would set up a fund the city can use to offset infrastructure needs for affordable housing projects.  

• Grant program to exempt permits and other fees.  

Grant funding proposal 

Burney recommended seeding the grant permit fee program with an initial $500,000 from the Economic Development Fund, which currently has a $1.2 million balance. This would provide immediate funding for projects in the first half of the year.  

The city manager also proposed maintaining the fund between $500,000 and $700,000 annually, which would cover either one large project, like Lansdale Point or several smaller projects, such as Unity Commons or multiple accessory dwelling units (ADUs).  

"We felt, if we could get keep a fund in that range, that's enough. I think we set the fund we're proposing for a period of time. We will reevaluate as we move forward. We may come back to you and make a different recommendation a year from now, or two years from now, if we don't think that fund balance is adequate," Burney told the committee.  

To keep it funded, Burney recommended dedicating the first 10% of any city property sale proceeds to the fund unless it is already at the target level. Alternatively, the city council could decide to contribute 10% of all sales, regardless of the balance.  

Finance Chair Clark Gilman suggested drawing parallels to the Community Development Block Grants process, where the council periodically reassesses and sets broad priorities every few years. These priorities have previously focused on areas like transitional housing, downtown support and small business assistance.  

Gilman proposed the council provide guidelines about housing priorities. He highlighted the potential for affordable housing developers to create additional missing middle units on their existing properties, noting the relatively low number of ADU permits issued annually.

He sees an opportunity to support housing providers in converting existing properties or adding ADUs, which could be a strategic approach to increasing housing density and affordability.