Olympia proposes emergency declaration and strategies to address affordable housing crisis

At a Land Use and Environment Committee meeting on Thursday, city staff presented a proposal for an emergency declaration related to affordable housing, which aims to implement a series of strategies to increase the supply of affordable and middle housing units.

Jacinda Steltjes, the Affordable Housing Program manager, discussed the challenges in developing affordable housing in Olympia.

Developing affordable housing is expensive. Steltjest said the developers noted that the required significant infrastructure improvements for many affordable and middle housing projects are driving up expenses.

In addition, navigating the city's permitting process can take time and effort, even for experienced developers. Steltjes said the longer the permitting takes, the greater the overall costs of bringing the units online.

Olympia's partner organizations, developers, and city departments have expressed the need for more tools and flexibility to encourage and support the development of affordable and "missing middle" housing.

Steltjes emphasized that the need for affordable housing far outpaces the current supply, with development costs being a major barrier.

The proposed solution is adopting an emergency declaration to affordable housing that includes strategies that lower development costs, guiding to navigate the city's permitting system,

She presented seven strategies for the city to consider, split between short-term and longer-term approaches.

Steltjes recognized that this may require additional training or education for existing staff taking on the role. However, the benefit would be that developers have a clear point of contact who can help navigate the process, potentially getting units online faster.

The short-term strategies include:

• Prioritize affordable and middle housing projects in the city permitting process. This would provide clear direction to staff on prioritizing these types of housing developments. Affordable and middle housing projects would be moved to the front of the permitting queue. This could mean some non-housing projects may experience longer permitting timelines. The benefit would be decreased holding costs for developers of affordable and middle-income housing.
• Specialized Community Planning and Development (CP&D) staff is dedicated to affordable and middle-housing projects. The role of the specialized staff would be to guide developers through the permitting processes, ensuring they understand requirements and timelines. The goal is to provide more support and follow-up to help affordable and middle housing projects move through the system more quickly.

Steltjes recognized that this may require additional training or education for existing staff taking on the role. However, the benefit would be that developers have a clear point of contact who can help navigate the process, potentially getting units online faster.

• Participate in 1033 Tax Exchange transactions with willing property owners. Steltjes explained that this is a transaction where the city would identify a property for public use, essentially using eminent domain to accomplish it. However, this would only be pursued if the property owner approaches the city voluntarily, expressing interest in selling the property.

Steltjes said that instead of the property going to the open market where it could potentially convert to market-rate units, the city would facilitate a sale to an affordable housing provider. This would allow the existing affordable units to remain affordable.

Steltjes noted that this type of transaction has been reviewed by the city's legal team, and they are comfortable with the city participating in this process.

• Give CP&D, Public Works, and Fire authority to waive or alter city processes for affordable and middle housing projects. "The goal is to give developers the flexibility to complete a project that still meets the city's objectives without strictly adhering to a specific code requirement."

Steltjes acknowledged that this would require defined guidelines to provide staff with clarity on when and how this flexibility could be applied. The city code would need to be revised to permit flexibility. The intent is to use this authority to help move affordable and middle housing projects forward that are facing issues in the permitting process.

Long-term strategies

• Adopt revised Engineering Design and Development Standards (EDDS) for affordable and middle housing projects. Steltjes explained that the city wants to explore adopting EDDS that specifically apply to these projects.

The goal is to increase the variety and supply of these housing types by potentially relaxing certain standards, while still ensuring appropriate safeguards. Steltjes noted this would require careful analysis to avoid unintended consequences when modifying individual standards or stacking multiple changes.

• Establish a grant program to provide financial assistance for needed infrastructure. The city is proposing its own grant program to supplement the state's Connecting Housing to Infrastructure Program (CHIP), which has provided grants to help developers with infrastructure needs.

Steltjes explained that many affordable and middle housing developments need to be more stable or able to move forward due to the high costs associated with required infrastructure improvements, such as water and sewer lines, sidewalks, and other site work.

The grant program would help cover these infrastructure costs for housing projects.

Steltjes noted that the city has had success with the CHIP. "However, it's also very limited in terms of the amount of funding at the state level that is made available. So, the staff thought this program would be structured after CHIP to achieve the same goals, but something that we would administer ourselves."

The potential funding source discussed for this local grant program was a 1% increase in utility rates, which Steltjes said could generate around $295,000 per year.

Steltjest said that more analysis is needed to determine if this would provide enough funding to support the infrastructure needs of affordable and middle housing projects. She added that this grant program would likely be structured as a "first come, first served" model, since the city may not have enough funding to assist every project.

• Waive permit and other fees. Steltjes discussed waiving or providing partial exemptions on permits and other development fees for affordable and middle housing projects.

She explained that these fees can add up significantly and contribute to the overall high costs of developing affordable housing. She noted that these soft costs ultimately get passed on to residents through higher rents.

Steltjes acknowledged that the city must carefully consider the appropriate level of fee waivers or exemptions. A full exemption would provide the most financial relief for developers but also impact the revenue used to fund city staff and services.

Steltjes cited the Family Support Center's The Landing project, which has 62 affordable units. The project received an 80% exemption on fees, but even with this exemption, it still incurred over $500,000 in fees.

In the slide Steltjes provided, the Landing project took eight financing sources—local, state, federal, private, developer's funds, and housing vouchers—to develop and six years to complete.

"This is a project that came to our Regional Housing Council and got regional funding at least twice, plus a CHIP grant because costs were so expensive," Steltjes said.

The committee expressed support for the proposed strategies and the concept of an emergency declaration related to affordable housing.

They also agreed that the staff should bring the proposed strategies and emergency declaration directly to the full city council for consideration and discussion.