Contents:
Purpose
The purpose of this research is to describe a program of local zoning policies that support and encourage small-scale incremental development as a case study of Bellingham, Washington. This project seeks to expand opportunity and access to entry-level homeownership for low- and middle-income households through product design & policy recommendations, within the framework of existing market mechanisms for “fixer-upper” sweat equity.
Study Area
The study area focuses on the City of Bellingham, WA, including designated urban growth areas and unincorporated Whatcom County properties with a “Bellingham” address.
Project Description
Quantitative analysis conducted for this field study includes a baseline review of housing inventory, household demographics, and labor force data. This baseline analysis is compared to reports published by Bellingham Planning staff as part of the comprehensive plan update process and City Council Meeting Agenda Packets. Quantitative analysis conducted also included an online community survey focused on housing experiences and preferences.This field study is an inquiry into designing land use and municipal policy to encourage the production of entry level homeownership opportunities in Bellingham, Washington. This study emphasizes affordable homeownership based on recommendations in the Final Report of the Washington Department of Commerce Homeownership Disparities Working Group and the American Planning Association’s “Planning for Equity Policy Guide”. The frameworks utilized in this study originate from a comprehensive literature review, an in-depth analysis of several case studies in North America, and insights from the Incremental Development Alliance. Additionally, I incorporated recommended changes to Bellingham municipal code, as presented in 2022 by the Kulshan Community Land Trust and the Whatcom Business Advisory Council. Merging local policy suggestions with policies from my case studies yielded a preliminary draft of proposed policy amendments, that served as a starting point for stakeholder interviews. The culmination of this research is a comprehensive set of local policy adjustments, curated with feedback and continuous dialogue with stakeholders and community allies, intending to bolster the production of entry-level homeownership through urban infill development in Bellingham, Washington.his field study is an inquiry into designing land use and municipal policy to encourage the production of entry level homeownership opportunities in Bellingham, Washington. The emphasis on affordable homeownership arises from recommendations within the Final Report of the Washington Department of Commerce Homeownership Disparities Working Group and the American Planning Association’s “Planning for Equity Policy Guide”. The frameworks utilized in this study originate from a comprehensive literature review and an in-depth analysis of South Bend, Indiana, findings from other comparable small- to mid-sized cities in North America, and insights from the Incremental Development Alliance. Additionally, I incorporated recommended changes to Bellingham municipal code, as presented in 2022 by the Kulshan Community Land Trust and the Whatcom Business Advisory Council. Merging local policy suggestions with policies from my case studies yielded a preliminary draft of proposed policy amendments, that served as a starting point for stakeholder interviews. The culmination of this research is a comprehensive set of local policy adjustments, curated with feedback and continuous dialogue with stakeholders and community allies, intending to bolster the production of entry-level homeownership through urban infill development in Bellingham, WA.
Quantitative Analysis
Quantitative analysis conducted for this field study includes a baseline review of housing Inventory, household demographics, and labor force data. This baseline analysis is compared to reports published by Bellingham Planning staff as part of the comprehensive plan update process and City Council Meeting Agenda Packets. Quantitative Analysis conducted also included an online community survey focused on housing experiences and preferences.
- Baseline:
- Labor force & wage data from Bureau of Labor Statistics
- Household demographics from Census/American Community Survey
- Housing inventory from Tax Parcel Data, COB GIS Portal
- Comparison:
- Reports Published by Bellingham Planning Staff
- City Council Meetings & Agenda Packets
- 20-year housing development goals under HB 1220 “Housing for all economic sectors” methodology report.
Qualitative Research
Qualitative research for this field study included a series of interviews with key stakeholders. Guided by input from stakeholder interviews, I then conducted a policy review of Bellingham Municipal Code and affordable housing incentive programs. The 2023 Washington State Legislative Session passed a historic package of bills intended to stimulate middle housing production, the most relevant of which are included in the policy review of this research.
Summary of Key Findings
Key Findings from Data Analysis:
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- A household must be earning more than 200% area median income to afford current median home prices in Bellingham. At time of publishing (Winter 2024), median home price in Bellinghm, WA was $635,981, a purchase price which requires earning $120,000 per year according to standard online mortgage calculators.
- The majority of renters earn below 120% of Area Median Income, while the majority of homeowners earn above 120% of Area Median Income. This represents a stark socioeconomic split between renters and property owners.
- Single Family Homes:
- 50% of all housing inventory in Bellingham is made up of single-family homes, but the land that these homes occupy takes up nearly 75% of residentially zoned land.
- 75% of single-family homes in Bellingham are owned-occupied.
- Multifamily Homes:
- 30% of all housing inventory in Bellingham is apartment buildings of 5 or more units.
- 20% of all housing inventory is made up of a combination of condominium, duplex, triplex, fourplex, and mixed-use apartments (urban village) housing types.
- Only 9% of all multifamily housing units in Bellingham are owner-occupied.
- 25% of all (presumed) rental unit owners live within the city of Bellingham.
- Out-of-town property owners hold 6,320 multi-family housing units, and 1,302 single family homes.
To meet the goals of the Housing for All planning tool, 52% of all new housing units need to be affordable to households earning less than 50% AMI, and 25% need to be affordable to households earning less than 30% AMI.
Key Findings from Online Survey:
- Large apartment buildings are the least preferred form of housing, after informal and makeshift structures.
- Renters experience significantly higher fear of housing displacement than homeowners.
- There is widespread frustration and dissatisfaction with property management business practices.
- Respondents overwhelmingly prefer to rent from an individual property owner who manages the rental unit themselves but does not live onsite.
- Even so, this type of rental arrangement is not more secure than any other rental arrangements.
- As many as 25% of existing homeowners want to do some kind of development on their property, but either lack funding for the project or feel that the permitting processes are a significant barrier.
- Nearly everyone wants more options for accessory dwelling units, co-housing, clustered housing courts, and small apartment buildings – all forms of Middle Housing.
Key Findings from Stakeholder Interviews & Policy Analysis, Combined:
- Barriers to Housing Development:
- PERMITTING: Time permitting process adds to overall project timeline, as well as the level of plan detail required to be submitted for building permits.
- BUILD COSTS: All builders are struggling to produce housing units at prices that are affordable to low- and middle-income households and also pay their staff and crew a high enough wages to afford local housing prices.
- PLUMBING: Cost of lateral sewer connections. Fee to upgrade water meter for additional fixtures.
- FIRE SAFETY/Large Vehicle Utility Services: Fire safety requirements such as sprinkler systems and turnaround access for large fire/ambulance/garbage vehicles often add such high costs and physical space requirements to projects that infill development cannot be built, especially for small-scale and owner-occupied infill projects.
- ENERGY CODE: As energy efficiency requirements for homes are increased, overall housing construction costs are also increased. For these increases to energy efficiency requirements to be equitable, they must be paired with funding for low-income housing development.
- ZONING/CODE: Zoning and Municipal Code definitions do not reflect adaptive re-use or the housing forms that residents want to build.
- FINANCING: Lack of access to mortgage and finance options for co-buying and multi-party land ownership.
- Why Aren’t We Building More Middle Housing?
- Most residential zones where infill is needed are dominated by owner-occupied single-family homes. The current municipal code and affordable housing incentives prioritize industrial, commercial-scale development practices that require a property to be purchased, fully re-developed, and then re-sold to new occupants. These funding programs are not accessible to small-scale developers or owner-occupied infill development.
- As a structure type, and under existing zoning restrictions, middle housing does not fit into large-scale housing developers’ standard business models and does not offer a high enough return on investment compared to building types currently being constructed.
- Existing municipal code limits opportunities for single family homes to be converted into multifamily, cottage court, co-housing, and other forms of co-operative shared housing
- Federally backed mortgage products still prioritize single family homes and individual or nuclear family home buyers. These mortgage products exclude all forms of co-buying and co-operative ownership, which are key tactics for existing community members to develop middle housing typologies for themselves to live in.
Recommendations
The best way to make Middle Housing more economically viable is for it to be developed by and for the people who are planning to live there, and to allow conversion of existing single-family properties into clustered communities and pocket neighborhoods.
Remove Barriers & Create Incentives
- Revise the existing Bellingham Municipal Code (BMC) definition for “co-housing” to allow developments of less than 5 units and “cluster short subdivision”.
- Add definitions for co-living and cooperative housing to municipal code.
- Create funding incentives for the remodel/redevelopment of single-family homes for adaptive re-use.
- Revise BMC to allow small lot subdivisions.
- Encourage condo ownership of ADUs and Multifamily buildings less than 12 units, per SB 5058.
- Establish a revolving loan fund for strategic acquisition of bottom-market properties and buildable lots.
- (Whatcom County) Use Economic Development Investment Fund (EDI) to fund pre-development of infill lots with electrical, plumbing and sewer connections for affordable housing developments.
Establish a Public Utility Housing Developer to Preform the Following Functions:
- Acquire, De-commodify & Rehabilitate Multifamily Buildings that qualify as “Naturally Occurring Affordable Housing.”
- Acquire buildable infill lots and pre-develop them for desired density using Economic Development Investment funding (and other affordable housing funding sources) to install water, sewer, and electrical services, groundwork, and foundation.
- Support existing homeowners and co-buyer groups to buy residential property for development, and to convert Single-Family Homes into Co-Housing developments.
- Provide administrative oversight for small-scale developers to access affordable housing funding subsidies.
- Operate as rental management service for property owners of existing rental units to access rebates and incentives in exchange for providing below-market rent.
- Partner with tenant advocacy organizations to establish ethical standards and business practices for residential property managers and rental unit owner/operators.
- Expand access to a greater variety of ownership models, including all forms of Limited Equity Cooperatives, Condo Ownership, and Private Co-Buying.
Simple Small Things First
A pivotal strategy to boost owner-occupancy prospects for low- and middle-income populations is their early integration into the property development process. This approach positions low- and middle-income populations as development partners rather than consumers or clients. With this re-framing, the remodel and redevelopment of existing single-family homes is a primary opportunity for rapidly creating new housing units. This research proposes a localized practice with an “all-hands-on-deck” approach to affordable housing development, with four clearly defined development pathways.
- One, partner directly with existing single-family homeowners to build subsidized housing units on their properties, with an affordability covenant attached to the resulting unit.
- Two, enable multi-party co-buying of existing single-family homes, to be re-developed by the occupants to create middle housing for themselves.
- Three, strategically acquire bottom-market residential and infill properties for re-development as permanently affordable housing.
- Four, expand mortgage assistance and financing options for households earning 50% – 120% of area median income.
For all four of these strategies, the existing legal structures of a co-housing condo association can be used to enable affordable homeownership opportunities. The condoization of detached accessory housing units can be used to affect a pre-emptive lot subdivision, in anticipation of state-level reform to legalize small lot subdivisions. This research also finds that over long-term investment timelines, it is more important to subsidize land acquisition and installation of utility services than to subsidize construction of the building itself. Additionally, expanding the overall inventory of residential property that is owned in public trust, such as the community land trust model, increases opportunity for retention and recapture of public housing subsidies in tandem with affordable homeownership and community wealth building.
Adoption of recently passed state legislation, specifically House Bills 1220, 1110 and 1337, takes a considerable step towards enabling affordable housing development and entry level home ownership opportunities. But the 2023 package of bills focuses mainly on reducing zoning and land use barriers to the architectural forms of middle housing. Additional incentives, funding sources and financing mechanisms are needed to ensure that the housing units produced will be affordable to low- and middle-income households. Bellingham can and should do more at the local level to incentivize the development of affordable and entry level homeownership opportunities through infill development. The City of Bellingham has existing policy frameworks that reflect best practices and innovations identified in the literature review and case studies of this research, but these existing policies need reform and revision to be accessible to small-scale developers.
The primary issue that restricts the strategies described in this research is the availability of financial products to support multi-party co-buying of land and property. This research focuses mainly on municipal land use and zoning policies, and the availability of financial products is beyond the jurisdiction of local municipal governments. However, there are several pro-active measures that local municipalities can implement within zoning and land use policies to encourage and enable the financial industry to accommodate multi-party co-buying. There are also measures that local municipalities can take to pro-actively lobby for state and federal level reforms, to allow subsidized down payment assistance and home repair funding to be more accessible to co-living and co-owned households.
Implementing such reforms at the state and federal level would be the fastest way to spur corresponding actions and mortgage products within finance industries. Within financial and real-estate industries, the biggest concern for expanding the practice of co-ownership and co-buying is the need for a clearly defined legal structure to support individual co-owners to buy in-and and buy-out of co-owned properties, without triggering refinance of the primary mortgage. The legal structure of a condominium association, as currently embedded in the Bellingham Municipal Code Definition for “CoHousing”, is the most robust existing legal structure to allow for this. However, there are several other structures to support cooperative co-ownership of residential properties that can and should be expanded alongside the condominium structure, including limited equity cooperatives, and tenants in common ownership structures.
