Policy Review

What are short-term, middle-term, and long-term policy and zoning changes that local governments can make to support small-scale incremental development?

Guided by input from stakeholder interviews, I conducted a policy review of local municipal code and affordable housing funding programs. The set of documents I looked at were specific sections of Bellingham Municipal Codes that stakeholder input had identified as primary barriers to affordable infill development. The review of Bellingham Municipal Codes looks at the specific sections of code that stakeholders had identified as primary barriers to affordable infill development. I also reviewed the Whatcom County Economic Development Investment Funding Program, based on the policy recommendations from the Business Advisory Council. Finally, I did a broad overview of all middle housing bills passed in the 2023 Washington State Legislative Session.

A product of this policy review, I created a summary matrix of the key insights from reviewing policies identified from stakeholder surveys. Referencing the list of key strategies and best practices identified through my literature review for development without displacement, equitable planning, and increasing production of entry-level affordable homeownership opportunities. The resulting summary, shown in Table 12 at the end of this section, provides a roadmap for the implementation of these best practices within the city of Bellingham.

Bellingham Municipal Codes

The current language in the Bellingham Municipal Code prohibits the conversion of existing single-family lots into cohousing developments or cluster short subdivisions. Consequently, this restriction severely limits the overall capacity of the development market to meet the demand for this housing type. Despite its popularity, there have been fewer than three developments within this category in over 50 years. Additionally, existing restrictions around co-housing, as defined in Bellingham Municipal Code, hamper small-scale developers from producing such housing, as the required lot size makes this housing type cost-prohibitive to develop.

BMC 20.08.020 – Definitions

“Cluster short subdivision” means a subdivision into four or fewer lots in which standard requirements may be modified in order to provide desirable open space, recreational opportunity or achieve other significant public benefits without increasing the overall density of dwelling units per acre except as provided in BMC Title 23 and the applicable neighborhood subarea pursuant to zoning tables in Chapter 20.00 BMC.

“Cluster subdivision” means a subdivision into five or more lots in which standard requirements may be modified in order to provide desirable open space, recreational opportunity or achieve other significant public benefits without increasing the overall density of dwelling units per acre except as provided in BMC Title 23 and the applicable neighborhood subarea pursuant to zoning tables in Chapter 20.00 BMC.

“Co-housing” means a residential development on one contiguous parcel of land, designed by and developed for members of an existing co-housing organization in which members of the co-housing organization will own and reside. A co-housing development shall consist of at least five residential dwelling units and shall be operated as a condominium, co-op or similar form which allows for individual ownership of each dwelling unit. It shall also include one or more common structures containing a shared kitchen, library, computer room, laundry, greenhouse, play area or other common residential facilities for use by the residents.

“Co-housing organization” means a legal development entity, during development and construction of a co-housing project, that transforms into a legal residential association upon completion of the development and subsequent occupation of the dwelling units. Membership of the association is open only to owners of dwelling units in the development.

BMC 20.29 – Incentive Program For Innovative Affordable Homeownership Projects

              As currently written, this program requires income qualification of occupants in the units produced, much like income qualification required for Low Income Tax Credit Subsidies. The program is not designed for, nor is it able to accommodate, small scale developers and it cannot provide funding for small individual development projects. Furthermore, the State of Washington has strict laws in place that prevent the expenditure of public funds on the enrichment of private property. In order to make this funding available as small grants for targeted support on the most expensive aspects of installing utility service to a housing unit build site, Bellingham and Whatcom County would need an intermediary entity, to act much the way the Chattanooga Neighborhood Enterprise and the South Bend Neighborhood Development Teams operate – providing a non-profit institutional bridge between large-scale funding sources with complex administrative requirements, and the small-scale housing developers, first-time home buyers, and existing owner-occupants who want to build middle housing infill units.

Whatcom County EDI Funding

The Port of Bellingham (operating under Whatcom County jurisdiction) has an existing program to support the development of affordable workforce housing, titled “Infrastructure Improvements for Affordable Workforce Housing Program”. The EDI Affordable Workforce Housing program defines “long-term” affordability as a minimum of 20 years supported by a deed restriction that requires the housing unit to be rented or sold to persons with incomes at 120% AMI and lower. 

Guidelines for Requesting the Use of Whatcom County Economic Development Investment (EDI) Grant Funds For Public Facility (Infrastructure) Costs Related to Construction of Low Income and Workforce Multi-Family and Single-Family Homes

Infrastructure Improvements Affordable Workforce| Whatcom County Official Website, https://www.whatcomcounty.us/3913/Infrastructure-Improvements-Affordable-W

“Regarding EDI funding for infrastructure and infill projects; as long as the infrastructure is owned by a public agency and has a benefit to the public, the funding is available for that purpose now.”

Don Goldberg, Port of Bellingham Director of Economic Development, from email correspondence

The biggest challenge to enacting the policies from the case study of South Bend, Indiana that subsidize the pre-development costs for installing in-ground utilities, is Washington State’s strict controls that public funds for housing subsidies can only be spent on property and infrastructure that is owned by a public agency. This limitation could be worked around by the formation of a public utility agency or community land trust entity dedicated to the purchasing bottom-market real estate, for the purpose of re-developing into pocket neighborhoods, small cluster housing and co-housing developments, as well as remodeling existing oversized homes or just building new apartment units on these larger lots.

The Port of Bellingham’s EDI Funding is currently an under-utilized funding source for workforce and middle-housing development. Used strategically as a small-grant program for the cost of lateral sewer hookups to new infill development lots, similar to South Bend’s rebate program, the public can realize a high return on the investment of public funding. Under the institutional structure of a supporting public utility housing developer, an opt-in housing affordability covenant could be created, where the affordability condition is attached specifically to the attached or detached housing unit the funding helped to build. Such an affordability covenant could allow state and federal funding to be spent for small-scale affordable housing units. This would also allow existing single family home owners who may want to participate in infill development, but lack the funding, time, or know-how to take on their project, and to host a housing structure that would be owned and operated as an affordable housing unit by the local land trust.

Washington State Legislature from 2022 and 2023 Legislative Sessions

The past two years, WA state has passed several bills dedicated to allowing the production of more affordable houseing and more missing middle infill housing, detailed below in Table 11. This recent work at the state level has preempted some of the specific recommendations from the policy analysis described In the Conclusion and Summary of Findings chapters of the research. Washington State Legislature and Department of Commerce are both dedicated to ongoing reforms to state housing regulations that can allow local municipalities to better support housing for all income levels.

Bill	Summary of Bill Passed	How it applies to Bellingham (pop 95,000)
HB 1220	Established new goals and methodology for housing needs assessments, and imperative to plan housing for all income levels. Passed 2022.	In effect. Bellingham is required to follow these regulations in the 2026 comprehensive planning cycle.
HB 1110	Legalized middle housing options like duplexes, fourplexes, or sixplexes, depending on city size and proximity to transit, on most residential lots in Washington’s urban communities. Meeting the requirements of the bill puts cities in compliance with projected housing needs until 2032.	Goes into effect 6 months after the jurisdiction’s next periodic comprehensive plan update – 2026.
HB 1337	Makes it easier for homeowners to add accessory dwelling units (ADUs), also known as “backyard cottages” and “bonus homes,” by ending renter bans (requirements for owners to live on-site), capping impact fees and parking mandates, legalizing two ADUs per lot, and setting baseline standards on lot and ADU size.	Allows two ADUs per lot, any combination of attached or detached. Goes into effect 6 months after the jurisdiction’s next periodic comprehensive plan update – 2026.
SB 5258	Reforms regulations for small-scale condos, specifically laws on construction defect actions and warranties, deposit requirements, and exempts first-time homebuyers from the real estate excise tax.	Beginning 2025.
SB 5058	Also helps small-scale condo development, exempting buildings with 12 or fewer units and no more than two stories from the definition of “multi-unit residential building,” which eliminates building enclosure design and enclosure inspection requirements that add excessive costs to small scale-condo developments.	No notes.
HB 1181	Makes a broad set of changes to the Growth Management Act to address climate change, including a provision for local governments to legalize higher-density housing.	Both Bellingham and Whatcom County must meet the requirements of the GHG emissions reduction sub-element of the climate change and resiliency element.
HB 1293	Streamlines local design review processes, requiring them to use “clear and objective” standards that don’t reduce development capacity otherwise allowed. In addition, the process cannot require more than one public meeting.	Beginning 6 months after the next comprehensive plan update – 2026.
SB 5290	Supports local governments in streamlining their permit processes for new housing, establishing grant programs for them to reduce permit review timelines and to support local governments’ transition from paper-based to software/web-based systems.	Plan from department of commerce for increased staffing must be introduced by December 1, 2023.
HB 1474	Supports first-time homebuyers harmed by historical discriminatory covenants. It establishes a Special Purpose Credit Program, funded by a $100 document recording fee, to provide down payment assistance and closing cost assistance to first-time homebuyers with income less than the area median who were themselves, or are descendants of someone who was, excluded from homeownership in Washington by a racially restrictive real estate covenant prior to April 11, 1968 (passage of the Fair Housing Act).	Beginning Jan 1, 2024 with subsequent CHP studies required March 2024, December 2028, and then every 5 years.
HB 1695	Clarifies the definitions of affordable housing that qualify as a “public benefit” to authorize governments and public agencies to sell publicly owned surplus property at discounted prices for affordable housing development.	May be relevant to expanding the kind of projects that the Port’s EDI Workforce funding can be used for.
SB 5045	Creates a property tax exemption for ADUs to owners who offer them at rent affordable to people making 60 percent of the area median income.	N/A – Only applies to counties with pop over 1.5 mil, Whatcom County has a population of about 230,000 residents.  Use this bill as a template to enact pre-emptive local policy.
HB 1326	Reduces utility costs for affordable housing by authorizing local waivers of utility connection charges for affordable and supportive housing owned by nonprofits and housing authorities.	No notes.

Implementation of Recommended Best Practices in Bellingham, Washington

Bellingham and Whatcom County both have existing programs and structures that resemble some of the strategies identified in the Literature Review and Case Studies, but there are gaps and missing links. Table 19 provides a feasibility assessment for each of the key housing development strategies identified in the Literature Review and Case Studies of this research. Feasibility is rated on a scale from “Easy to Implement, or Already in Practice (bright green),” to “Some organizations and programs to support this strategy, but the programs are scattered across different orgs (light green),” “Precedence for this strategy in nearby municipalities, but none within City of Bellingham (yellow),” and “This strategy is illegal under local regulations or state law (orange)”.

Implementation Feasibility for key strategies identified in Literature Review and Case Studies
You can download the original PDF of this report to see the full-color version of this table

Strategy	Feasibility Rating	Notes
Catalogue of Pre-approved Building Designs	Being Developed	This is already being developed by City Staff, and the Whatcom Housing Alliance ran an ADU Design Competition to build public engagement for it over September and October of 2023.
Community Land Trust Building ADUs on land donated from city.	Already In Practice	Kulshan Community Land Trust and the City of Bellingham are already doing this, at every available opportunity.
Pink Zone, Zoning Vacation, Overlay Zone, Relaxed Permitting Process intended to allow short-term development of Affordable Housing.	Easy To Implement	A version of technique was employed in 2018 when the first ADU Ordinance was passed as a pilot project overlay zone of Happy Valley, in collaboration with Happy Valley Neighborhood Association.
Convene and Pay Salary/Stipends for an advisory board for participants from renters, low-income, racial minorities, disabled, and other marginalized populations.	Precedence in WA State	Grant funding is available from Dept of Commerce for this, as well as the precedent set in Cities of Tacoma and Vancouver.
Training Curriculum & Technical Assistance for small-scale property developers	Precedence in USA	This programming could be rapidly developed, with an initial grant to run a pilot demonstration, recruiting the first round of small-developer cohorts from residents with existing, viable development projects, and Accessory Dwelling Unit projects.
Community Land Trust Operating as Property Manager of ADUs built on single-family properties, in collaboration with homeowners seeking to remain in place with infill development.	Precedence in Whatcom County	Kulshan CLT and Habitat for Humanity have a joint pilot project in Lynden, in collaboration with an elder homeowner who wants to age in place.
Donations of small parcels from large single-family properties where mortgage is paid off, or infill development where an elder homeowner plans to age in place.	Precedence in USA	There are limited case studies of this strategy locally, but definite interest from the local community of retired homeowners.
City Department Dedicated to Economic Engagement & Empowerment	Requires Significant Program Development	Bellingham already has several Non-profit organizations that operate different facets of this strategy, including the Chuckanut Health Foundation, Project Neighborly, and some city grants for community benefit and housing development. However, these are all separate organizations with overlapping but distinct missions and current grant funds from these are limited.
Small Lot Subdivision (flag lots)	Municipal Code Revision	Requires revision of BMC, city council vote.
Pocket Neighborhoods of small footprint cottages built on existing single-family lots.	Municipal Code Revision	Current BMC requires that Co-Housing developments consist of at least four units. With land values in Bellingham and Whatcom County at historical highs, this lot and unit minimum prevents the development and small lot, cluster court Co Housing developments.
Funding Incentives for Cost of Lateral Sewer Hookups available for Small-Scale Infill Development	Municipal Code Revision & Significant Program Design	Implementing this in Washington State requires: An affordability covenant that can be attached to the specific housing unit created, the existence of a public utility housing developer to provide institutional oversight and funding options for small scale development projects, or a repeal/amendment to the Washington state law that prohibits the use of public funding for enrichment of private property.
Grant funding to support ADU construction on privately-owned single-family properties.	Municipal Code Revision & Significant Program Design	See above notes for Lateral Sewer Hookups.
Community Land Trust Operating as Property Manager for any Privately Owned Rental Unit and autonomously formed co-living households.	Requires Significant Program Development	Requires the existence of a public utility housing developer to operate as rental property manager, and existing affordability covenant.
Small/prefabricated entry level homes designed to be added onto over time.	Requires Market Research and Industrial Manufacturing Facilities Development	Examples exist within the United States in Oregon, Texas, and Pennsylvania, but as of yet there are no local housing developments that employ this strategy as an opportunity for entry-level homeownership.

Key Findings & Summary

Bellingham has several existing land-use policies and programs that could be leveraged to further incentivize small-scale and incremental infill development, but these existing policies are currently siloed in separate sections of the municipal code and are primarily geared towards large-scale and institutional developers. The BMC 20.29 – Incentive Program for Innovative Affordable Homeownership Projects is written in such a way that only institutional developers with dedicated administrative staff and the ability to conduct income qualification for low-income housing recipients can use the program. The existing definition for “co-housing” is an excellent starting point, but the definition only applies to new development and builders and developers are not voluntarily producing this as project type. To date the only new market-rate development project in Bellingham to fall under this designation is Millworks Co-Housing in Fairhaven, with resale prices currently in excess of $600,000. The Conclusions & Recommendations section below is dedicated to translating the strategies above into actionable revisions to Bellingham Municipal Code and creating a matrix of housing strategies at local, regional, and state levels.