A report says the island is getting more affluent, housing choices disappearing.
After waiting nine years, Madeline Johnson is finally getting an affordable home of her own – by moving off-island.
“It’s like moving my life,” Johnson said. “(But) if I didn’t, I wouldn’t have this home.”
Johnson’s situation reflects the findings of a just-released report from the mayor’s 2004 Affordable Housing Task Force, which found that affordable housing programs established by the city in 1997 have not been effective. The report will be presented at a special Affordable Housing Forum at City Hall at 6 p.m. May 19.
Economic diversity on the island is suffering, the report said. A separate 2003 Housing Needs Assessment commissioned by the city, shows that since a 1994 assessment, households with annual incomes of $35,000 or less have decreased by 40 percent, while households with incomes of $50,000 or more increased nearly 800 percent.
Median household income in 2000 was $70,110.
The 90-day task force included members with expertise in housing, land use planning, real estate, financing, law, architecture and construction, and with experience working on current affordable housing programs. The group was charged with reviewing and revising the Housing Element of the Comprehensive Plan, evaluating current programs, understanding housing needs, and prioritizing options for change.
“We learned that we need a more inclusive and broader approach to affordability,” architect and task force chair Charlie Wenzlau said. “The way we’ve defined our affordable housing program is too narrow a definition and actually need to be serving broader economic segments.”
The report is clear on the gap between housing supply and demand, based on the 2003 assessment by consultant Karen Monson. Highlighted is a large housing gap for households in the $30,000-$70,000 per year range, with larger gaps as income decreases. An average of 21 percent of homes sold each year – about 90 homes – are priced as affordable to this group.
Interestingly, Bainbridge has a high homeownership rate (78.3 percent) compared to Seattle (48.4 percent) or Kitsap County (67.4 percent), which the task force concludes shows homeownership as highly valued.
Multifamily housing projects showed vacancy rates below 1 percent, with a particular lack of studios and three-bedroom apartments, and entry-level housing for young families also is lacking.
But, without public water and sewer availability, land costs hamper affordable housing.
Where to go?
The task force report recommends fixing current city programs while looking at more options.
For new developments, the city now requires 10 percent of units be affordable to moderate-income households, defined as having 95 percent or less of Seattle median income. In exchange, developers receive a density bonus to build extra market-rate units.
The result is unhappiness all around.
Income-qualified buyers are allowed to sell the property later at market price, but any appreciation must be shared with the city as “equity recapture,” an unknown amount at time of purchase and varying widely even within a subdivision.
The incentive to purchase such homes is low, because buyers agreeing to give up their equity hurt their chances to afford their next home, or the ability to leverage equity for other needs.
Also, since a buyer’s cash assets are not considered, the buyer may not be part of the intended economic segment. Lenders dislike the second lien of the “equity recapture” when refinancing the home, the report found.
Developers also find that in some cases the density bonus does not compensate for the monetary loss of the affordable units, and few financially qualified buyers are willing to accept the “equity recapture” obligation. Consequently, the affordable home may go unsold for months.
To solve this, the task force recommends using the HUD definition of “affordable” – monthly mortgage payments not to exceed 30 percent of income or loans not higher than three times annual salary – and establishing a maximum sales price.
The “equity recapture” requirement would be eliminated; the city’s role would be limited to verifying the sales price of an affordable home at construction.
A “fee-in-lieu” option, adopted in 2003, allows developers to pay money into the Housing Trust Fund rather than constructing affordable housing.
But the fee does not help “moderate-income” households as the trust fund money is targeted to “low income” households.
Wenzlau said that one interesting conclusion was that the city could be doing a better job promoting “smaller scale” housing, where by limiting the size of houses or lots, prices will be naturally limited.
Current zoning effectively encourages big houses in low-density areas, and condominiums around town, he said.
Changing existing programs to address problems has been hampered by lack of dedicated staff to this area, the report found.
To add flexibility, the task force calls for establishing a community housing commission, hiring a housing planner and a consultant to manage city programs.
“The task force people were pretty discouraged with the lack of affordable housing over the last few years,” Wenzlau said, “but sense (that) the City Council sees it as a critical issue for the community.
“I don’t think there is a quick fix for any of these things.”
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To-do list
Among the “priority recommendations” of the mayor’s 90-day Affordable Housing Task Force:
• Develop more “tools” to promote cheaper housing, and make programs responsive to changing circumstances.
• Revise current for-purchase and for-rent affordable housing and fee-in-lieu programs.
• Establish “silent seconds” in which the city matches an income-certified buyer’s 10 percent down payment, and only asks for the same amount back plus interest at time of resale.
• Expand the Housing Trust Fund to support moderate-income households.
• Legalize non-conforming structures containing subsidized units; higher density affordable housing that is now non-conforming would remain so when rebuilt or renovated if there are subsidized units.
• Allow additional dwelling units on lots where the owner does not have to live in the primary building.
• Allow “cottage housing” in areas outside Winslow, allowing moderate density increases in exchange for limited residence sizes.
