Busy and successful session for our housing priority

It was another busy and largely successful year on affordable housing issues for AWC. Several bills that AWC supported made it through the Legislature and are on the Governor’s desk awaiting signature. Additionally, the compromise operating and capital budgets include significant new investments for affordable housing.

To start, a major new councilmanic revenue authority was provided to cities and counties. HB 1590 passed and provides a new option for councilmanic approval of a currently voter-approved 1/10^th of one cent sales tax for affordable housing and behavioral health. AWC has been working on versions of this for three years and there was a significant push again this year. For a while it looked like the effort may get waylaid by the attention garnered by a proposal to provide King County a new tax on high-wage earners to fund affordable housing needs in the region. As that effort lost steam and agreement could not be reached between cities, counties, and large employers, attention shifted back to HB 1590. Rep. Beth Doglio (D–Olympia), a former AWC City Champion, went above and beyond in her efforts to help provide this new tool to our communities.

The “HB 1406 trailer bill”, HB 2797, passed on the final day of session amidst a little bit of drama. This important bill fixed errors in the landmark revenue sharing program created by the Legislature last year that allows cities and counties to share in state sales tax revenues to build affordable housing. In the new bill, cities whose counties do not participate were protected from having their revenue sharing turned off after one year, and cities were given more time to take advantage of the incentive to receive more revenue sharing if they pass local housing levies (aka a qualifying local tax).

Perhaps the largest housing policy fight of the last several years was continued again this year as accessory dwelling unit (ADU) advocates brought back their desire for the state to mandate local ADU policy. In some ways, it was a replay of last year. Cities argued that we supported ADUs and were taking actions to promote them but needed flexibility to fit them into our communities. Advocates countered, accusing cities of only pretending to want ADUs but intentionally developing our ordinances to make them infeasible. Ultimately, the Legislature largely sided with cities and only passed a significantly watered-down version of the ADU bill, SB 6617. The only mandate in the bill prohibits cities from requiring on-site parking for ADUs that are within a quarter mile of a major transit stop. There are two significant exceptions to this preemption. If a city has adopted or significantly amended their ADU ordinances within the prior four years, they are grandfathered in and the provisions of the bill do not apply. If a city desires to require on-site parking for ADUs near transit they may do so, but they must provide an evidence-based justification, such as lack of on-street parking capacity. We continue to hope that the focus will shift away from micromanaging where and how ADUs are allowed, and towards how to get more ADUs built in our cities—such as approaches like SB 6231, which provides a 3-year property tax exemption for homeowners who build ADUs. Unfortunately, we expect that we’ll likely have to go through the same fights in the future as advocates are not satisfied with the progress they have made.

The other expansive housing-related land use preemption bill that was introduced, SB 6536, did not pass. This proposal would have mandated a rezone of all single-family neighborhoods to allow for duplexes, triplexes, quadplexes, and courtyard apartments. As with ADUs, the proponents of this bill were not compelled by data that we provided showing large numbers of cities already permitting these housing types in their single-family neighborhoods. Instead, SB 6536 advocates desired the “splash” of the state dictating this choice from on high. Like ADUs, this is a discussion that will more than likely resurface next year.

We would not have been able to forestall these major preemption efforts without strong support from several legislators. These lawmakers went to the mat on our behalf with their colleagues to defend the principle of local control. They helped make the point that local decision-making can be preserved while we work together to improve access to more affordable housing in our communities. There are too many to name them all, but special thanks to Rep. Gerry Pollet (D–Seattle) and Rep. Jake Fey (D–Tacoma) for their work to organize their like-minded colleagues on our behalf.

In a much more collaborative effort, the voluntary and incentive based HB 2343 from Rep. Joe Fitzgibbon (D–West Seattle), which aims to promote density and pro-housing policies, passed. The bill includes a new suite of options to improve development streamlining and we were also able to include a variety of missing middle housing choices into the menu of options. Cities taking these policy options are eligible for grant support from the Department of Commerce and protected from appeal under the Growth Management Act and the State Environmental Policy Act. We intend to continue to foster the approach of this bill—where the state identifies housing policies that they believe are helpful and then encourages and incentivizes cities to adopt those policies without mandating them. Rather than assuming a one-size-fits-all approach, this framework encourages the state and cities to work together towards a common goal.

Several smaller but still important bills regarding tax incentives for affordable housing also passed. SB 6212 passed, allowing use of one of the property tax levies for affordable housing to serve individuals making 80% of the area median income (rather than the 60% limit in current law). This will allow more flexibility for cities with a desire to address workforce housing.

Above, we referred to the ADU fight as “perhaps” the biggest housing policy debate of recent years. A close competitor was the attempt this year to extend the Multifamily Tax Exemption (MFTE) to allow all cities to use this successful program, including small cities that are currently excluded. In addition, HB 2620 would have allowed cities to offer extended tax exemptions in order to preserve the affordable units that were aging out of the program and soon to be exposed to market rental forces. The bill enjoyed significant support across local government, affordable housing providers, community groups, the broad business community, and the development community, more specifically. On the other side, the Washington Low Income Housing Alliance fought vigorously for changes to the program to make it focus on deeper affordability and tenant protections. While there were good faith efforts to find a path forward, what the Housing Alliance wanted would have made the program a less effective tool. The MFTE only works when the incentive is enough to entice voluntary participation by developers; but the value of extending this program to more cities and for a longer time period was being outweighed by the requested changes to the program.

The Legislature did pass HB 2950 on the final day of session. This is a narrow MFTE bill that extends the tax exemption for the next two years for buildings that have income-restricted units that would have expired out of the program during that time. A work group is also created to attempt to find common ground on the broader issues of expanding the scope of the program. AWC and individual cities are asked to participate in this work group along with a variety of other stakeholders.

On the budget front, the Legislature made $160 million investments in affordable housing and homelessness. For a supplemental budget (and really for any budget) this is a very significant level of investment. Some highlights include:

• $60 million for competitive grants for cities and counties for temporary local shelter capacity
• $40 million in the Housing Trust Fund from the operating budget
• $15 million ongoing annual increase for the Housing and Essential Needs (HEN) program that provides people who are too disabled to work with housing and other essential needs
• $15 million for ongoing annual operations and maintenance funding for Permanent Supportive Housing
• $10 million for preservation of affordable multifamily housing
• $5 million for housing preservation grants

City priorities – Outcomes

The Legislature:

PRO: Passed HB 1590 to provide councilmanic authority for cities to raise a 1/10th of a cent sales tax to address housing affordability.

PRO: Passed HB 2343 to expand incentives for cities to adopt voluntary housing and development streamlining policies through grants and legal support.

PRO: Passed amendments to clarify HB 1406 from the 2019 session and extended the timeline to adopt a qualifying local tax.

PRO: Preserved local land use authority around housing.

PRO: Invested $160 million in affordable housing and homelessness.

CON: Failed to pass a comprehensive expansion of the Multifamily Tax Exemption program.