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Resolution 21-001 Housing Action Plan
CITY OF SPOKANE VALLEY SPOKANE COUNTY,WASHINGTON RESOLUTION NO.21-001 A RESOLUTION OF THE CITY OF SPOKANE VALLEY,SPOKANE COUNTY, WASHINGTON,ADOPTING THE HOUSING ACTION PLAN FOR THE CITY OF SPOKANE VALLEY,AND PROVIDING FOR OTHER MATTERS RELATING THERETO. WHEREAS,the Growth Management Act allows cities to adopt a Housing Action Plan(HAP) as described in RCW 36.70A.600(2); and WHEREAS,the goal of a HAP is to encourage the construction of additional affordable and market rate housing in a greater variety of housing types at prices that are accessible to a variety of incomes; and WHEREAS, the City applied for and received grant funding from the Washington State Department of Commerce (Commerce)to develop and adopt a HAP and used the grant funds to contract with Maul, Foster, and AIongi (MFA)to assist in the completion of the HAP; and WHEREAS, pursuant to the State Environmental Policy Act, RCW 43.21C (SEPA), and Title 21 Spokane Valley Municipal Code(SVMC),the City issued a Determination of Non-Significance(DNS)for the HAP on March 12,2021; and WHEREAS, the requirements of SEPA and Title 21 SVMC have been fulfilled; and WHEREAS, on March 12 and 19,2021, notice of the Planning Commission public hearing for the HAP was placed in the Spokane Valley News Herald; and WHEREAS,on March 25,2021,the City issued a press release on the availability of the HAP, and sent direct email to the HAP distribution list and stakeholders; and WHEREAS, prior to the Planning Commission's public hearing,the City created a rotating banner on the City's website that linked to the HAP project page, and published social media posts on Facebook, Twitter and Instagram about the public hearing; and WHEREAS, on April 8,2021,the Planning Commission held a public hearing, received evidence, information and public testimony followed by deliberations; and WHEREAS, on April 8, 2021, after reviewing and deliberating on the HAP, the Planning Commission moved and voted 7-0 to forward to City Council a recommendation of approval of the HAP; and WHEREAS, on April 22, 2021, the Planning Commission approved findings and recommendations,which are attached hereto and incorporated herein by reference; and WHEREAS,pursuant to the grant agreement with the Washington State Department of Commerce and RCW 36.70A.600(2),the HAP is required to include the following components: a. A summary of community engagement:The development of the HAP and its strategies included a robust citizen engagement process,which is summarized in the HAP as Appendix D; Resolution 21-001 Adopting the 2021 Housing Action Plan Page 1 of 2 b. Housing needs assessment: The housing needs assessment included in the HAP as Appendix A identifies the City's housing needs for all income segments with detailed information about the City's demographics, including population and employment trends; c. Recommended policy and code changes: Section 3 of the HAP includes policy and code changes. Section 3 and Appendix C of the HAP include an analysis of the City's housing element and associated policies in meeting planned housing within the City; d. Housing strategies: Sections 3 and 4 of the HAP identify strategies to increase the supply and variety of housing types and ways to minimize and reduce displacement of low-income residents; and e. Implementation plan: Section 4 of the HAP includes an overview of the strategies including proposed timing and potential needed resources for implementation. WHEREAS,the HAP is a planning document and does not amend the City's Comprehensive Plan or development regulations; and WHEREAS, the implementation of any recommended strategies in the HAP will undergo its own process for review, adoption, and engagement; and WHEREAS,consistent with the grant agreement with Washington State Department of Commerce, the HAP is required to be formally adopted by the City. NOW THEREFORE, be is resolved by the City Council of the City of Spokane Valley, Spokane County, Washington as follows: SECTION L Findings. The City Council hereby adopts and incorporates by reference the recitals above as findings for the adoption of the Housing Action Plan. The City Council hereby finds that the HAP complies with all state and local requirements, including the grant with the Washington State Department of Commerce, and RCW 36.70A.600(2). SECTION 2. Adoption. The City Council hereby adopts the Housing Action Plan, attached hereto and made a part hereof. SECTION 3. Effective Date. This Resolution shall be effective upon adoption. Adopted this IS'day of June 2021. CIT OF S/PO NE VALLEY Ben Wick,Mayor A S )3Dt4.1,411 te Kristine Bainbridge, City Clerk Approved as to Form: O of ice e Ci omey Resolution 21-001 Adopting the 2021 Housing Action Plan Page 2 of 2 HOUSING ACTION PLAN a. Prepared for MAUL CITY OF SPOKANE VALLEY FOSTER ALONGI Prepared by EGO NorthweSt Maul Foster&Alongi, Inc. ECONOMICS • FINANCE • PLANNING 2815 2ndAvenue, Suite 540, Seattle, WA 98121 ACKNOWLEDGMENTS Maul Foster &Alongi, Inc., in collaboration with ECONorthwest, prepared this report for City of Spokane Valley. We are grateful to the numerous staff, elected officials, and community members who participated in this process and provided feedback to shape the plan. CITY OF SPOKANE VALLEY COUNCIL • Councilmember Rod Higgins - (position 1) • Councilmember Brandi Peetz— (position 2) -Deputy Mayor • Councilmember Arne Woodard— (position 3) • Councilmember Ben Wick— (position 4) -Mayor • Councilmember Pam Haley— (position 5) • Councilmember Tim Hattenburg— (position 6) • Councilmember Linda Thompson— (position 7) CONSULTANT TEAM • Maul Foster&Alongi, Inc • ECONorthwest SPOKANE VALLEY COMMUNITY MEMBERS (ALPHABETICAL ORDER) • Lanzce Douglas,Douglas Properties • Deb Elzinga, Community Frameworks • Jim Frank, Greenstone • Michelle Girardot,Habitat for Humanity • Rob Higgins, Spokane Association of REALTORS • Julie Honekamp, SNAP WA • Ray Kimball,Whipple Engineering • Jonathan Mallahan, Catholic Charities • Jennyfer Mesa,Latinos en Spokane • Dave Roberts, Spokane Housing Ventures • Ben Stuckart,Spokane Low Income Housing Consortium • Todd Walton,Inland Development • Darin Watkins, Spokane Association of REALTORS • Joel White Spokane, Home Builders Association PAGE II CONTENTS 1 PURPOSE 1 1.1 OVERVIEW 1 1.2 ORGANIZATION 2 2 SUPPORTING DATA AND ANALYSIS 3 2.1 SUMMARY OF HOUSING NEEDS ASSESSMENT 3 2.2 SUMMARY OF POLICY AND REGULATORY ASSESSMENT 15 2.3 SUMMARY OF PUBLIC ENGAGEMENT 18 2.4 DISPLACEMENT RISK ANALYSIS 23 2.5 DEVELOPMENT FEASIBILITY ANALYSIS 25 3 HOUSING STRATEGY RECOMMENDATIONS 29 3.1 SUMMARY OF HOUSING STRATEGY RECOMMENDATIONS 30 3.2 ASSESSMENT OF HOUSING STRATEGY RECOMMENDATIONS 35 4 IMPLEMENTATION PLAN 54 4.1 DEVELOP AND ASSIGN WORK PROGRAMS 54 4.2 USE TO INFORM HOUSING POLICY AND PLANNING PROJECTS 62 4.3 MONITOR IMPLEMENTATION PROGRESS 62 APPENDIX A HOUSING NEEDS ASSESSMENT APPENDIX B HOUSING NEEDS ASSESSMENT METHODS AND DATA SOURCES APPENDIX C HOUSING POLICY FRAMEWORK APPENDIX D SUMMARY OF COMMUNITY ENGAGEMENT APPENDIX E DEVELOPMENT FEASIBILITY AND MULTIFAMILY PROPERTY TAX EXEMPTION ANALYSIS APPENDIX F AFFORDABLE HOUSING FUNDING SOURCES APPENDIX G ACCESSORY DWELLING UNIT AND TINY HOME POLICY ANALYSIS PAGE III 1 PURPOSE 1 .1 Overview The City of Spokane Valley's (City) Housing Action Plan (HAP) defines strategies and implementing actions that promote greater housing diversity, affordability, and access to opportunity for residents of all income levels. This HAP is meant to implement a voluntary program of the Growth Management Act and fulfill a State of Washington Department of Commerce grant that Spokane Valley received through House Bill 1923 which aims to: • Quantify existing and projected housing needs for all income levels with documentation of housing and household characteristics. • Develop strategies to increase the supply of housing, and the variety of housing types, needed to serve the housing needs identified above. • Analyze population and employment trends,with documentation of projections. • Consider strategies to minimize low-income residents' displacement resulting from redevelopment. • Review and evaluate the current housing element adopted pursuant to RCW 36.70A.070, including an evaluation of success in attaining planned housing types and units, achievement of goals and policies, and implementation of the schedule of programs and actions. • Provide for participation and input from community members, community groups, local builders,local realtors,nonprofit housing advocates, and local religious groups. • Include a schedule of programs and actions to implement the recommendations of this HAP. The purpose of this HAP is to: • Provide an overview of the housing landscape and planning environment. • Help the City plan for additional housing through 2037 by providing key data and analysis on the current housing inventory and future housing need in Spokane Valley. • Highlight current City development regulations and incentives that are effective. • Identify strategies that consider emerging development issues to promote housing development that will help meet Spokane Valley's projected housing needs. • Recommend actions that will encourage more housing development at all income levels to accommodate future and current residents. PAGE To develop this HAP, the City assessed housing needs, reviewed housing policies, and engaged the public. The results have led to three key housing objectives that are addressed in this HAP: • Preserve affordable housing and prevent or mitigate displacement. • Increase market-rate and affordable housing supply throughout Spokane Valley,but focus on areas that support multifamily and "missing-middle" housing types. • Increase housing options and housing choice. 1 .2 Organization This HAP is organized as follows: • Supporting Data and Analysis offers background on the housing needs analysis,policy and regulatory review,and public engagement. • Housing Recommendations offers 13 policy and program recommendations as Spokane Valley works toward increasing housing supply through 2037. • Implementation Plan that provides Spokane Valley with near-term actions for City Councilmembers to consider. • Appendices provide technical appendices that support this HAP,including the full public engagement plan, data, methods for key parts of the analysis, affordable housing information,and the policy review. PAGE 2 2 SUPPORTING DATA AND ANALYSIS Incorporated in 2003, the City is the second most populated city in Spokane County,behind the City of Spokane. Spokane Valley can be described as an auto-oriented suburban community with commercial areas and improving mass transit service. Spokane Valley's population is currently 97,490 (Washington Office of Financial Management [OFM],2020) and has increased by 25,246 people since 2003,translating to a 17.5 percent increase,which equates to an average of approximately one percent of growth per year. Spokane Valley is projected to add 14,103 more residents between 2018 and 2037 (OFM, 2020). The housing market in Spokane Valley has not kept pace with this increased demand brought on by new residents (ECONorthwest, 2020). This underproduction is one important factor in rising rents and home prices. To accommodate new residents,developers in Spokane Valley will need to produce housing at a modestly faster rate than has been done over the past ten years.The new unit production will also have to accommodate households across the income spectrum. The confluence of population growth with a need for more housing spurs many questions: What income and demographic characteristics will future households have?Where will households live and in what housing types? The answers to these questions and the ability of future households to meet their housing needs depend on decisions and policy choices that the City makes today. In response to the housing challenges facing many of its residents, the City has worked locally and regionally to analyze data on the housing needs of current and future residents and to develop strategies that can support housing at a variety of price points to meet these needs. Housing markets function at a regional scale so it can be challenging for individual jurisdictions to adequately address this issue on its own. Partnerships and coordination throughout the broader county/region will be needed to successfully implement this HAP. 2.1 Summary of Housing Needs Assessment The housing needs assessment fact packet (Appendix A) synthesizes background information on the current housing inventory,demographics,and employment trends in Spokane Valley.This assessment helps inform the development of potential strategies. In particular, the housing needs assessment focuses on housing affordability issues and identifies the types of housing that the City should plan for in the future. The data source for the following summary is predominantly 2018 and 2019 data from the OFM,with additional data from the U.S. Census Bureau's Public Use Micro Sample (PUMS) and American Community Survey(ACS).The methods and sources used to develop the housing needs assessment fact packet and the information below are found in Appendix B. PAGE 3 2.1 .1 Spokane Valley Employment Trends EMPLOYMENT IN SPOKANE VALLEY CONTINUES TO GROW. The City's total employment grew from 46,205 jobs in 2010 to 51,305 jobs in 2017, an increase of 5,100 jobs (11 percent change). The top three largest industry sectors,in terms of total employment, were: (1) Retail Trade, with 10,032 employees; (2) Manufacturing, with 6,686 employees; and (3) Health Care and Social Services,with 6,273 employees. Combined,these industry sectors represent 45 percent of Spokane Valley's total employment base. The sectors with the greatest employment growth from 2010 to 2017 were: (1) Educational Services, with 1,978 new jobs or a 120 percent increase; (2) Construction, with 978 new jobs or a 45 percent increase, and (3) Wholesale Trade,with 684 new jobs or a 23 percent increase. Combined,these three industries representa gain of around 3,640 employees. Median salaries in 2018 also varied by industry. At opposite ends of the wage spectrum are the Accommodations and Food Services industry(average wage: $28,307 per year) and the Utilities sector (average wage: $69,936 per year). The Manufacturing sector, which makes up 13 percent of the workforce,averages an annual wage of$46,683 per year1. Figure 1 presents a travel shed map showing access to employment within a 45-minute drive and 45-minute transit trip. There are 260,178 jobs in the 45-minute drive shed from Spokane Valley and 63,115 jobs in the 45-minute transit shed. This indicates that a large majority of jobs are more accessible by driving an automobile rather than taking public transit. These are approximate estimates based on analysis of the following data sources:US Census LODES database,2017 and census block geometries,2010;ECONorthwest. PAGE 4 Figure 1. Travel Shed Map, Access to Employment Transit and drive time of 45 minutes or less, departing at 7:044M,midweek • Spokane Valley ■ Drive time I Transit time 1 • , I 4 - • Note:lsochrones depicted here are WA ID only the largest by surface area for the given I 110 rni jurisdiction,not necessarily the most typical Sources:US Census LODES database,2017 and census block geometries,2010;and Spokane Transit Authority database.ECONorthwest Calculations 2.1 .2 Who lives in Spokane Valley? SPOKANE VALLEY IS GAINING NEW RESIDENTS. Between 2010 and 2020,Spokane Valley's population grew 8.6 percent,from 89,755 people to 97,490, a gain of 7,735 new residents. For comparison, the City of Spokane grew by 7 percent or by 14,684 people during the same period. These two cities combined account for 43.6 percent of Spokane County's population growth of 51,379 people during this time (OFM, 2020). The housing needs assessment showed Spokane Valley's population between 2010 and 2018 grew by 6,055 people (OFM, 2020). Housing needs vary for different age groups and change over a person's lifetime. Consequently, it is important to track shifts among the share of different age groups to better comprehend how housing needs change as community demographics fluctuate. Between 2012 and 2018Spokane Valley's millennial population (25-34 years) almost doubled, growing substantially from 10 percent to 15 percent of the population total from 12,148 to 21,144 persons (U.S. Census ACS PUMS,2012,2018). Another growing sector is the senior population which includes persons over 65 years old. During 2012-2018, seniors grew from 13 percent to 15 percent of the total population settling at an estimated total of 20,910 persons, a total similar to the millennial population sector. PAGE 5 SPOKANE VALLEY IS BECOMING SLIGHTLY MORE DIVERSE. Spokane Valley's population has become slightly more diverse,as illustrated in Figure 2.While all race and ethnicity categories increased in total share of population, the share of residents who are Black, indigenous, and persons of color increased more than white households in this period;most Spokane Valley residents (83 percent) identify as white non-Hispanic.' Figure 2: Population by Race and Ethnicity, Spokane Valley 100% wee 5% 90% pro 7% 80% 70% ■Hispanic/Latino 60% Some Other Race Alone 50% 40% 87% 83% ■Asian Alone 30% •Black or African American Alone 20% 10% ■White Alone 0% 2012 2018 Source:U.S.Census Bureau.(2012,2018).ACS PUMS 1-Year Data Understanding Area Median Income The U.S.Department of Housing and Urban Development(HUD) calculates affordability and income limits for metro areas and counties across the country, based on the area's Median Family Income (MFI),which is derived from Census data. Since housing needs vary by family size and costs vary by region, HUD also produces Area Median Income (AMI) benchmarks for different family sizes on an annual basis. These benchmarks are used for understanding what different households can afford to pay for housing. In 2018, the Spokane, WA, HUD Metro Area, which includes the City, AMI was $65,200 for a family of four. HUD adjusts the income limits up or down, based on family size (see Figure 3). Figure 3. HUD 2018 Income Limits for Spokane, WA, HUD Metro Fair Market Rent Area Affordability Family Size (Number of People) Level 1 2 3 4 5 6 7 8 30% $13,700 $15,650 $17,600 $19,550 $21,150 $22,700 $24,250 $25,850 50% $22,850 $26,100 $29,350 $32,600 $35,250 $37,850 $40,450 $43,050 60% $27,420 $31,320 $35,220 $39,120 $42,300 $45,420 $48,540 $51,660 80% $36,550 $41,750 $46,950 $52,150 $56,350 $60,500 $64,700 $68,850 100% $45,700 $52,200 $58,700 $65,200 $70,500 $75,700 $80,900 $86,100 Source:https://www.spokanecounty.org/DocumentCenter/View/26421/HUD-2019-MEDIAN-FAMILY-INCOME-LIMITS-effective-6-28- 2019. INCOME COMPARISONS IN SPOKANE COUNTY. Most households in Spokane Valley,66 percent,earn more than 80 percent of AMI and 34 percent of households earn less than 80 percent of AMI (ACS, 2018). Compared the City of Spokane and to 2 The U.S.Census Bureau considers race and ethnicity as two distinct concepts.The Census applies two categories for ethnicity:Hispanic or Latino and Not Hispanic or Latino.Hispanic/Latino is an ethnicity and not a race,meaning that individuals who identify as Hispanic/Latino maybe of any race.The share of the population that identifies as Hispanic/Latino should not be added to percentages for racial categories. PAGE 6 Spokane County as a whole', Spokane Valley has the smallest share of households earning below 30 percent of AMI (eight percent) and the highest share of households earning above 100 percent AMI (56 percent). The shares of households in the 30 to 100 percent AMI range is similar across the three jurisdictions (ACS, 2018). Figure 4 summarizes this narrative. Figure 4: Income Distribution Comparison, 2018 City of Spokane Valley 8% 10% 16% 107, 56% City of Spokane 13% 12% 50% Spokane County 11% 54% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Household Income as a%of AMI 0-30%of AMI 30-50%of AMI ■50-80%of AMI ■80-100%of AMI •100%+of AMI Source:U.S.Census Bureau(2018).ACS PUMS 1-Year Data. Describing AMI Affordability Levels Affordability levels categorized by income ranges. Figure 5 describes these income ranges by the 2018 Spokane County AMI rate and corresponding income limits for a family of four. Figure 5: Characterization of Affordability Levels Income Description AMI Range Income Range* Monthly Housing Payment Range** Extremely low-income Below 30% under$19,550 $489 or less Very low-income 30 to 50% $19,550-$32,600 $489 to$815 Low-income 50 to 60% $32,600-$39,120 $815 to$978 Moderate-income 60 to 80% $39,120-$52,260 $978 to$1,307 Middle-income 80 to 120% $52,260-$78,240 $1,307 to$1,956 High-income Above 120% above$78,240 More than $1,956 *Based on family of four income(HUD,2018). **Assumes that up to 30 pefcent of income is used for housing. THE PERCENTAGE OF MIDDLE- AND HIGH-INCOME HOUSEHOLDS IN SPOKANE VALLEY IS INCREASING FOR BOTH OWNERS AND RENTERS. Comparing the distribution of owner and renter households over time, as shown in Figure 6,reveals two insights that inform this HAP strategies.First,while the shares of households described as middle- 3 The Spokane County data comprises unincorporated Spokane County and all the incorporated jurisdictions including the City of Spokane and the City of Spokane Valley. PAGE 7 income or high-income increased What is Missing-Middle Housing? between 2012 and 2018 there is still Missing-middle housing types bridge a gap between single roughly one third of the households family and more intense multifamily housing. They can in the City that are described as generally be described as single-family attached housing units with two or more units such as duplexes,triplexes,quad homes, to extremely low income. Production of missing- moderate-incomeand multiplexes. Missing-middle housing types also includes accessory dwelling units, town homes, backyard homes, and middle housing such as tiny homes, row homes. accessory dwelling units, cottages, In theory, these space efficient housing units can be more townhomes and apartment buildings affordable than other units because they are smaller and should be a focus of the strategies to more energy efficient and they use less land resources. provide new units to house these Providing middle housing expands opportunities for housing families as well as to help preserve that may be lower cost than single family detached housing. existing affordable units. The second These units can be well-integrated into existing neighborhoods and often can be designed to resemble single-family observation is that these missing- detached housing.This housing could provide seniors housing middle home types should be options that would allow for "downsizing" and lower- available for ownership, but the maintenance living and would serve moderate to middle- greater need is for rental units. income households. Figure 6: Income Distribution in Spokane Valley, 2012-2018 Overall Ilb 10% 56% 2018 Renter% 18% 34% Owner% . 6%- 67% Overall 10% 46% Renter% 18% 28% 2012 Owner% _ 6% 55% 0% 20% 40% 60% 80% 100% Household Income as a %of AMI •Less than or equal to 30% 30-50% ■50-80% ■80-100% •Over 100% Source:U.S.Census Bureau.(2012,2018).PUMS. Household incomes have increased overall in Spokane Valley over the last decade. Figure 6 shows that the share of households earning 100 percent of AMI or more (Including a portion of the middle- income households and all high-income households) increased between 2012 and 2018 overall for both renters and owners from 46 to 56 percent of the total households. Unsurprisingly, this figure also shows that households described as middle or high income consistently tend to be homeowners. Low to moderate income households (households earning below 80 percent AMI) decreased overall for both owners and renters from 42 to 34 percent of the total. INCOMES HAVE INCREASED, BUT MORE SO FOR HOMEOWNERS. Household incomes have increased at a greater rate in Spokane Valley for homeowners than for renters. Figure 7 shows that the median household income for homeowners in Spokane Valley was PAGE 8 $77,299 in 2018,whereas the median household income for renters was $38,498. For both household types, this median income is higher than that of households in Spokane County and the City of Spokane. Incomes in Spokane Valley increased at an annual rate of 3.8 percent for homeowners, whereas households that rent saw a 1.9 percent increase per year (PUMS, 2018). For context,median single-family home prices increased at an inflation adjusted annual rate of 5.1 percent between 2012 and 2018 (Spokane County Assessor, 2020) while the average rental price for a two-bedroom unit increased at an inflation adjusted annual rate of 1.5 percent during the same period (CoStar, 2020). Figure 7: Median Household Income, 2012-2018 Median Household Renter Income Median Household Owner Income $80,000 4.0% $80,000 4.0% $70,000 3.5% $70,000 3.5% E $60,000 3.0% a $60,000 3.0% 8 $50,000 2.5% ° 0 $50,000 2.5% Q $40,000 2.0% o $40,000 — 2.0% Q $30,000 1.5% 3 g $30,000 1.5% $20,000 I I I 1.0% Q $20,000 c 1.0% $10,000 0.5% m $10,000 0.5% F $0 0.0% $0 - 0.0% Spokane City of City of Spokane City of City of County Spokane Spokane County Spokane Spokane Valley Valley ■2012 ■2018 •AnnualPercentChange Source:U.S.Census Bureau(2012,2018).PUMS.Numbers were adjusted to 2018 inflation values,using the Consumer Price Index. 2.1 .3 What are the current housing conditions in Spokane Valley? SPOKANE VALLEY'S HOUSING STOCK IS SIMILAR TO OTHER EDGE CITIES. • Spokane Valley's housing is predominantly single-family detached housing. As of mid- 2020,the majority(66 percent) of Spokane Valley's 38,730 housing units (Spokane County Assessor,2020) are single-family detached. Most Spokane Valley residents living in single- family detached housing own their home (86 percent) rather than rent (ACS 1-Year,2018). An additional 20 percent of the housing units are apartments and condos and only 9 percent of the housing stock is single-family attached (includes duplexes, triplexes, and quad homes). Data source: Spokane County Assessor,2020. Spokane Valley lacks housing diversity needed to accommodate future demand particularly associated with aging baby boomers and young households forming. The city has a low supply (9%) of "missing- middle"housing or single-family attached housing which allows more seniors to downsize and remain in their community, while also providing more options for millennial households and working families to get a foothold in great neighborhoods. • Spokane Valley's housing stock is relatively new, with nearly one-third built before 1969 and over half built after 1980 (Spokane County Assessor, 2020). PAGE 9 • Spokane Valley has more homeowners than renters. About 67 percent of occupied units are inhabited by homeowners and 33 percent of occupied units are inhabited by renters as of 2018 (ACS, 2018). SPOKANE VALLEY HAS NOT BEEN PRODUCING ENOUGH HOUSING TO MEET DEMAND. This continual growth has added pressure on a limited supply of housing.From 2010 to 2019,Spokane Valley saw an average of 345 new housing units built per year, for a total of 3,445 new housing units (Spokane Spokane Valley's population growth and County Assessor, 2020). This unit count includes all housing development has remained steady for most of the decade. From 2010 units, ownership homes and housing units for rent. to 2018,Spokane Valley's population grew Figure 8 illustrates the housing unit development trends by 7%, adding 6,055 new residents. in Spokane Valley between 2010 and 2019. Figure 8: Number of Units Built in Spokane Valley Per Year, 2010-2019 3,500 3,000 800 2,500 n c c Q 600 2,000 c o • 400 1,500 c o 1,000 �- 200 • 500 285 145 437 119 216 657 220 267 0 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Annual Cumulative --- Annual Average (345 units/yr) Source:Spokane County Assessor,2020. Underproduction is the estimated number of housing units needed to satisfy the housing shortfall over the last decade. Over the last decade, Spokane Valley underproduced housing by approximately 1,463 units (ECONorthwest analysis of OFM and PUMS datasets)4. If too few housing units are constructed relative to the number of new households formed, underproduction occurs and contributes to price increases. Without including current underproduction in calculations of future need,the current mismatch of housing units to numbers of households will continue into the future. 4 Current underproduction of housing was calculated based on the ratio of housing units produced and new households formed over time.The average household size in the City is calculated and converted to a ratio of total housing units to households.This ratio is compared to that of the region as the target ratio.If the City's ratio is lower,then we calculated the underproduction as the number of units it would have needed to produce over time,to reach the target ratio. PAGE 10 A useful way to detect whether the housing supply is meeting the demand is to examine vacancy rates. On average during the last decade,the vacancy rate was 5.4 percent for 2-bedroom apartments in the City. This is a standard rate of vacancy, indicating that the supply for this product type should be adequate to meet demand. However,nearby,the City of Spokane's vacancy rate was an average of 2.7 percent for 2-bedroom apartments over the last decade. This low rate is below the 5.0 percent standard,indicating an inadequate supply to satisfy demand.Vacancy rate trends should be monitored to track housing supply limitations to help build a more comprehensive understanding of emerging housing needs. SPOKANE VALLEY HOME PRICES AND RENTS ARE HIGHER THAN THOSE IN THE COUNTY AND THE CITY OF SPOKANE. When demand for new housing exceeds the supply of new housing, the market tightens and prices rise. Supply and demand imbalances and subsequent price increases can also be exacerbated by rapid regional job growth and too few newly created housing units to meet the demand for in migration from the job growth. There has not been a substantial spike in employment in Spokane County; however, there has been an increase in in-migration with more households moving to the area from high-cost cities in search of a lower cost of living and the improved quality of life offered in Spokane Valley and the Spokane region. Between 2010 and 2020, Spokane Valley's average What might an owner's monthly two-bedroom rent increased 15 percent, or an average of 1.4 percent annualized, while median payment be on a $300,000 home? sales prices increased 48 percent, or an average of The payment on a $300,000 home in Spokane 4.0 percent annualized. In 2020, the average rent Valley would be about $1,500 per month if financed in 2020. This assumes a 20 percent for a two-bedroom apartment was $1,131 per down payment, a 3.8 percent interest, and month,while the median sales price for ownership $3,500 in taxes based on actual recent comps. housing was $300,000. Figure 9 illustrates this pricing progression. During this period, the average annual rate of inflation was 1.7 percent. The annual rate of change for an average two-bedroom apartment was in-line with inflation; however, home prices increased at a rate over three times inflation. Median household incomes in Spokane Valley increased by 3.8 percent per year for owners and 1.9 percent per year percent for renters between 2012 and 2018 (ACS, 2018). Figure 9: Spokane Valley Housing Costs, 2010 and 2020 2010 2020 Annualized Percent Change Average Rent $983 $1,131 1.4% Median Sales Price $202,461 $300,000 4.0% Source:CoStar,Spokane County Assessor,2020.Numbers were adjusted to 2020 inflation values,using the Consumer Price Index By comparison,two-bedroom rent increased by 13 percent and 11 percent in Spokane County and in the City of Spokane, respectively, between 2010 and 2020. The current average two-bedroom rent in Spokane County is $1,094 per month and $1,081 in the City of Spokane. The 2020 median home prices in Spokane County were $255,900 and $275,000 in the City of Spokane (CoStar, Spokane PAGE 11 County Assessor, 2020). The escalating cost of housing, especially for those wanting to buy a home, is a top concern for people finding very few options of housing affordable at their income level. NEARLY HALF OF SPOKANE VALLEY'S RENTER HOUSEHOLDS ARE COST BURDENED AND THIS COST BURDENING DISPORTIONATELY IMPACTS LOWER INCOME HOUSEHOLDS. A typical standard used to determine housing affordability is that a household should pay no more than a certain percentage of gross household income for housing,including payments and interest or rent,utilities,and insurance. HUD's guidelines indicate that households paying more than 30 percent of their income on housing and utilities experience "cost burden," and households paying more than 50 percent of their income on housing and utilities experience "severe cost burden." Without enough rent-restricted and regulated affordable housing, many low-income households end up paying more than they can afford on housing.In Spokane Valley,an estimated 48 percent of renter households are cost burdened, and 25 percent are severely cost burdened (ACS,2018). Recent figures (2018) show that lower income households and renters are paying a much greater share of their income on housing. In fact, those most cost burdened tend to be extremely low-income and very low-income (earning less than Households earning 50 percent or less of AMI) are A Note on COVID-19 disproportionally impacted. Nearly 6,500 Another factor affecting housing is the COVID-19 Spokane Valley households earning 50 percent or pandemic. Since its emergence, the pandemic less than AMI out of the 7,600 total households has slowed the production of housing in many regions and due to growing remote work in this group are cost burdened, while practices, commuting rates have diminished and approximately 4,350 households in this income housing preferences are shifting. In addition, the group are severely burdened (ACS, 2018). The pandemic has impacted the ability to pay for housing consistently, which will likely exacerbate need for more affordable housing has expanded housing availability and stability. These types of particularly for low to moderate income owner trends should be monitored as conditions and households and low-to moderate-income renter communities adjust. households (less than 80% AMI). Low-income renters earning less than 50%AMI tend to be more severely cost burdened.This may mean trade-offs must be made between housing and paying for other essentials,such as food,clothing,and healthcare'. THERE IS A LIMITED SUPPLY OF RENT-RESTRICTED AFFORDABLE HOUSING AND LOW-COST MARKET RENTALS. Spokane Valley has approximately 1,663 units of rent-restricted affordable housing for households earning less than 60 percent of AMI (ECONorthwest analysis of HUD, Spokane Housing Authority, and Washington State Housing Finance Commission data,2020)7. 5 Cost burdening for owner-occupied households is not terribly common because mortgage lenders typically ensure that a household can pay its debt obligations before signing off on a loan,but it can occur when a household sees its income decline while still paying a mortgage.Households with incomes over 100%AMI are less burdened overall since their larger income will go farther to cover non-housing expenses.Cost burden does not consider accumulated wealth and assets. 6 Rent-restircted affordable housing is income-or rent-restricted to ensure that the housing is occupied by households earning a certain income.Rents for such units are set so as to be affordable to those income levels.Rent restrictions are set according to the types of funding used to develop the housing,such as the Low-Income Housing Tax Credit,or HUD funding,.The City does not regulate or influence the rates for these units.Most rent- restricted affordable housing is restricted to be affordable to households earning under 60 percent MFI,but these restrictions vary. 7 The data available for this section describes housing affordable to 60 percent of AMI or lower and in other sections housing affordability is described in different AMI categories.This is due to differences between various data sources.Household affordability information provided in US Census ACS PAGE 12 The map in Figure 10 shows where in Spokane Valley these units are located. Given the limited supply of these units,Spokane Valley's population at this income level must compete for lower-cost/lower- amenity unregulated market rate housing. Like many places, Spokane Valley Figure 10: Rent-Restricted Unit Location Map, does not have enough rent-restricted Spokane Valley affordable housing units, which are costly to build and operate. As a result, many low-income households y,a live in low-cost market (unregulated) • housing units (often called naturally ` occurring affordable housing, or 7. NOAHs). There is no official - - > _ _ definition of low-cost market rentals `. - ,_. or NOAH units. They can be defined • by condition/age/and amenity level, 4 or by rent price (typically below 80 percent of AMI).The common factor - m is that they are affordable to low- income households, but their rents are unregulated by a funding or financing program. Source:ECONorthwest analysis of HUD,Spokane Housing Authority,and Washington State Housing Finance Commission data,2020. 2.1 .4 Future Housing Needs TO ACCOMMODATE NEW RESIDENTS, DEVELOPERS IN SPOKANE VALLEY WILL NEED TO PRODUCE HOUSING AT A SLIGHTLY FASTER RATE THAN THEY HAVE IN THE PAST. The OFM medium population forecast indicates that by 2037, Spokane Valley's population will have risen to 109,913. Based on Spokane Valley's population estimate for 2018 (95,810 people), Spokane Valley is forecast to grow by 14,103 people by 2037 (14.7 percent), at an annual growth rate of 0.7 percent (ECONorthwest calculation; OFM,2019 data). Spokane Valley is forecasted to grow at a rate similar to past rates,and this growth will continue to drive future demand for housing in the city over the planning period. To accommodate expected population growth through 2037 Spokane Valley will have to produce 6,660 new housing units of all types, sizes, and affordability levels (ECONorthwest analysis). This translates to 351 housing units per year.Between 2010 and 2019,an average of 345 new housing units were built in Spokane Valley each year. This means that slightly more housing would need to be built per year than the average produced from 2010 and 2019. Spokane Valley should continue to support robust housing growth and advance strategies that support a diversity of housing types and affordability levels. and PUMs analysis is not available at the 60 precent level while HUD helps to fund affordable housing developments that provide units to households earning less than 60 percent of AMI. PAGE 13 If units are allocated based on recent income distribution To meet future housing needs the trends, over half of Spokane Valley's needed housing units preservation of NOAH units that may (3,760 units) should be for households earning at least 100 be displaced because of new percent of AMI,and another 10 percent(686 units) targeted development is important for helping for households at above 80 percent AMI. The remaining 33 to house very low- to moderate- incomepercent, or 2,214 housing units, needed through 2037 A households.supportthStrategies in this HAP also need to the creation should be targeted for households earning less than 80 of rent restricted affordable housing percent of AMI. Figure 11 provides the complete units for extremely low- and very low- distribution of housing units needed among the five AMI income households through public agency support and assistance ranges. Overall, a healthy housing market should have a programs since this type of housing is variety of housing types at different price points that are becoming increasingly difficult affordable to a range of different household incomes. through the private market. Figure 11. Housing Units Needed in Spokane Valley by AMI, 2037 AMI Number of Units Need Percent of Total Units through 2037 Needed 0-30% 550 8% 30-50% 625 9% 50-80% 1,039 16% 80-100% 686 10% 100%+ 3,760 56% Total 6,660 100% Sources:ECONorthwest calculation;OFM,2019;U.S.Census Bureau,2018 PUMS. The housing needs analysis shows a mismatch in the type of housing units available. Around 44 percent of all the City households need housing priced below 100 percent of the AMI,yet this housing is inadequate since only 34 percent of the current housing stock includes housing types affordable for incomes below the AMI, such as less expensive detached single-family homes (ADUs, manufactured homes, cottage), attached single-family homes (duplexes and townhomes and multifamily developments). Figure 12 illustrates the type of home a household may afford based on its income. The information in Figure 12, together with Figure 11 above inform the strategies recommended in this HAP. PAGE 14 Figure 12: Housing Types and Financial Attainability If your household earns ... $19,560 $32,600 $52,260 $65,200 $78,240 (30%ofAMI) (50%ofAMI) (80%ofAMI) (100%ofAMI) (120%of AMI) Then you can afford ... $489 $815 $1,304 $1,630 $1,956 PER MONTH PER MONTH PER MONTH PER MONTH PER MONTH Housing types generally affordable to these households are ... Single-Family Detached manufactured homes in parks/on lots cottage cluster small-lot single-family large-lot single-family lk_ Single-Family Attached n 4M11.- duplex,tri-plex,quad-plex,townhomes higher-priced products •� • 1 1 Multifamily , 1111 1111 1 low-amenity apartments(rental) apartments(5+units) condominium A 1111 I. 1111 Common characteristics ... LESS EXPENSIVE MORE EXP " , Predominantly renter occupied&existing construction Predominantly owner occupied&new construction Government subsidized 41 Source:ECONocdiwest.Note:All values are in 2019 inflation-adjusted dollars. 2.2 Summary of Policy and Regulatory Assessment A policy and regulatory assessment identified existing housing goals, policies, and strategies from the 2017 Spokane Valley Comprehensive Plan as well as housing regulations, programs, and incentives currently available to encourage greater housing supply and the development of affordable housing in Spokane Valley. The information was used alongside the housing needs assessment and input from community members and stakeholders to develop strategy and policy options that could be used to meet housing needs within Spokane Valley. 2.2.1 Policy Review In its Comprehensive Plan,Spokane Valley identified three goals and four priorities specifically related to housing. Other elements of the Comprehensive Plan, particularly the Land Use element, include several other goals and policies related to housing. The summary of housing-related policies and strategies is organized around four housing themes identified in the Comprehensive Plan: PAGE 15 Ensure a Range of Housing Options for Residents: During the development of the Comprehensive Plan, community members identified a need for a greater diversity of housing types to serve people at all income levels and stages of life. A goal that exemplifies this theme is "allow for a broad range of housing opportunities to meet the needs of the community." • Key Action taken: In 2017, Spokane Valley implemented new regulations that allows missing-middle housing types such as accessory dwelling unit (ADUs); cottage housing; duplexes; manufactured homes, both on individual lots and in-home parks; and townhouses. In 2020 the City modified the Spokane Valley Municipal Code (SVMC) to establish a new zoning district, R-4 Single-Family Residential Urban that allows the full range of missing-middle housing products and focused where in the City townhomes and cottages maybe developed. Improve Housing Affordability: The current Comprehensive Plan includes a goal to allow for a diversity of housing options that are affordable to households at all income levels. One such goal is to "enable the development of affordable housing for all income levels." • Key Action taken: In 2020, Spokane Valley adopted a new ordinance to authorize a sales and use tax credit for affordable and supportive housing, which is expected to generate approximately$178,000 per year. Spokane Valley has not yet designated a specific use for such revenues. Enhance Distinctive Neighborhood Character/Support Neighborhood Commercial: Several goals and policies in the Comprehensive Plan encourage neighborhood conveniences and mixed-use residential development. An example is Housing Element-Goal 3, "Allow convenient access to daily goods and services in Spokane Valley's neighborhoods." • Key Action taken: Spokane Valley modified its zoning regulations in 2020 to create a new Single-Family Residential Urban (R-4) zoning district that permits more diverse housing development within close proximity to public transportation and services. Encourage the Creation of Mixed-Use Destinations: The Comprehensive Plan cites the Kendall Yards area of Spokane as an example of a mixed-use destination development that combines housing, retail,and amenities in a walkable community connected to transit.Land Use Element Goal 3 calls for Spokane Valley to "support the transformation of commercial, industrial, and mixed-use areas into accessible districts that attract economic activity." • Key Action taken: Spokane Valley's mixed-use zones (MU and Corridor Mixed-Use [CMUD allow for concurrent development of residential and commercial space. These uses may be developed side by side or on top of each other, with the commercial space on the ground floor. A detailed review of the existing policies, actions taken by Spokane Valley to date, and an evaluation of these actions is available in Appendix C. PAGE 16 2.2.2 Regulatory Review A detailed review of Spokane Valley's existing zoning and permit procedures helped to identify where housing development is currently allowed and how it is permitted. Spokane Valley has five residential zones (R-1,R-2,R-3,R-4,and MFR) that are specifically intended to support residential development; however, certain residential development is also permitted in mixed use zones and nonresidential zones. The residential zoning districts range from Single-Family Residential Estate (R-1), the least dense zone,which allows for lots of at least 40,000 square feet and one dwelling unit per acre (du/ac); to Multifamily Residential (MFR), which has no minimum lot size and allows up to 22 du/ac. No density bonuses are currently allowed, except in Planned Residential Developments. The City has placed a moratorium on new Planned Residential Developments and related regulations are currently under review. Appendix C includes a detailed review of dimensional requirements and parking standards for each zoning district. Spokane Valley has three main permit application types, which correspond to increasing levels of review procedures. For example, Type I permits generally have limited public notice and are administratively approved,while Type III permits require extensive public notice and are subject to a public hearing and approval by a neutral Hearing Examiner. Most residential development types fall under Type I or II application review,with the exception of cottage housing, industrial ADU development,and subdivisions,which require the more intensive Type III review. In addition, Spokane Valley has adopted the maximum State Environmental Policy Act (SEPA) flexible exemption thresholds so that multifamily developments of 60 units or fewer are not required to go through SEPA review. 2.2.3 Barriers BARRIERS TO DEVELOPMENT OF EXISTING HOUSING TYPES The housing development process is defined in the SVMC and in practice by Spokane Valley staff. There is sufficient development capacity on land in Spokane Valley to support a range of new housing, and the zoning regulations provide flexibility for developers to deliver housing at a pace to meet the identified housing needs assessment objective of at least 6,600 housing units by 2037, or around 351 units per year. Spokane Valley is primarily a large-lot, The community was asked... single-family community. While residents How can the City of Spokane Valley improve housing for have voiced appreciation for those our community? characteristics, a survey conducted for this "More cottages and duplexes" project identified a desire for more housing "More housing options such as condos and choices,including townhomes,ADUs, and townhouses." cottages. Spokane Valley should continue "More auxiliary housing,cottages on homeowner lots." to support housing growth and advance "By not regulating so tightly the ability to put strategies in support of housing growth for ADUs on properties." "Allow homeowners to build ADUs,cottages and co- a diversity of housing types and affordability levels to meet its target. housing." PAGE 1 7 Several barriers impact the delivery of housing in general and specific types of housing such as the allowed maximum density in specific zones,open space requirements,and allowed building height for multi-family development are areas where the City may improve the quantity, quality, and range of new housing development. Other barriers identified are beyond Spokane Valley's control, such as the market's acceptance of different housing types or appeals of project from residents. AFFORDABLE HOUSING FUNDING AND INCENTIVES While its zoning regulations allow flexibility in the housing types permitted, Spokane Valley currently has limited incentives to support the development of a range of housing types that are attainable for a broad variety of household incomes. The policy and regulatory review found that Spokane Valley should explore additional funding mechanisms and incentives to encourage affordable housing development. Recommended strategies are discussed in Section 3 of this HAP. 2.3 Summary of Public Engagement MFA led a robust public engagement process to gather community input to inform the HAP. The purpose of the community engagement is to connect with and listen to residents,workers,businesses, nonprofit organizations,service providers,and other key stakeholders.The community's participation in this process includes qualitative,anecdotal input as well as quantitative input via a survey to develop and support the recommendations offered in the HAP. Below is a summary of the survey results and the interviews. In addition to public engagement efforts taken during the development of the HAP, additional public engagement will occurred as part of the adoption process. 2.3.1 Community Engagement Approach The outreach process was predicated on the need to conduct engagement reflecting the Spokane Valley community and to help illuminate the City's housing opportunities and challenges. Community input helped shape the direction of the HAP's strategies and recommendations. Draft strategies and recommendations were then reviewed by staff, and the final HAP, once prepared,will be distributed to the public for further comment prior to adoption. A list of the outreach tactics used in development of the HAP is summarized in Figure 13. Conducting community outreach amidst the COVID-19 pandemic presented unique challenges. All community outreach that has been conducted to inform the HAP was held by video or phone calls with people who had access to technology and via a public survey. Because of the challenge of scheduling and organizing effective focus groups, we concentrated our outreach efforts on a set of one-on-one interviews with a diverse group of community stakeholders and developers. Figure 13: List of Outreach Tactics Month Outreach Tactics Summer 2020 • Community engagement plan • Project web page,materials,and "on-hold" message for the City of Spokane Valley general phone line • Stakeholder interviews • Community and partner update describing the HAP purpose, need, and process PAGE 18 Month Outreach Tactics Fall 2020 • Community survey#1 about the current state of housing and housing needs (Survey was live 9/21-10/19) • Website updates regarding project status Winter 2020-21 • City magazine article about the HAP (quarterly magazine mailed to over 50,000 residents in November 2020) • Website updates regarding project status • Community and partner update on project status Appendix D contains the complete summary of the community engagement process,including goals, approach, and methodology for identified stakeholder input. 2.3.2 Public Engagement Results ONLINE SURVEY In September and October 2020, an online public survey was conducted. A total of 124 respondents completed the survey. The Spokane Valley community was well represented, and demographics of those that took the survey aligned closely to the makeup of the City. Key findings from the survey are summarized below. Appendix D contains additional information on the survey. Owners and renters in Spokane Valley:The survey asked whether the respondents owned or rented their homes.All respondents answered this question and 75 percent were owners-56 percent owned with a mortgage and 19 percent owned free and clear. Renters accounted for 23 percent of the responses. The other three respondents either occupied their unit without payment of rent or they did not have stable housing. Barriers to renting in Spokane Valley: Only 25 of the 124 respondents (20 percent) identified as renters. This question allowed respondents to select more than one choice. The 25 respondents provided a total of 31 responses. Of these 31 responses, 77 percent said finding affordable housing in the city was a barrier to renting. Challenges included not being able to find affordable housing (61 percent identified this as a barrier), 10 percent identified as a barrier not being able to find housing that accepted housing vouchers, and six percent said past evictions, or no ADA-available units was a barrier. The remaining 23 percent of renters did not experience any barriers to renting. Barriers to purchasing a home in Spokane Valley:This question asked if respondents had recently tried to buy or bought a home and allowed respondents to select more than one answer. The 102 responses include renters and homeowners. Of this total, 23 percent said affordability was a barrier, and 18 percent could not afford a down payment. Others noted difficulty finding the right type of housing, being outbid, or not finding a place in the location they wanted. Less than half of the respondents did not encounter any barriers (45 percent, or 29 of 64). Types of housing in Spokane Valley: Of the 124 respondents, 109 indicated the type of housing that they currently live in. Single-family homes accounted for 80 percent of where respondents live, while the next most common housing type was multifamily homes at 13 percent. PAGE 1 9 Favored housing types for Spokane Valley: Respondents were also asked what type of housing they would like to live in. Of the 124 respondents 107 provided at least one answer. Respondents could select more than one housing type and a total of 159 housing types were selected. Single-family homes were the most desired housing type at 60 percent of responses, though nearly all the respondents (90 percent)included single-family homes as one of their choices.The next most favored were: • Cottages: 16 percent of the total responses selected this choice. • Townhomes: Nine percent of the total responses selected this choice. • Duplex: Seven percent of the total responses selected this choice. Housing options in the greatest need: Respondents were asked what kind of housing options are in greatest need in Spokane Valley. Of the 124 respondents, 93 provided at least one answer. Respondents could select more than one type of housing and a total of 206 responses were provided. Of the 93 respondents,73 percent felt more affordable ownership housing options were in the greatest need. The other two most frequently selected needs were the desire for more affordable housing for seniors, with 48 percent selecting this choice, and the desire for more flexibility for single-family homeowners to build accessory dwelling units, such as backyard cottages, with 44 percent selecting this choice. The survey also asked respondents to address three open-ended questions. The questions and summary of the responses are below. Are there any issues or challenges that impact quality of life in your neighborhood? Respondents provided a total of 65 comments. Responses ranged from lack of affordable housing to pesky neighbors. Respondents noted that higher drug, crime, and homelessness areas are often also lower income housing areas. The desire for recreation and parks was mentioned several times. How can the City of Spokane Valley improve housing for our community? Respondents provided a total of 89 comments. The comments generally noted either the need to encourage the development of more affordable housing and to help promote more housing choices. What is the primary reason you chose to live in Spokane Valley? Respondents provided a total of 92 comments. Comments indicated that apart from train traffic, Spokane Valley is a quiet community with less vehicle traffic and fewer challenges associated with bigger cities. Good schools and great quality of life were noted many times, as well as ease of access to Interstate 90. ONE-ON-ONE INTERVIEW SUMMARY The purpose of the one-on-one interviews was to discern and understand the current and historical housing situation of Spokane Valley through intentional discussion and analysis of the lived and professional experiences from local developers and community leaders. Below is a summary of feedback;Appendix D presents more details and supporting recommendations from stakeholders. PAGE 20 Development Process Input from the developers interviewed was that development process in Spokane Valley is working efficiently for permitting and constructing new single-family and multifamily housing. Interviewees indicated positive experiences working with building officials and Spokane Valley staff navigating the permit process. The fee schedules are in line with the market. However, those involved with developing affordable housing noted there would be an added benefit to an otherwise challenging development pro forma if the City reduced or waived fees for affordable housing projects. Competitive and Limited Affordable Housing Funding Sources With regards to affordable housing, federal, state, and local funds are limited and highly competitive and there is limited funding available for distribution to projects annually. It was noted that there are only two qualified census tracts in the city, 117.02 and 118.00. Affordable housing developments in qualified census tracts that apply for low-income housing tax credit funding receive a boost in the amount of tax credits they can receive.These tax credits are important for making regulated affordable housing projects feasible.Interviewees noted the benefits that a City managed housing fund supported through a property tax levy for affordable housing and/or sales and use tax fund for affordable and supportive housing. Opportunities to Encourage Housing Development Several interviewees noted that there is very limited inventory for starter homes and the gap in missing- middle housing in Spokane Valley is real. The following summarizes the range of ideas offered based on the interviewees'professional experience and their conversations with the community: Low-Income Households • Rent deposits and documentation requirements can be hurdles for portions of the population. Consider programs or policies that address this hurdle. • Down payment assistance for first time home buyers — either through a City fund or a community partner. • Acknowledge equity and race in the City's Comprehensive Plan to position the City to address housing equity. • Limited equity co-ops are a means to create wealth and home ownership for long-term tenants. Challenges include patient investors and gap financing. The other model often noted is shared equity. These programs do not require City intervention. The city may provide resources and information, and/or provide financial support for limited equity co-ops if it creates a housing fund. Programs and Incentives • Provide housing around state and federally supported transportation investments.Planned Action Environmental Impact Statements may provide additional incentives for developing housing in these areas by reducing the project-level permitting process. • Implement a multifamily tax exemption program. PAGE 21 • Offer nonprofits the first right of refusal to develop affordable housing units on City- owned properties or properties with a property tax lien. • Brownfields may provide land opportunities not sought by market-rate developers. Outreach and Partnerships • A regional communications campaign dispelling housing myths and showing the positive benefits of healthy homes. • Partner with neighborhood groups or support the creation of one that is focused on Spokane Valley. SNAP (Spokane Neighborhood Action Partners) is a model. • Seek partnerships with private entities seeking philanthropic endeavors.A local example is a project in northeast Spokane that was built by Spokane Housing Ventures in partnership with Empire Health Foundation. Traditional affordable housing funding sources were used as was support from the foundation. Threats to Housing Development and Preservation of Affordable Units Several interviewees mentioned threats to housing development and the need to preserve affordable units. A range of observations and ideas were offered based on the interviewees' professional experience and their many conversations with the community. • Lumber prices have gone up by more than 120 percent over the past year. There is not anything the City can do about this, but these increased costs directly impact housing prices. • Labor shortages impact development costs. It was noted that encouraging more trade jobs through apprenticeship programs or partnerships could help grow the workforce that may reduce labor availability and related development cost impacts. • Rent-restricted developments that need rehabilitation could be an area of focus. The rehabilitation costs require debt, and the financial package may require higher incomes. The unintended consequence is a loss of units that serve the 30 percent or less AMI households. • One developer shared about a single-family subdivision that was subject to public comment and SEPA review being held up because of protest from nearby residents despite complying with local code. External Forces Driving Developers from Spokane County Developers that have been active in Spokane County indicated that they are seeking development opportunities in northern Idaho where the housing market is similar but where there is significantly less state regulation. These observations are for information and context. The City has limited influence to improve these identified conditions. • Interviewees noted the diminishing availability of large tracks of unimproved land in Washington and the increasing cost of land relative to Idaho as driving forces. There was PAGE 22 also a strong desire to expand the Urban Growth Boundary to provide more land to develop housing. • Several interviewees cited that the energy code revisions adopted by Washington will add costs to home development. These measures, which take effect in 2021, increase development costs which are passed through to the home buyer. • Finally,Washington state's condominium laws create a disincentive to develop this type of attainable housing due to insurance requirements. Condominium law reform is needed to encourage development of higher density condominium buildings that may offer affordable home ownership options. PRE HAP-ADOPTION OUTREACH Community input was used to shape the direction of the HAP's strategies and recommendations. Draft strategies and recommendations were then reviewed by staff,and the final HAP, once prepared,will be posted on the HAP project web page (www.spokanevalley.org/HAP),distributed to the public for further comment, and refined based on feedback prior to adoption. 2.4 Displacement Risk Analysis Displacement occurs when a household is forced to relocate because of changes in the housing market, either because their housing is being redeveloped or undergoing major renovations or because their housing costs are increasing to beyond what they can afford. With regional housing prices escalating and new housing development taking place, some existing residents in Spokane Valley may be at risk for displacement. The overarching intent of examining displacement risk is to help Spokane Valley proactively identify residents who may be at risk and help inform strategies for preventing and minimizing displacement. This analysis of socioeconomic and demographic displacement risk was modeled after the Puget Sound Regional Council's Displacement Risk Mapping Tool and is based off a method developed by ECONorthwest. Six variables that can highlight areas where households are most susceptible to displacement were evaluated at the block group level. The evaluated variables were: • Percent of population that is a race other than non-Hispanic white • Percent of households that speak a language other than English at home • Percent of population under 25 who lack a bachelor's degree • Percent of households that are renters • Percent of households paying more than 30 percent of gross income on housing • Per capita income These factors include renter households,low-income households,and households that are more likely to experience housing discrimination(including communities of color, seniors,and other marginalized (populations). PAGE 23 2.4.1 Types of Displacement There are typically three types of displacement referred to as economic, direct, and cultural displacement (ECONorthwest research). Economic or indirect displacement. Economic displacement Low income households can occur if new development or redevelopment in an area rents are at high risk of or sells at higher price points that encourage owners of existing economic displacement, units to increase rents, and these increases exceed what existing as they have fewer tenants can afford. The effects of (re)development renting at choices about where they can afford to live. market rates may spill over to lower-cost rental units, causing rents to rise and potentially displacing existing residents. Economic displacement can happen without new development or redevelopment when high demand and low housing supply push prices up. Economic insecurity and displacement are a very important issue for existing communities, but they are difficult to measure quantitatively. Physical or direct displacement. Physical In theory, any type of household could displacement occurs if existing housing is torn be at risk of physical displacement due down for redevelopment and existing tenants are to a new development demolishing displaced. In some cases, public programs could their current housing. But in reality, low income households, households of encourage displacement by incenting a developer color,immigrant households, and other to rehabilitate or replace older, low-cost housing marginalized populations are at higher (unregulated affordable housing) with newer, risk of physical displacement. Wealthy higher-priced units. This could lead to the direct or "powerful" households are at lower displacement of existing residents,who may not be risk of direct displacement, as they may not live in areas experiencing new able to afford the higher rents in the new development,and they may hold sway development. over decision makers or otherwise know how to exert influence in the process. Cultural displacement. Cultural displacement Marginalized communities—be occurs when people move because their neighbors and they low-income, a specific culturally relevant businesses and institutions have left the race or ethnicity, or another area. The presence (or absence) of these cultural assets group of people—are at higher risk of cultural displacement can influence racial or ethnic minority households, more than dominant communities. than broader populations,in their decisions about where When businesses and housing to live.While this is difficult to measure quantitatively,and that serve these communities one could consider whether these are "choices" or leave or are removed, people whether this is "forced" displacement, it is an important can feel pushed out of their effect that can have broad equity implications beyond neighborhoods. physical or economic displacement alone. Cultural displacement can also include business displacement. 2.4.2 Areas with Displacement Risk Figure 14 shows the results of the socioeconomic and demographic variables identified in section 2.4 that have been used to measure displacement risk. The layering of socioeconomic characteristics for each block group in Spokane Valley shows the neighborhoods that have the highest risk for all three types of displacement. Seventeen of the 64 Census block groups are identified as high vulnerability PAGE 24 and 31 are identified as medium vulnerability. Of the total population that comprises these block groups, 27 percent is in a high-vulnerability block group and 46 percent is in a medium-vulnerability block group. Figure 14: Displacement Risk in Spokane Valley by Block Group % 's Legend ""�, -Spokane Valley City Limits Tidien Displacement Vulnerability 4 J Ore. Vulnerability Index by Block Group MAIM IN 9 High Vulnerebi@y 8 mn. Cat 5 Medium Vulnerability 8. 4 larilude Valley Lexuxdr, CCE= 3 2 CO2upeltr 1 Low Vulnerabi Isy • • • Source:U.S.Census Bureau(2018).ACS. More conversations and analysis are needed to truly understand displacement risk.A deeper dive into economic displacement resulting from the spillover of new development requires a robust analysis of new and existing rent trends,which is beyond the scope of this work. In addition, measuring cultural displacement is difficult, and not quantifiable from data. It requires qualitative information from in- person engagement with people living near new development. When the City considers land use changes and planning projects it should track,monitor,and engage intentionally with high vulnerability areas. 2.5 Development Feasibility Analysis To inform recommendations about new and revised development incentive programs that can support more housing, including more affordable housing, development (or financial) feasibility was analyzed by ECONorthwest using several housing prototypes and market data unique to submarkets and different development types across Spokane Valley. PAGE 25 This development feasibility sensitivity analysis iPolicy Evaluation and helps identify regulatory and program Financial Feasibility recommendations that would most effectively To compare development feasibility and the advance Spokane Valley's goals of creating new impact of policy options across different housing to meet forecast demand and growth, development types, ECONorthwest used a creating a variety of housing types at different price common method to identify economic points to meet the needs of current and future feasibility called a residual land value analysis. Residual land value is an estimate of what a residents. The results of the sensitivity tests are developer would be able to pay for land given summarized in the following sections and help to the property's income from rental or sales inform recommendations for changes to Spokane revenue, the cost to build as well as any cost to operate the building,and the investment returns Valley's housing programs and development code. and programs needed to attract capital for the project. In Potential regulatory modifications other words, it is the budget that developers tested herein were informed by the regulatory have remaining for land after all the other analysis. Appendix E provides more detail on this development constraints have been analyzed. analysis, along with a summary of assumptions. A few of the housing strategies recommended in this HAP to encourage more housing variety and housing supply include modifications to existing development code as well a recommendation for the City to consider the adoption of a multifamily tax exemption (MFTE) program. Code modifications and the potential addition of MFTE program incentives were analyzed to evaluate their effectiveness in improving the likelihood of development of townhomes and multifamily apartments. A development feasibility analysis tests the impact that various changes to development standards and incentive programs have on market-realistic development examples called prototypes. 2.5.1 Analysis Overview The purpose of this analysis is to examine a set of key program changes and policy levers that can help "tip"project feasibility for the MFTE program and regulatory changes in Spokane Valley. This section describes the findings from evaluating a set of key planning tools, specifically the METE and regulatory changes—including modifications to the allowed density in certain zones and changes to other development standards. These planning tools were selected for their potential to boost housing production, especially housing priced for low- to middle-income households. • MFTE: The MFTE allows a local jurisdiction to incentivize diverse housing options in urban centers lacking in housing choices or workforce housing units by providing taxing exemptions or credits for developers. Essentially this program supports increased housing availability, possibly including affordable units, largely in mixed-income developments conveniently located in urban centers. Chapter 84.14 RCW outlines the existing requirements for implementing a MF IL program. This program exempts eligible new construction or rehabilitated housing from paying property taxes for either an eight-year or a 12-year period. Only projects with four or more rental units are eligible for either the eight- or 12-year exemption, and only property owners who commit to renting or selling at least 20 percent of these units to low- and moderate-income households—earning less than 80 percent of the AMI—are eligible for the 12-year exemption. Spokane Valley currently does not have an established METE program. Additional detail on the MF IE program is provided in Appendix E. PAGE 26 MFTE Testing Parameters: Test out the addition of a MFTE program offering a 12-year tax exemption that would require that at least 20 percent of the units be set aside for households earning 80 percent of the AMI or less. In Spokane County, the ANTI for a four-person household was $77,400 in 2020. Two ways that this program was tested were: — MFTE program without any increase in residential density in MFR zones. — MFTE program with an increase in allowed residential density up to 40 du/ac in MFR zones compared to the 22 du/ac that is allowed under the current regulations. • Density and Development Standards: The density of residential buildings is limited by the maximum density allowances that the SVMC sets for each zone. Density allowances differ by zone and sometimes are specific to the type of residential building. Residential density is important for housing development because it determines the number of dwelling units that can be built on a parcel.Minimum lot sizes can also influence residential development, since they can prevent development on lots below a certain size. The number and size of housing units that can be built on a parcel is also determined by requirements for nonresidential uses or areas to be set aside and not developed. Open- space requirements (as well as setbacks and minimum landscape requirements) limit the residential building size on a parcel. The size of the building can also be limited by maximum lot coverage,which determines the largest share of a parcel that a building can occupy. Residential density on a development site can increase by modifying standards affecting the horizontal aspects of a project (i.e., building footprints via setback and open space regulatory changes) or standards influencing the vertical profile of a project (i.e., the maximum building height). • Development Prototypes Tested: Three prototypes are evaluated in this feasibility analysis; two types of townhomes and garden style apartments. The financial feasibility findings would generally track with other similar missing-middle product types such as duplexes and cottages. Townhomes are side-by-side- attached single family housing types that are oftentimes associated with fee simple development and small lot sizes. Townhomes can also be built as attached single family condominium housing on larger parcels. — 3-story townhomes on a 0.3-acre lot. Townhomes are 2-bedroom or 3-bedroom units with about 1,400 square feet (sf) to 1,700 sf of net floor area, sharing walls with neighboring units, a one-car garage on the ground floor, and a driveway that can function as an additional parking stall. They are assumed to sell at about$421,000 per unit on average. — 3-story townhomes on a 1.0-acre lot. These townhomes are the same as above, but they are laid out on two rows and share a private alleyway. They are assumed to sell at about$429,000 per unit on average. Garden style apartments are generally characterized as three-story wood frame construction multifamily rentals. PAGE 27 - For this analysis ECONorthwest Figure 15: Garden-Style Apartment evaluated 3-story, garden-style Example apartments on a 2.5-acre lot. Apartments have a mix of various sizes ranging from 600 sf for a studio unit to 1,300 sf for a 3-bedroom unit. Residents and their guests have access j o �1 to surface parking and a shared lobby or ' ' , I n' iRio,�P I � �._ common space area.The average rent is assumed to be $1,400 per month. An example image of a garden-style �`' , apartment is show in Figure 15. 2.5.2 Summary of Development Feasibility Findings Below is a thematic overview of the findings from the development feasibility assessment. For more detail on the analysis, assumptions, and dollar values of the assessment results, please refer to Appendix E. • Based on existing development standards and land prices in Spokane Valley,the townhome prototype has limited feasibility in the R-4 zone and three-story garden-style apartments are not feasible in the MFR zone,given current land prices.The value of new development is limited by development standards that restrict the scale of development possible on a parcel. Increasing density allowances is an effective way to encourage development of townhomes and garden-style apartments in Spokane Valley. • For garden-style apartments, the 12-year MFTE also makes projects more cost-effective and feasible,but it is not as impactful as increasing density allowances to 40 du/ac. • The development prototypes that tested policy changes included townhomes and apartments at various densities. However, the development feasibility of other missing- middle housing types such as duplexes and cottages would also benefit from these density increases. • Decreasing open-space requirements, increasing maximum lot coverage, or increasing maximum building height is unlikely to have any meaningful effect on housing development in the near future. PAGE 28 3 HOUSING STRATEGY RECOMMENDATIONS The strategy recommendations advanced in this HAP were informed by public engagement, data analysis,review of relevant policies and planning documents, staff input,and development feasibility. These recommendations are intended to be options for Spokane Valley that will, if implemented, provide tools to increase housing supply, increase variety of housing types, and/or increase the availability of housing affordable to all income levels in Spokane Valley. The housing needs assessment concluded that 6,660 new housing units are needed to support growth in the City though 2037.With 1,175 of those units needed for households earning 50 percent or less than AMI, this HAP provides recommended actions that focus on supporting this largely rental household population that is largely cost burdened or severely cost burdened. There is also an additional need for 1,039 units that needs to be targeted to households earning between 50 and 80 percent of AMI. Strategies that encourage and provide incentives to develop missing-middle housing types are provided because these are homes where many millennial families first start or where seniors move to down-size. There is no "silver bullet" for developing housing strategies, as each idea brings benefits, drawbacks, different levels of impact, and tradeoffs. These recommended actions are proposed because they can help to fulfill housing needs equitably across the spectrum of different household incomes. The recommendations are organized under the following goals, and are not ordered in any rank or priority: A. Preserve existing affordable housing and prevent and mitigate displacement. Housing preservation and anti-displacement recommendations can mitigate and minimize the negative effects that often arise from new housing development. Housing preservation and anti-displacement recommendations can expand housing affordability and availability in various ways. Of particular focus is aging housing stock that could be at risk of investment purchases (where they are bought,renovated,and rented at higher prices).This is important in the Census Block Groups identified as at high risk for development feasibility and physical displacement. B. Increase market-rate and affordable housing supply throughout Spokane Valley but focused on zones that support multifamily and missing-middle housing types. The housing needs assessment found that a range of housing types meeting the affordability needs for a range of household incomes will be needed to meet the identified goal through 2037 as illustrated in Figure 11. Recommended actions to encourage the development of a diversified housing stock include SVMC modifications, provision of incentives, and the consideration of a targeted tax exemption. C. Increase housing options and housing choice. Increasing housing choice and expanding options to households in Spokane Valley is a focus of several housing and land use policies and goals.The City has policies and regulations that support"middle housing" development, such as cottages,duplexes,triplexes, and ADUs. Recommended actions will PAGE 29 encourage the development of more ADUs,provide for the development of tiny homes and tiny home villages, support transitional housing, and provide for the establishment a City program to fund efforts to supporting housing for the full range of income ranges. 3.1 Summary of Housing Strategy Recommendations Figure 16 provides an overview of each recommended action by category. These recommendations are within Only Recommendations Spokane Valley's control, but work will span The adoption of this HAP by City Council departments and involve meaningful contributions from does not mean these recommendations stakeholders such as the City Council and the Planning will all be advanced. The recommended Commission,as well as renters,homeowners,advocates, actions will undergo their own process for developers (both affordable and market-rate),and many review,adoption,and engagement. others. Each housing strategy recommendation presented in Figure 16 includes a description of how it advances Spokane Valley's Comprehensive Plan housing goals,the rationale for moving forward,and key next steps. Some recommended actions may cross over into other categories. The detailed assessment of each recommended action follows the summary of recommended actions found in Figure 16. PAGE 30 Figure 16. Summary of Recommended Actions Action Recommended Description Implementation Considerations No. Action Goal A: Preservation of Affordable Housing and Displacement Mitigation Comprehensive Plan Goals and Policies that support these recommended actions: • H-Gl Allow for a broad range of housing opportunities to meet the needs of the community. • H-G2 Enable the development of affordable housing for all income levels. Recommended Comprehensive Plan Goal, Policy, or Strategy Updates to support these recommended actions: • Revise H-Pl "Support voluntary efforts by property owners to rehabilitate and preserve buildings of historic value and unique character" to "...preserve buildings that provide affordable housing and buildings of historic value and unique character." • Revise H-P3 "Use available financial and regulatory tools to support the development of affordable housing units."to "...support the development and preservation of affordable housing units." • Consider a Housing Element Strategy that encourages Spokane Valley to monitor its regulated affordable housing units. • Consider a Housing Element Strategy that encourages Spokane Valley to establish a rental housing business license program. Al Monitor Rent-Restricted Implement a program to monitor the supply of rent- Evaluate the feasibility from a City resource Properties restricted affordable housing units in the City. standpoint of establishing a monitoring program and Maintenance of such a knowledge base will allow consider working with housing partners in developing the City and community housing partners to foresee a monitoring program to receive data. and plan for threats to rent-restricted housing supply. A2 Retain Affordable To address potential displacement risks,ensure safe Research and evaluate the costs and benefits of a Market Rate Units rental housing and collect key data on rental rental housing business license program for the City in housing properties by establishing a rental housing order to monitor the rental housing stock and the business license program. income ranges they serve. A3 Evaluate Potential Identify and track key demographic and Develop a Spokane Valley program that includes Displacement Impacts socioeconomic data for neighborhoods in Spokane methods to evaluate risks and engages in effective from Proposed Land Valley; pay attention to current conditions in areas community outreach. Use Changes targeted for growth. A4 Provide Tenant Support Work with community partners to increase access to Work with community organizations to identify new tenant supports. Consider establishing and programs and partnerships;identify potential funding monitoring compliance with fair housing policies. sources; consider relocation assistance for displaced Seek funding for programs requiring financial aid or renters. resources. A5 Provide Homeowner Work with community organizations to increase Work with community organizations and identify Resource Assistance access to homebuyer supports;seek funding for potential funding sources. down payment assistance and financial counseling classes. PAGE 31 Action Recommended Description Implementation Considerations No. Action Goal B: Increase Housing Supply Comprehensive Plan Goals and Policies that support these recommended actions: • H-Gl Allow for a broad range of housing opportunities to meet the needs of the community. • H-G2 Enable the development of affordable housing for all income levels. • H-P2 Adopt development regulations that expand housing choices by allowing innovative housing types,including tiny homes, accessory dwelling units, prefabricated homes, cohousing, cottage housing,and other housing types. • H-P3 Use available financial and regulatory tools to support the development of affordable housing units. • LU-G4 Ensure that land use plans,regulations,review processes,and infrastructure improvements support economic growth and vitality. • LU-P14 Enable a variety of housing types. • LU-P16 Maximize the density of development along major transit corridors and near transit centers and commercial areas. • LU Strategy:Collaborate with the private sector to ensure the successful redevelopment of vacant land at Mirabeau Point. Recommended Comprehensive Plan Goal, Policy, or Strategy Updates to support these recommended actions: • Revise LU-P13 "Work collaboratively with landlords and developers that seek to provide mixed-use residential projects"to "...that seek to provide affordable housing, mixed-income, or mixed-use residential projects." B1 Modify the SVMC to Decrease minimum lot sizes,increase density limits, Review potential actions and draft regulations to encourage and modify the lot coverage ratios in R-4, multifamily, revise the SVMC. production of and mixed-use zones.Consider flexibility in open townhomes and space requirements and setbacks for cottages. cottages B2 Adopt a MFTE Adopt 12-year MFTE program in R-4, multifamily, and Conduct a study and solicit input from stakeholders program mixed-use zones with an emphasis on transit-served to weigh public benefit of affordable units with lost areas. tax revenues. B3 Create incentives to Allow increased density in exchange for inclusion of Conduct additional studies and solicit input to weigh produce additional affordable units. Waive up to 80 percent of impact public benefit of affordable units with lost revenues. market rate and fees for projects with affordable units. Consider local affordable housing sales tax waivers for projects that provide affordable housing at or below 30 percent of AMI. B4 Adopt a planned Subareas with a planned action ordinance will Weigh potential areas and resources needed to action ordinance(s) provide for streamlined development where a well- implement a planned action ordinance. in subareas with defined vision has been defined,infrastructure transit investment or investments made,and specific incentives created where large, mixed- to encourage mixed-income, mixed-use use phased development. developments can occur PAGE 32 Action Recommended No. Action Description Implementation Considerations Goal C: Increase Housing Choice Comprehensive Plan Goals and Policies that support these recommended actions: • H-G1 Allow for a broad range of housing opportunities to meet the needs of the community. • H-G2 Enable the development of affordable housing for all income levels. • H-P2 Adopt development regulations that expand housing choices by allowing innovative housing types,including tiny homes, accessory dwelling units, prefabricated homes, cohousing,cottage housing, and other housing types. • H-P3 Use available financial and regulatory tools to support the development of affordable housing units. • H-P4 Enable the creation of housing for resident individuals and families needing assistance from social and human services providers. • LU-G2 Provide for land uses that are essential to Spokane Valley residents,employees, and visitors. • LU-P9 Provide supportive regulation for new and innovative development types on commercial,industrial, and mixed-use land. • LU-P14 Enable a variety of housing types. Recommended Comprehensive Plan Goal, Policy, or Strategy Updates to support these recommended actions: • Add a Housing Element Strategy that focuses Spokane Valley on exploring the development of a housing fund to support the development of new units and preservation of existing units that target moderate-income to extremely low-income households. Cl Update regulations for Development of ADUs has been slow; modifications Revise ADU standards and established approved Accessory Dwelling to the SVMC may increase the production of these models. Units attainable units. C2 Permit and clarify tiny Allow tiny homes as an alternative to ADUs. Allow Review and modify land use and building codes to home regulations for tiny house villages in MU zones or on publicly/ permit tiny homes in specific zones. religious owned properties to promote development of lower-cost transitional housing. Consider minimum density requirements for tiny house villages. C3 Coordinate with Establish siting requirements for homelessness Evaluate best practices and the feasibility of siting existing systems of support centers and establish streamlined policies, shelters or transitional housing.Continue to engage care for effective regulations,and guidance relating to the siting of with the community and partners about the need for Homeless Services Homeless Services in City. such facilities and how they will integrate in the area. Implementation PAGE 33 Action Recommended Description Implementation Considerations No. Action C4 Develop a City Identify new funding sources that may formalize a Evaluate the range of ways these funds may be used managed housing housing fund program such as a housing trust fund for direct investment or to leverage additional fund program,such including, but not limited to an affordable housing dollars.Consider needed staffing resources to as a housing trust property tax levy, grants,consortium and manage a housing funds program. fund,to supporting supplement funds to be received from the recently Draft a plan to define how the City will expend the housing for moderate adopted sales and use tax credit for affordable sales and use tax funds it currently collects to support to extremely low- and supportive housing.These funds may be used of low-and extremely low-income households. income households for direct investments,to leverage grants,and Develop the rationale for a housing tax levy partner with non-profit service providers and including potential impacts to the average affordable housing developer to support extremely household and a detailed plan for how funds would low-income to low-income households. be used and gauge community support. PAGE 34 3.2 Assessment of Housing Strategy Recommendations Goal A. Preserve affordable housing and prevent and mitigate displacement. Al. MONITOR RENT-RESTRICTED PROPERTIES Spokane Valley should consider a staff program that allows it to monitor its supply of rent-restricted affordable housing. As described in the Housing Needs Analysis section, Spokane Valley has approximately 1,663 units of rent-restricted affordable housing (see page 12). These properties have been built and maintained at different times,with different funding types and different restrictions on their affordability. They all have various expirations on those affordability restrictions as well. Rationale: When affordability restrictions end, rent-restricted properties are at risk of moving to market-rate housing, losing critical affordability for their tenants. This risk is particularly high if properties are owned by private, for-profit companies (nonprofit affordable housing owners and operators will typically work to keep the rents affordable). When affordability restrictions end, properties often must be recapitalized (get new funding and loans) and/or rehabilitated to improve their physical conditions and renew affordability limits. This funding is typically competitive and hard to find. In tight housing markets, for-profit developers may seek properties that need rehabilitation, finance the construction with debt, and then raise the rents to pay for the debt service, thereby removing units from the affordable housing stock. By monitoring rent-restricted affordable housing properties that are nearing their affordability expiration dates,Spokane Valley can be a strong partner and advocate.With the big-picture knowledge of rent-restricted property conditions the City may either directly work with the property owners through a housing fund program it establishes or direct owners to its housing partners to help secure needed funding and prevent the property from becoming market rate. Next Steps: • Evaluate the level of effort and staffing resources needed to establish a monitoring program or identify a community partner to lead the effort. • Ensure that Spokane Valley has a relationship with, and proper contact information for, all rent-restricted affordable housing property owner-operators in Spokane Valley. • Work with these housing providers to ensure that data sharing is possible; consider setting up a reporting agreement with reporting information and deadlines. • Create a database and mapping system to monitor and plan for these upcoming expirations. • Become familiar with the various funding sources that are available to support recapitalization and rehabilitation (see Appendix F for a list of national, state, and local funding sources for affordable housing). PAGE 35 A2. RETAIN AFFORDABLE MARKET RATE UNITS Spokane Valley should collect key data on its rental housing properties by developing a rental housing business license program. A good starting point would be to establish reporting requirements of landlords and gather additional information on rental rates ranges and housing prices. This would provide Spokane Valley with a more detailed inventory of low-cost market rentals (also called NOAHs) across Spokane Valley. Rationale: Because regulated affordable housing is so difficult and costly to build, most low-income households live in unregulated, but affordable housing. This type of affordable housing is not a rent- restricted property, but a lower-cost property that is attainable to very low-income to moderate- income households. Because these housing units are not regulated,rents can increase by any amount at any time,putting these households at high risk of housing insecurity and displacement. Spokane Valley could evaluate the feasibility of implementing a monitoring program on its own or partnering with a non-profit. This program could provide a unique, low-cost, and low-barrier way to monitor and track the low-cost market rentals. Regular updated access to this type of data would allow Spokane Valley to actively monitor the rents and affordability levels of rental housing as well as to have readily available contact information for landlords when properties are listed for sale. An expanded program could inspect and license rental housing to ensure that landlords maintain their units consistent with livability standards. Tracking Housing Conditions in Spokane Valley A robust housing monitoring database would include the following. Most of these data points (such as address,size,and landlord contact information) likely are already collected through the annual licensing and inspection process, but the database could be more useful if additional information were gathered from landlords.As a start,this type of information could be voluntarily supplied by landlords,with required reporting coming as staffing and organizational capacity allows. In addition,some information (such as code enforcement) may be collected by other city departments or through collaboration with county agencies.The City of Tukwila and the City of Burien have established such programs. Basic Information Additional Information • Property address • Rents by unit type • Property size (number of units) • Number of renters using rent assistance • Year built programs • Contact information for the landlord • Typical unit amenities • Management company(if applicable) • Amenities on site • Inspection results and schedules (with • Number of units and properties owned by particular attention to deferred landlord (can be provided in ranges) maintenance at the property) • Property violations or complaints Next Steps: • Develop a work plan and identify staffing needs and potential partners. The work plan should consider the feasibility of managing a rental housing licensing program and fee structure to understand impacts for cost-recovery and staffing needs. Inspections and licensing programs can be structured to be revenue neutral, where fees cover all programmatic expenses. PAGE 36 • Work directly with the Landlord Association to identify and mitigate challenges with the establishment of a monitoring program. • Establish criteria to identify properties at risk for displacement, such as those that have low rents, meaningful deferred maintenance, few units (e.g., fewer than 20), noninstitutional owners, and those that are in amenity-rich areas, near recent redevelopments, or on high-cost land. These factors all increase the risk that a mom-and- pop landlord might look at deferred maintenance needs and decide to sell their property to a willing investor. With this information the City or its partners may help match high risk properties with funds from a City housing fund or other resources available to housing partners such as with home repair grants and loan programs supported by the state. PAGE 37 A3. EVALUATE POTENTIAL IMPACTS FROM DISPLACEMENT WHEN PROPOSING LAND USE CHANGES Figure 13 shows only one of the many tools and strategies available to monitor displacement risk. Displacement does not happen equally across Spokane Valley, as some neighborhoods and some communities are more likely to be forced from their homes because of economic,physical,or cultural changes. Spokane Valley should continue to monitor these areas as The Displacement Vulnerability Risk development takes place,housing market conditions change, map in Figure 13 shows one point in or development opportunities continue to expand. Special time. Community-level demographic attention should be paid to historically marginalized changes can occur relatively quickly. communities such as communities of color,immigrants,and The methodology for this analysis is included in this report and can easily non-English-speaking communities. be updated regularly by City staff. In addition, before land use and Comprehensive Plan updates are enacted in areas with high displacement risk, Spokane Valley should reassess risk and proactively engage with the communities where such changes will be proposed. Spokane Valley should integrate this risk assessment with its approval criteria in SVMC 17.80.140.H for Comprehensive Plan amendments and develop safeguards in response to its findings. Rationale: With a nuanced understanding of the areas that might have the most vulnerability to physical, economic, and cultural displacement, Spokane Valley can employ its anti-displacement recommendations in a geographically focused way. Many of the tenants living in unregulated affordable properties will be at risk if their building is purchased and rents rise. In addition, Spokane Valley-led changes in zoning allowances to allow more intense housing development can increase the chances that households vulnerable to displacement will see increased displacement pressures. Consequently, displacement risk should be assessed before rezones and safeguards are developed in response to the findings. Next Steps: • Create an update process for identifying and assessing key factors associated with displacement risk,using the most up-to-date data. • Focus on historically marginalized communities such as communities of color, immigrants, and non-English-speaking communities. • Spokane Valley could choose to have more targeted outreach in these areas with high displacement risk to better understand the community's desired outcomes relative to proposed zone changes. PAGE 38 A4. PROVIDE MORE TENANT SUPPORT Spokane Valley should explore additional tools and practices to strengthen tenant support. This recommendation suggests working with community organizations to provide a broad array of community-based supports and resources for tenants and renters. The City, either directly or with its housing partners, could better support tenants in accessing services by providing an accessible resource to understand legal protections through the state's Residential Landlord-Tenant Act (RCW 59.18).Additionally, a responsive code enforcement department for those rentals that are in disrepair or unfit for habitation when landlords are nonresponsive may also help. Rationale: Direct resources that support residents in Spokane Valley will help minimize and mitigate the effects of displacement pressures. At the federal level, the Federal Fair Housing Act prohibits housing discrimination based on race,color,national origin,religion, sex, familial status and disability. (Title VIII of the Civil Rights Act of 1968, as amended in 1988 (42 U.S.C. P3601 et seq.) and Civil Rights Act of 1866 Organizations such as the Fair Housing (Title 42 of the United States Code sections 1981 and Center of Washington serve as a resource for jurisdictions implementing projects 1982)).Tenants need to know their federal and state tenant that use federal funds to affirmatively rights and feel empowered to maintain their housing, further fair housing (AFFH). Local Housing particularly for households belonging to marginalized Solutions is another resource that communities (such as immigrant and refugee communities, connects housing strategies with AFFH. communities of color,and low-income communities). Next Steps: Spokane Valley could establish,update, or strengthen resources available to tenants involving: • Low-barrier application screening (e.g.,Fair Choice Housing or Ban the Box efforts). • Create tenants' rights and education resources (e.g., funding for RentWell programs). • Require language translation of tenant information to increase the education available to immigrant and refugee communities. PAGE 39 A5. PROVIDE HOMEOWNER RESOURCE ASSISTANCE Spokane Valley should work with community organizations to explore and expand on a range of homeownership assistance programs. There are many aspects of homeownership assistance that Spokane Valley could consider supporting through partnerships with regional organizations. Rationale:A major way to mitigate displacement is by increasing the homeownership rate,particularly for low-income households, households of color (who have historically lower homeownership rates than white households), as well as immigrants and refugees. Displacement often does not affect homeowners, in large part because they have fixed mortgage payments that cannot change without warning (taxes do change but they are a small portion of overall homeownership housing costs). In addition,because lenders size a mortgage to a buyer's income and ability to pay,homeowners are less susceptible to cost burdening and housing insecurity, absent a sudden change in income. Because homeowners are largely shielded from larger economic and housing market changes, encouraging homeownership is one of the best ways to prevent physical and economic displacement. It cannot, however,prevent cultural displacement. Next Steps: Homeownership down payment assistance programs can be challenging to maintain and can only help a limited number of households.Many homeowner and homebuyer resources require funding through grant programs such as the Washington State Housing Trust Fund grants and loans or HUD's HOME programs managed by Commerce. Spokane Valley's role can be to enhance its partnerships with regional organizations already working in these areas and explore avenues to educate and provide resources for prospective homeowners.Areas where the City can provide additional resource support include: • Hosting homebuyer education (classes educating renters on the home buying process). • Foreclosure assistance and counseling. • Energy assistance and counseling. • Provide resources on cooperative ownership housing models (information and guidance for tenants looking to buy out a landlord and establish a cooperative ownership structure). • Provide resources on community land trust models (which provide shared equity as home prices appreciate,while still maintaining long-term affordability). • Down payment assistance (funding would have to be identified, and income thresholds would have to be carefully considered to establish eligibility criteria). • Homeownership weatherization and rehabilitation grants. PAGE 40 Goal B. Increase market-rate and affordable housing supply throughout the city but focused on zones that support multifamily and missing-middle housing types. B1. MODIFY THE SVMC TO ENCOURAGE PRODUCTION OF TOWNHOMES AND COTTAGES Townhouses and cottages are permitted under the supplemental use regulations in the R-4,MFR,MU, and CMU zoning districts. The Neighborhood Commercial zoning district also permits townhouses. Spokane Valley defines a townhouse development as one where between three and six attached single- family dwelling units are developed side by side, and a cottage development as one where small, detached, single-family dwelling units are developed as a group clustered around a common area. A limited number of townhomes have been developed in the City, and no cottage projects have been completed to date. This action recommends modifications to density requirements and minimum lot sizes in the R-4 zone, and allowing unit-lot subdivisions to improve development feasibility for townhome and cottage developments.Unit-lot subdivision defines boundary lines and use areas within a larger "parent" parcel for the purpose of defining and creating individual sellable lots. This is primarily used when multiple buildings are designed to fit on a single original lot such as for townhome and cottage developments. Site development standards apply only the parent site as a whole. New buildings are on individual lots allowing for fee simple transfer to new owners. Many cities have adopted code to support this type of subdivision including Spokane, Wenatchee, Arlington, Seattle, and Bellevue to name a few. The following recommended SVMC modifications would improve development feasibility and encourage the development of more missing-middle housing for moderate-income and middle- income households. • Increase the residential density in the R-4 zone from ten du/ac to 15 du/ac. • Decrease the minimum lot size for townhomes in the R-4 zone from 4,300 square feet to 2,000 square feet. • Reduce the building setback and open space requirements for cottage developments for projects that provide affordable housing. • Allow unit-lot subdivisions. Rationale: The City already accommodates townhouses and cottages as permitted uses in the R-4 zone, so modifications that help encourage these product types are likely to be more palatable politically than extending these changes to other residential zones. The regulatory review in Appendix C highlights regulatory barriers that limit townhome development. The development feasibility analysis in Appendix E found that the current code results in residual land values that fall at or below average land prices. Further, for lots with existing homes, the development economics become even more challenging. The analysis of the modifications found that developers likely will respond positively by producing townhome units in R-4. Because of challenging economics, cottage projects are not as common as townhomes. Reducing setbacks and open space requirements for cottage projects with affordable housing improves development economics and will encourage more missing- middle development. PAGE 41 Next Steps: • Review potential actions and draft regulations to revise the SVMC. • Evaluate the potential impacts from displacement of residents in existing NOAH single- family rental homes and consider the potential benefits and resource costs/impacts to implement a relocation fee program. The fee would be paid by developers to the City's housing fund for supporting tenant relocation elsewhere in Spokane Valley. PAGE 42 B2. ADOPT A MFTE PROGRAM Spokane Valley should consider establishing a 12-year MF'I'E program in mixed-use and multifamily zones that are transit served. Spokane Valley should consider establishing a MFTE program with the 12-year affordability requirements to capture value from the financial incentive. This MFTE program should also be packaged with modifications to density standards. With the COVID-19 pandemic hurting cities'economic and fiscal outlooks, special consideration will have to be given to the impact of an MFTE program on Spokane Valley's tax revenues. Rationale:Tax abatements positively impact the feasibility of projects where market-rate projects are feasible and can help cross-subsidize the affordable units.When considering a MF IL program,careful consideration of the temporary loss of tax revenue from the new affordable units against the potential attraction of new When a project is approved under investment. MFTE can help support increased housing a multifamily tax exemption production byincreasingthe feasibilityof multifamilyand program, the value of eligible housing improvements is exempted mixed-use development. If MF I'E were to be applied in areas from property taxes. Property tax planned for frequent transit, such as the Sprague, it could revenue is still collected on increase the development feasibility of the existing MFR and remainder of the project. mixed-use zones. The current development standards in the MFR zone create marginally feasible projects, but the MFTE program with the 12-year tax exemption will add new units at 80 percent of AMI or less that would not have been developed otherwise. The 12-year MF I'E program specifically increases the supply of affordable housing, and this incentive could be paired with an increased allowed density from 22 du/ac currently allowed in the MFR zone up to 40 du/ac. Such an incentive would improve the development feasibility of projects adding density. Multifamily development in the CMU and MU zones is considered commercial and has no density limits. Project in these mixed-use zones will not need the density bonus;however, the MFTE program will improve project performance and provide units affordable to moderate income households. Next Steps: • Explore the programmatic implications for the City to create and manage a 12-year MFTE program for projects delivering at least 10-units to support both housing development and new affordable housing. The City could refer to other city's MFTE programs such as the City of Bellingham's (https://cob.org/services/planning/development/mfte). • To weigh the fiscal impacts and potential benefits associated with increased housing production(market and affordable units) study the potential impacts to the City's tax base. Specific to Spokane Valley is that it has not taken its property tax increases for 12 years, so the only increase in property tax is from new construction. An MF I'E program that reduces tax revenue from the affordable units in new developments would have an increased effect for the City's revenues compared to cities who take annual increases. • Conduct additional outreach with developers, impacted residents, and other stakeholders to determine the best approach to land use changes. Ensure that potential displacement is evaluated alongside any proposed land use density changes. PAGE 43 • Map out the process to adopt a MF 1'E program including the creation of targeted areas (RCW 84.14.040) that are designated urban centers.The creation of urban centers requires a Comprehensive Plan amendment. Urban center means a center designated as such in the land use element of the City's Comprehensive Plan. An urban center is an identifiable district containing business establishments,adequate public facilities,and a mixture of uses and activities, where residents may obtain a variety of products and services (RCW 84.14.010(18)). PAGE 44 B3. CREATE INCENTIVES TO PRODUCE ADDITIONAL MARKET RATE AND AFFORDABLE HOUSING Several tools for incentivizing market rate and affordable housing may be adopted by Spokane Valley. These incentives provide an exchange where a city offers a benefit to a proposed project such as a density bonus,a mechanism for reducing project costs like reduced parking, or a means to streamline the permitting process.In exchange,the developer agrees to provide a certain percentage of affordable units for a certain number of years. These incentives could be limited to certain zones or overlay zones. Density bonus programs may also allow developers to contribute to a housing fund in lieu of building the units themselves. The following incentives are recommended strategies to increase affordable housing production (see Appendix E the analysis summary): • This HAP recommends modifying the permitted R-4 density from 10 du/ac to 15 du/ac to encourage townhome and cottage development. This strategy recommends increasing the modified permitted density from 15 du/ac to 22 du/ac for townhome and cottage developments if 20 percent of the units are set aside for households earning 80 percent or less of AMI. These units would also be eligible for the MFTE incentive. • Increase the allowed density in the MFR zone from 22 du/ac to 40 du/ac if 20 percent of the units are set aside for households earning 80 percent or less of the AMI. These units would also be eligible for the MFIE incentive. • Consider a fee-in-lieu program for projects seeking the additional density but choosing to forego providing affordable housing on site. These funds would be managed by Spokane Valley's housing fund program to support affordable housing elsewhere in the City. • Waive up to 80 percent of impact fees for projects that provide affordable units targeted toward households earning 60 percent or less of the AMI. Rationale: The analysis in Appendix E found that the development economics create a strong motivation for the development community to respond positively to these incentives. Pairing the density bonus with affordable housing requirements provides housing choices for a broader range of household incomes. Next Steps: • Conduct additional studies and solicit input to weigh public benefit of affordable units with lost property tax and sales tax revenues. • Evaluate a fee-in-lieu program to access the density bonus in exchange for funds that Spokane Valley may use to support affordable housing development and preservation. PAGE 45 B4. ADOPT A PLANNED ACTION ORDINANCE(S) IN SUBAREAS WITH TRANSIT INVESTMENT OR WHERE LARGE, MIXED-USE PHASED DEVELOPMENTS CAN BE BUILT Planned actions,which are authorized under SEPA (RCW 43.21C.440 and WAC 197-11-164 through -172), provide more detailed environmental analysis during an areawide planning phase rather than during the permit review process.As a result, future projects in the designated planned action area do not require SEPA determinations at the time of permit application if they are consistent with the type of development, growth and traffic assumptions, and mitigation measures studied in the environmental impact statement or the threshold determination. Rationale: A planned action ordinance would help streamline the development process for projects in the planned area. Planned actions may help Spokane Valley increase its housing supply and add to its low- and middle-income housing stock near transit and jobs.Transit oriented development around Spokane Transit Authority (STA) investments also encourages more ridership helping to justify its investment. Next Steps: • Administering the planned action ordinance process can be an expensive endeavor for the City. It should estimate the resources to develop needed to implement a planned action ordinance and identify potential grants or funding partners such as the STA that may help offset these costs. • Identify potential subareas for a planned action. Two areas for consideration may be a portion of the Sprague Avenue corridor between Havana and Pines and the station area at Mirabeau Point. • Coordinate with the STA on its plans for future station areas and discuss the concept of partnering with housing developers to provide affordable housing its surface parking lots in a transit-oriented development. PAGE 46 GOAL C. INCREASE HOUSING OPTIONS AND HOUSING CHOICE. Cl. UPDATE REGULATIONS FOR ADUS ADUs are currently permitted in all Spokane Valley zoning districts except for MFR. These units are regulated by SVMC 19.40.030, which contains the siting, building, parking, and ownership requirements for developing an ADU. Several recommended revisions to this section could increase the pace of ADU development. Appendix G provides additional background on ADUs. Spokane Valley could consider the following: • Eliminate or reduce the off-street parking requirement for an ADU if the owner can provide evidence it already has enough parking area to meet this requirement.Adding off- street parking space to the existing parking requirements can make development of an ADU cost prohibitive and physically impossible. • Remove the ownership requirement for developing an ADU. There are over 4,850 single- family homes in Spokane Valley for which the tax bills are mailed to different addresses. These homes are likely rental properties and would not be allowed to have an ADU. Generally, requiring owner-occupancy of one of the units can negatively impact ADU construction. Some cities have removed such requirements or has modified them—for instance, the City of Renton exempts owner occupancy requirements in exchange for 60- percent-AMI affordability. • Spokane Valley should explore whether there are feasible opportunities to relax the size limitations to allow for more flexibility and smaller units that could result from the conversion of garage spaces. • Relaxing the ADU setback requirements (particularly the side and rear) to five feet could make ADU projects more feasible,particularly on lots with irregular or elongated shapes. • Lower barriers to allow homeowners to consider developing ADUs and consider reducing costs by allowing strategic permitting fee waivers for affordable dwellings. • Increasing the density to allow for two ADUs per lot could be helpful, particularly if Spokane Valley sees increasing demand for ADU housing options. Jurisdictions will not see large numbers of ADUs being constructed until the market rents reach a level that makes development feasible. • Monitor: Cities may need to address short-term vacation rental use of ADUs and spillover effects in terms of parking, service, and neighborhood impacts. Rationale: The City recognizes that approximately 30 ADUs have been formally developed in Spokane Valley since 2012 based on available permit data. These recommendations are intended to encourage the development of ADUs. These units help to broaden housing diversity and choices in a wider range of neighborhoods, since they can be offered at a more affordable cost because of their small size. ADUs also offer additional options for seniors and younger populations, single-person households,etc.The AARP surveyed people 50 and older and found that they would consider creating an ADU to provide a home for a loved one in need of care (84 percent),provide housing for relatives or friends (83 percent),feel safer by having someone living nearby(64 percent),have a space for guests (69 percent), increase the value of their home (67 percent), create a place for a caregiver to stay (60 PAGE 47 percent), and earn extra income from renting to a tenant (53 percent)8. Finally,ADUs can blend into single-family neighborhoods and be a source of added income to help pay housing expenses. Next Steps: • Evaluate the possible impacts from modifying the ADU regulations around parking and ownership requirements. • Revise ADU development standards in the SVMC. • Eliminate or reduce ADU-related permit fees. • Established approved ADU models to expedite permitting. 8 Source:AARP Home and Community Preferences Survey,2018. PAGE 48 C2. PERMIT AND CLARIFY TINY HOME REGULATIONS Tiny houses are one way to provide a housing option for individuals and households who desire privacy and smaller home size but prefer single-family home amenities. Tiny homes, sometimes referred to as micro-homes, are small, single-family Micro-home (i.e. Tiny homes) dwellings, typically 80 to 200 square feet but almost always vs Micro housing units less than 500 square feet and have a kitchen and a bathroom. Appendix Gprovides additional background on tinyhome Micro housing units typically are very PPenx � small dwelling units in multi-family considerations. buildings in which all living space other than a bathroom is contained in a single Until recently, state law, building codes, and local room (usually under 300 square feet). regulations have presented numerous legal and logistical Generally, the units share common barriers to siting and building these very small, detached kitchen, laundry, a gathering spaces. Micro-housing in theory could be less dwellings. In 2019, the state legislature passed ESSB 5383, expensive than a standard 1-bedroom which updated state law to enable the development of tiny apartment but this is not always the houses or tiny house communities throughout the state. case. This type of housing usually is This law defined tiny houses and mandated that the building targeted to a very specific population— single-person households typically in code council write building codes for tiny homes by the end their 20s and 30s either in college or of 2019. Washington State has adopted Appendix Q Tiny working. Houses which relates to tiny homes on a foundation. Spokane Valley can do the following to study and improve its code and policies on tiny houses: • Add definitions for tiny houses to differentiate them from trailers, manufactured homes, and recreational vehicles.This includes clarifying that only tiny houses on foundations (not on wheels) are allowed. • Create a permit pathway for Binding Site Plans that allow siting of tiny homes (such as in a manufactured-home park). • Consider modifying the land use matrices to specify where tiny houses or tiny house villages would be permitted or conditionally allowed. In general, review the zoning code to identify potential hurdles associated with tiny home development. Tiny house village communities include property that can be rented or held by other others for the placement of tiny houses. These can also provide transitional housing for those experiencing homelessness (these villages have been built in Olympia and Seattle). • Allow tiny homes, set on a foundation, to be utilized as a detached ADU to lower construction costs. • Analyze the potential for the updated International Residential Code (IRC)with Appendix Q (2018) modified to be included in the building code to incorporate tiny house building standards. This IRC defines a tiny house as a dwelling smaller than 400 square feet excluding lofts. The Washington state legislature (via ESB 5383) recognizes that the IRC has issued tiny house building code standards in Appendix Q which can provide a basis for the standards requested within this act. This is important since the building code can be the most significant hurdle for legally constructing a tiny home. PAGE 49 Rationale: Tiny houses are one way to provide a housing option for individuals and households who desire privacy but do not want or cannot afford a large, single-family home. They can also be used as a way of providing housing for people experiencing homelessness. Next Steps: • Review and modify land use and building codes to permit tiny homes in specific zones. • Update site plan approval criteria to account for unique site needs of tiny houses. This would benefit from a process soliciting input from tiny home developers. As a first step, the City should solicit input or convene a focus group or working group including tiny house owners and developers, city planners,and city building code experts to review how tiny homes would fit in the existing site plan approval process and identify regulatory barriers and possible areas of flexibility related to the use of the IRC. • Because a negative perception of tiny homes may present hurdles, develop material summarizing the rationale and benefits for this housing type. PAGE 50 C3. COORDINATE WITH EXISTING SYSTEMS OF CARE FOR EFFECTIVE HOMELESS SERVICES IMPLEMENTATION Homelessness is a housing challenge in Spokane Valley. The Washington state Growth Management Act requires that communities plan for all economic segments of the population. This strategy addresses the very lowest income segments by recommending approaches to supporting shelters and transitional housing to help stabilize these households as they move into permanent housing. There are several ways that cities can address homelessness.The Homelessness&Housing Toolkit for Cities produced by Association of Washington Cities and Municipal Research and Services Center (2020) provides some resources and case studies. Rationale:Spokane Valley has identified a need to include goals and strategies related to homelessness in the current Comprehensive Plan update process.While the Comprehensive Plan includes goals and strategies related to affordable housing, it does not currently address homelessness. This strategy provides recommendations for supporting the very lowest income segments of Spokane Valley. Next Steps: • Include a land use and housing goal in the Comprehensive Plan that addresses Spokane Valley's intention to supporting transitional housing. • Identify best practices and potential siting requirements for shelters and transitional housing such as tiny home villages,including,but not limited to,land owned by the public or a religious institution. • Actively engage with existing service providers, faith-based organizations and regional bodies to coordinate housing resources. • Consider Spokane Valley's role in the countywide approach to addressing homelessness and evaluate the benefits and impacts from managing its portion of the real estate excise tax fees to support the homeless community as it seeks to transition to stability. PAGE 51 C4. DEVELOP A HOUSING FUND PROGRAM A Spokane Valley housing fund program could serve three functions: (1) being a resource for the development community seeking input on funding options; (2) managing active funding resources such as Spokane Valley's recently adopted sales and use tax funds for affordable and supportive housing or other potential future funding sources; and (3) collaborating, educating and advocating on new projects,initiatives,and the pursuit of new funding sources. Rationale:A housing fund program will help facilitate more housing options at the moderate-to low- income levels. There is one active funding sources this program can manage plus several others it could help Spokane Valley evaluate and pursue. This program could also help manage monitoring activities identified in Strategies Al through A3. In the near term,this program would manage the sales and use tax fund for affordable and supportive housing. Spokane Valley has estimated the annual increase of funds from this program to be approximately $178,000. These funds can be used for acquiring, rehabilitating, constructing, or operating and maintaining new affordable housing units. These funds cannot be used to fund construction or operation of a homeless shelter,but instead are reserved for longer-term low income, affordable,and supportive housing. Spokane Valley can use these funds independently,or they can be pooled in partnership with funds from other regional organizations to pay for a larger regional affordable housing development. Spokane Valley may consider two other funding sources that may support a housing fund program promote housing choice and increase housing options: Homeless Housing Assistance Act (HHAA) funds and a city-wide property tax levy (RCW 84.52.105). To begin receiving HHAA funding from recording fees, Spokane Valley would need to take responsibility for homeless housing within its borders by forwarding a resolution to the Spokane County Board of Commissioners stating its intention and commitment to operate a separate program. Spokane Valley must then comply with the same requirements as Spokane County and the City of Spokane under the HHAA. Based on 2019 recording fee collections,this program could generate approximately$657,750 per year. The property tax levy requires voter approval and would place an additional tax of up to $0.50 per thousand dollars assessed for up to ten years. For a home valued at$300,000,this levy would increase the household property tax burden by $150. Funds must go toward financing affordable housing for households earning below 50 percent MFI. Based on current tax rolls, this could generate up to approximately $4.7 million per year. While these taxpayer supported funds could be leveraged to a range of affordable housing developments and initiatives,passing a levy can be very challenging. Even with a well-defined rationale communicated to the public,taxpayers may still not support an additional tax. A complete list of Washington state, local, and federal affordable housing funding sources can be found in Appendix F.A Spokane Valley program can coordinate with other regional housing providers and offer developers resources when seeking tax credit or bonding funding from the Washington State Housing Finance Commission as well as resources from Commerce-led funding programs. These funding sources are competitive statewide. PAGE 52 Next Steps: • Identify and define the housing fund program including sources of revenue,programmatic priorities,and staffing resources needed in order to justify its creation. • Evaluate the resources needed to staff the program. • Ensure that its focus is on supporting the development and preservation of low- to moderate-income households in areas of Spokane Valley that are served by transit or where households are at greater risk for displacement. PAGE 53 4 IMPLEMENTATION PLAN In the coming years,implementing the HAP will require Spokane Valley to balance and coordinate its pursuit of actions, funding, and partnerships with its other policy and programmatic priorities. This section outlines an implementation process thatwill improve succes s with advancing this HAP's recommendations. 4.1 Develop and Assign Work Programs The city's implementation of the 13 recommendations in this HAP will require varying levels of effort. Each recommendation will require different levels of partnership and staff time and will function at varying scales (working at the property, neighborhood, or citywide level). Each of these recommendations is within Spokane Valley's control, but work will span departments and involve meaningful contributions from stakeholders such as the City Council, Planning Commission, residents, homeowners, neighborhood associations, advocates, developers (both affordable and market rate), and many others. The city will need to assess the varying levels of effort, assign staff, and examine technological solutions to develop work programs that can help complete the needed analysis and initiate important conversations with these stakeholders. It is important to have a HAP that balances different housing needs among its current and future residents. This HAP includes targeted actions to help compensate for where the supply is tight and to help those who are underserved or where demand is growing. The recommendations also address the need for both subsidized and non-subsidized market rate housing. Figure 17 provides an overview of each action,focusing on their impacts to Spokane Valley's key goals of increasing housing affordability and lowering displacement risk. PAGE 54 Figure 17. Summary of Recommended Actions and Implementation Considerations Goal A: Preservation of Affordable Housing and Displacement Mitigation. Type of Action Implementation Potential Operational Proposed Task Description Needed Lead/ Partners Funding and Staff Resources Timing? Action Al:Monitor Rent-Restricted Properties Household Incomes Targeted: Low-income(below 60%AMI) Moderate-income(60-80%AMI) Middle-income(80-120%AMI) High-income(above 120%AMI) Ability to Reduce Displacement: Low Moderate High Document the level of effort and staffing resources needed to Administrative Housing&Homeless Existing staff time Short-term establish a monitoring program and identify the potential for a Coordinator community partner to lead the effort. If City chooses to advance past the first task, then... Creation of contact list for all rent-restricted affordable housing Administrative Housing&Homeless Existing staff time Short-term, properties and property owner/managers in Spokane Valley. Coordinator or ongoing Community partner Establish a data sharing relationship with housing providers. Administrative Housing&Homeless Existing staff time Short-term, Provide them with a reporting agreement with reporting Coordinator or ongoing information and deadlines. Community partner Create a database and mapping system to monitor that flags at Administrative Economic Development Existing staff time Short-term, risk regulated properties of and plan for these upcoming Division or ongoing expirations. Community partner Develop a shareable database of funding sources that are Administrative Economic Development Existing staff time Short-term, available to support recapitalization and rehabilitation. Division or ongoing Community partner Action A2: Retain Affordable Market Rate Units Household Incomes Targeted: Low-income(below 60%AMI) Moderate-income(60-80%AMI) Middle-income(80-120%AMI) High-income(above 120%AMI) Ability to Reduce Displacement: Low Moderate High Develop a work plan for and identify staffing needs and Administrative Housing&Homeless Existing staff time Short-term potential partners for the creation of a rental-housing monitoring Coordinator program. If City chooses to advance past the first task, then... Work directly with the Landlord Association to identify and Administrative Housing&Homeless Existing staff time Short-term, mitigate challenges with the establishment of a monitoring Coordinator or ongoing program. Community partner 9 Proposed timing description: Short-term:1 year,start after plan approval Medium-term:2-3 years,completed by 2024 Long-tern:4-5 years,completed by 2026 Ongoing PAGE 55 Type of Action Implementation Potential Operational Proposed Task Description Needed Lead/ Partners Funding and Staff Resources Timing? Implement work plan,informed by input from Landlord Administrative Housing&Homeless 0-1.0 FTE to manage program. Short-term, Association,including establishment of database,system for Coordinator or Program fees and/or City funds ongoing collecting information from landlords and tenants,and a Community partner potential fee system. Establish criteria to identify properties eligible for resources.The Administrative Housing&Homeless 0-1.0 FTE to manage program. Short-term, list of properties identified would be flagged as at risk for Coordinator or Program fees and/or City funds ongoing displacement due to property disinvestment and/or increasing Community partner land values. Create a tool-kit for eligible landlords of high-risk properties in Administrative Economic Development 0-1.0 FTE to manage program. Short-term, need of upgrades to assist with resourcing funds to from a City Division or Program fees,City funds and/or ongoing housing fund or other resources available to housing partners. Community partner City housing fund Action A3: Evaluate Potential Displacement Impacts from Proposed Land Use Changes Household Incomes Targeted: Low-income(below 60%AIvlI) Moderate-income(60-80%AMI) Middle-income(80-120%AMI) High-income(above 120%AMI) Ability to Reduce Displacement: Low Moderate High Using the most up-to-date data,update and maintain a GIS Administrative Housing&Homeless Existing staff time Short-term web map that identifies the areas with the greatest Coordinator displacement risk.Create an update process for maintaining the web map. Conduct targeted outreach in these areas with high Administrative Housing&Homeless Existing staff time Short-term, displacement risk to better understand the community's desired Coordinator ongoing outcomes relative to proposed zone changes. Create a review standard for assessing how potential policy Administrative Housing&Homeless Existing staff time Short-term, changes may impact housing in neighborhoods facing Legislative Coordinator ongoing displacement risk. Action A4: Provide More Tenant Support Household Incomes Targeted: Low-income(below 60%AMI) Moderate-income(60-80%AMI) Middle-income(80-120%AMI) High-income(above 120%AMI) Ability to Reduce Displacement: Low Moderate High Create a resources webpage that is updated regularly for Administrative Economic Development Existing staff time Short-term, tenant information that is accurately translated in multiple Division ongoing languages to increase the education available to immigrant and refugee communities. Related to Action Al,provide a web-based form for tenants to Administrative Economic Development Existing staff time Short-term, submit comments on the condition of their housing unit for Division ongoing monitoring trends. PAGE 56 Type of Action Implementation Potential Operational Proposed Task Description Needed Lead/ Partners Funding and Staff Resources Timing' Action A5: Provide Homeowner Resource Assistance Household Incomes Targeted: Low-income(below 60%AMI) Moderate-income(60-80%AMI) Middle-income(80-120%AMI) High-income(above 120%AMI) Ability to Reduce Displacement: Low Moderate High Explore avenues to educate and provide resources for Administrative Housing&Homeless Existing staff time Short-term prospective homeowners through the City's existing or new Coordinator or partnerships with regional organizations already focused in Community partner providing homeownership assistance Host home ownership seminars and foreclosure assistance and Administrative Housing&Homeless Existing staff time Medium-term, counseling and counseling in partnership with regional Coordinator or ongoing organizations. Community partner Host or collaborate with a partner organization to create a Administrative Housing&Homeless Existing staff time Long-term homeownership resource webpage for prospective buyers,for Coordinator or distressed homeowners,or for developers seeking information on Community partner cooperative ownership housing or community land trust models. Create a tool-kit for eligible landlords of high-risk properties in Administrative Housing&Homeless 0-1.0 FTE to manage program. Medium-term, need of upgrades to assist with resourcing funds to from a City Coordinator or Program fees,City funds and/or ongoing housing fund or other resources available to housing partners. Community partner City housing fund Goal B: Increase market-rate and affordable housing supply throughout the city but focused on zones that support multifamily and missing-middle housing types. Type of Action Implementation Potential Operational Proposed Task Description Needed Lead/ Partners Funding and Staff Resources Timing? Action B1:Modify the SVMC to encourage production of townhomes and cottages Household Incomes Targeted: Low-income(below 60%AMI) Moderate-income(60-80%AMI) Middle-income(80-120%AMI) High-income(above 120%AMI) Ability to Reduce Displacement: Low Moderate High Review recommended potential actions and draft regulations to Administrative Economic Development Existing staff time,Potential for Short-term revise the SVMC. Division,Building& grant funding Planning Division Evaluate the potential impacts from displacement of residents in Administrative Housing&Homeless Existing staff time,Potential for Medium-term existing NOAH single-family rental homes that may result from Coordinator grant funding regulation modifications and weigh against potential new low- income and moderate-income unit production. 9 Proposed timing description: Short-term:1 year,start after plan approval Medium-term:2-3 years,completed by 2024 Long-term:4-5 years,completed by 2026 I Ongoing PAGE 57 Type of Action Implementation Potential Operational Proposed Task Description Needed Lead/ Partners Funding and Staff Resources Timing9 Consider the potential benefits and resource costs/impacts to Administrative/ Housing&Homeless Existing staff time to evaluate. Medium-term, implement a relocation fee program. Fee would be paid by Legislative Coordinator 0-1.0 FTE to manage program. ongoing developers to the City's housing fund for supporting tenant Program fees and/or City funds relocation elsewhere in Spokane Valley. Seek code adoption and related Comprehensive Plan Legislative Economic Development Existing staff time,Potential for Medium-term Amendments Division,Building& grant funding Planning Division Action B2:Adopt a MFTE Program Household Incomes Targeted: Low-income(below 60%AMI) Moderate-income(60-80%AMI) Middle-income(80-120%AMI) High-income(above 120%AMI) Ability to Reduce Displacement: Low Moderate High Map out the process and programmatic implications to Administrative Economic Development Existing staff time Short-term develop,adopt,and manage a 12-year MFTE program. Division,Building& Planning Division Study the fiscal impacts and potential benefits associated with Administrative Economic Development Existing staff time Medium-term increased housing production (market and affordable units). Division Conduct additional outreach with developers,impacted Administrative Economic Development Existing staff time Medium-term residents,and other stakeholders to determine the best Division approach to land use changes. Seek code adoption and related Comprehensive Plan Legislative Economic Development Existing staff time Medium-term Amendments Division,Building& 0.5-1.0 FTE to manage program Planning Division Action B3: Create incentives to produce additional market rate and affordable housing Household Incomes Targeted: Low-income(below 60%AMI)AMI) Moderate-income(60-80%AM fiddle-income(80-120%AMI) High-income(above 120%AMI) Ability to Reduce Displacement: Low Moderate High Study public benefit of potential new affordable and market Administrative Economic Development Existing staff time,Potential for Short-term to rate units resulting from the recommended incentives against Division&Housing& grant funding medium-term potential fiscal impacts and household displacement. Homeless Coordinator Evaluate a fee-in-lieu program to access the density bonus in Administrative Economic Development Existing staff time,Potential for Short-term to exchange for housing program to support affordable housing Division&Housing& grant funding medium-term development and preservation. Homeless Coordinator Map out the process and programmatic implications to Administrative Economic Development Existing staff time,Potential for Short-term to develop,adopt,and manage the incentive program. Division,Building& grant funding medium-term Planning Division Conduct additional outreach with developers,impacted Administrative Economic Development Existing staff time,Potential for Medium-term residents,and other stakeholders to determine the best Division&Housing& grant funding approach to land use changes. Homeless Coordinator PAGE 58 Type of Action Implementation Potential Operational Proposed Task Description Needed Lead/ Partners Funding and Staff Resources Timing9 Seek code adoption and related Comprehensive Plan Legislative Economic Development Existing staff time,Potential for Medium-term Amendments Division,Building& grant funding Planning Division Action B4:Adopt a Planned Action Ordinance(s)in subareas with transit investment or where large, mixed-use phased developments can be built Household Incomes Targeted: Low-income(below 60%AMI) Moderate-income(60-80%AMI) Middle-income(80-120%AMI) High-income(above 120%AMI) Ability to Reduce Displacement: Low High Estimate the resources to develop needed to implement a Administrative Economic Development Existing staff time,Potential for Medium-term planned action ordinance and identify potential grants or Division,Building& grant funding funding partners such as the STA that may help offset these Planning Division costs. Identify potential subareas for a planned action. Administrative Economic Development Existing staff time,Potential for Medium-term Division grant funding Coordinate with the STA on its plans for future station areas and Administrative Economic Development Existing staff time,Potential for Medium-term to discuss the concept of partnering with housing developers to Division grant funding long-term provide affordable housing its surface parking lots in a transit- oriented development. Conduct SEPA and seek code adoption and related Legislative Economic Development 0.25-0.5 FTE to support process, Long-term Comprehensive Plan Amendments Division,Building& City funded Planning Division Goal C: Increase housing options and housing choice. Type of Action Implementation Potential Operational Proposed Task Description Needed Lead/ Partners Funding and Staff Resources Timing 9 Action Cl: Update regulations for ADUs Household Incomes Targeted: Low-income(below 60%AMI) Moderate-income(60-80%AMI) Middle-income(80-120%AMI) High-income(above 120%AMI) Ability to Reduce Displacement: Low Moderate High Evaluate the possible impacts from modifying the ADU Administrative Economic Development Existing staff time,Potential for Short-term regulations around parking and ownership requirements. Division grant funding Revise ADU development standards in the SVMC. Administrative Economic Development Existing staff time,Potential for Medium-term Division,Building& grant funding Planning Division 9Proposed timing description: Short-term:1 year,start after plan approval Medium-term:2-3 years,completed by 2024 Long-term:4-5 years,completed by 2026 Ongoing PAGE 59 Type of Action Implementation Potential Operational Proposed Task Description Needed Lead/ Partners Funding and Staff Resources Timing9 Eliminate or reduce ADU-related permit fees. Administrative Economic Development Existing staff time,Potential for Medium-term Division,Building& grant funding Planning Division Established approved ADU models to expedite permitting Administrative Economic Development Existing staff time,Potential for Medium-term Division,Building& grant funding Planning Division Seek code adoption and related Comprehensive Plan Legislative Economic Development Existing staff time,Potential for Medium-term Amendments Division,Building& grant funding Planning Division Action C2: Permit and clarify tiny home regulations Household Incomes Targeted: Low-income(below 60%AMI) Moderate-income(60-80%AMI) Middle-income(80-120%AMI) High-income(above 120%AMI) Ability to Reduce Displacement: Low Moderate High Review and modify land use and building codes to permit tiny Administrative Economic Development Existing staff time,Potential for Short-term homes in specific zones. Division,Building& grant funding Planning Division Update site plan approval criteria to account for unique site Administrative Economic Development Existing staff time,Potential for Medium-term needs of tiny houses informed by input from a focus group or Division,Building& grant funding working group of technical experts. Planning Division Develop material summarizing the rationale and benefits for this Administrative Economic Development Existing staff time,Potential for Medium-term housing type. Division grant funding Draft amendments and legislation and seek code adoption and Legislative Economic Development Existing staff time,Potential for Medium-term related Comprehensive Plan Amendments. Division,Building& grant funding Planning Division Action C3: Coordinate with existing systems of care for effective homeless services implementation Household Incomes Targeted: Low-income(below 60%AMI) Moderate-income(60-80%AMI) Middle-income(80-120%AMI) High-income(above 120%AMI) Ability to Reduce Displacement: Low Moderate High Update the Comprehensive Plan to addresses Spokane Valley's Administrative Economic Development Existing staff time Short-term intention to supporting transitional housing. Division&Housing& Homeless Coordinator Identify best practices and potential siting requirements for Administrative Housing&Homeless Existing staff time Short-term shelters and transitional housing. Coordinator Actively engage with existing service providers,faith-based Administrative Housing&Homeless Existing staff time Short-term, organizations and regional bodies to coordinate housing Coordinator ongoing resources. PAGE 60 Type of Action Implementation Potential Operational Proposed Task Description Needed Lead/ Partners Funding and Staff Resources Timing? Given Spokane Valley's role in the countywide approach to Legislative Housing&Homeless Existing staff time Short-term, addressing homelessness,determine if the City should manage Coordinator ongoing its portion of the real estate excise tax fees to support the homeless community in Spokane Valley. Action C4: Develop a housing fund program Household Incomes Targeted: Low-income(below 60%AMI) Moderate-income(60-80%AMI) Middle-income(80-120%AMI) High-income(above 120%AMI) Ability to Reduce Displacement: Low Moderate High Identify and define the housing fund program including sources Administrative Housing&Homeless Existing staff time Short-term of revenue,programmatic priorities,and staffing resources Coordinator needed to justify its creation. Evaluate the resources needed to staff the program. Administrative Housing&Homeless Existing staff time Short-term Coordinator Ensure that its focus is on supporting the development and Administrative Housing&Homeless Existing staff time Short-term preservation of low-to moderate-income households in areas of Coordinator Spokane Valley that are served by transit or where households are at greater risk for displacement. Establish and operate the program,initially with funds from sales Legislative, Housing&Homeless 0.5-0.75 FTE to manage Short-term, and use tax fund for affordable and supportive housing and Administrative Coordinator program,City funded ongoing expand as new funds(taxes,grants,etc.) are accessed. PAGE 61 4.2 Use to Inform Housing Policy and Planning Projects Recommendations advanced in this HAP likely will inform future planning and zoning implementation projects that include modifications to development standards and allowances as well as area planning efforts. Spokane Valley could develop work plans and identify budget implications for recommendations provided in this HAP as an early step. Additionally, Spokane Valley should leverage near-term planning projects to advance this HAP's recommendations. 4.3 Monitor Implementation Progress The city should track its progress toward achieving its housing goals by developing a set of indicators to track on a regular basis. Determining the exact indicators and monitoring frequency will require additional research into availability of data and availability of staff time and tracking systems, as well as discussions with city leaders and the community, to ensure that the chosen indicators adequately gauge equitable housing progress. Figure 18 provides examples of potential indicators that Spokane Valley could track. Figure 18. Potential Indicators for Future Exploration, by HAP Goal Goals Potential Indicators Potential Data Sources A. Preservation of Number of properties or units acquired by city, Community and agency Affordable Housing county,or nonprofit partner partners and Displacement Share of rent-burdened residents Census data Mitigation County of households on waiting lists for rent- Community and agency restricted units partners Number of requests the county receives for tenant Community and agency assistance from the Spokane Valley zip code partners People seeking and receiving education and City,Community and housing support on homeownership or the agency partners number of participants using a weatherization program Number of properties or units acquired or Assessor's data, developed by city, county, or nonprofit partner community or agency partners B. Increase housing Amount of funding generated for affordable City,community or supply housing. agency partners Missing-middle housing development and split Assessor's data between ownership and rental The number of housing units produced from MFTE City C. Increase housing Number and type of new homes produced over Costar, Assessor's data, choice. time—location,tenure,size,sale price/asking rent, Census data,or OFM accessibility, and unit type data Number of permitted ADUs and tiny homes City Share of homebuyers receiving assistance (e.g., Community partners down payment assistance) Home purchases by transaction type—cash vs. Home Mortgage mortgage by type (conventional, FHA,VA, etc.) Disclosure Act NOTE:Proposed performance measures will require additional discussion to confirm them as well as how to integrate data collection and analysis into ongoing staff workflow.Potential data sources include City of Spokane Valley,Spokane County,HMDA,the ACS,and proprietary sources(e.g., Costar and Property Radar). PAGE 62 APPENDIX A HOUSING NEEDS ASSESSMENT i• I. v . , , , 1 ..,, .. - ,A 1 il I - il it r SPOKANE VALLEY HOUSING ACTION PLAN HOUSING NEEDS ASSESSMENT SUMMARY REPORT , OCTOBER 2020 Cityof Spokane Valley The City of Spokane Valley is developing a Housing Action Plan (HAP) to identify ways to meet housing needs now r- Spokane Valley and into the future. The HAP is made possible due to a Washington State Department of Commerce Housing g p Bill 1923 Grant. The HAP will include strategies and �01° implementing actions to encourage greater housing diversity and affordability, access to opportunity for residents of all income levels,and should address both affordable and market-rate housing needs. An initial step in the HAP process is to define the range of housing needs by analyzing the best available data In addition, housing markets function at a regional scale, that describes the area's housing and associated which makes it challenging for individual jurisdictions to demographic,workforce, and market trends over the past adequately address issues without regional partnerships. few decades. This assessment helps answer questions about the availability of different housing types,who The following summary compares the City of Spokane lives and works in the Spokane Valley area, and what Valley with Spokane County and the City of Spokane range of housing is needed for all income levels through to provide a more complete picture of the county-wide 2037,the planning horizon for the HAP which is also housing landscape while also offering insights on aligned with the 20-year growth target for the City of localized versus regional trends, and a more nuanced view Spokane Valley Comprehensive Plan. Housing analysis of housing market dynamics. Various U.S. Census Bureau, is an important exercise since a community's housing county assessor,and housing market datasets were used needs tend to continually evolve based on changes in the to assess the housing stock,workforce,demographics, broader economy, local demographics, and regulatory and expected demand. The housing needs assessment environment. findings are organized in the following topic areas: The City of Spokane Valley, like other communities in the • Executive Summary Spokane County region, has changed and grown over the • National Trends years, leading to greater demand for different housing • Spokane Valley Housing Trends types. Analyzing housing needs is complex because it • Spokane Valley Demographics represents a bundle of services that people are willing to • Spokane Valley Housing Affordability or able to pay for, including shelter and proximity to other • Spokane Valley Housing Needs Forecast attractions (e.g.,jobs, shopping, recreation); amenities • Spokane Valley Workforce Trends (e.g.,type and quality of home fixtures and appliances, • Spokane County Trends landscaping,views); and access to public services (e.g., quality of schools, parks). Because it is difficult to This document and analyses were produced by: maximize all of these services while minimizing costs, households must make decisions about trade-offs and ECO Northwest sacrifices between needed services and what they can afford. ECONOMICS • FINANCE • PLANNING 2 City of Spokane Valley I Housing Needs Assessment Executive Summary > Spokane Valley's population growth and housing are more likely to live in single-person households which development has remained steady for most of the decade. tend to be smaller in size. The aging of the Baby Boomer From 2010 to 2018, Spokane Valley's population grew by generation (born 1946-1964) could generate greater 7%, adding 6,055 new residents. (Demographics Section). demand for living assistance and low-maintenance middle housing options such as townhomes. (County >The City of Spokane Valley needs about 6,660 new Trends Section). housing units by 2037 when its population is expected to reach about 109,913 people. This includes 1,463 housing > Household incomes have increased in Spokane Valley. units to address housing underproduction over the last Spokane Valley's median household incomes for owners decade. Around 351 units per year should be produced grew by nearly 25% between 2012 and 2018 (from through 2037 to meet forecast housing needs which $61,873 to $77,299). Renter incomes increased too by means slightly more would need to be built per year than almost 12%from $34,417 to $38,498 during the same the average produced from 2010 and 2019 (345 housing time period. Overall,these trends indicate increasing units built per year). Spokane Valley should continue to pressure on the already limited supplies of moderate support robust housing growth and advance strategies in and middle-income housing (60-120%AMI) and if they support of housing growth for a diversity of housing types continue,will lead to increased financial hardships for and affordability levels. (Housing Forecast Section). households across the City. (Affordability Section). > Housing needs change over a person's lifetime. It is > Population growth coupled with housing important to track shifts among the share of different age underproduction throughout Spokane Valley and the groups to better comprehend how housing needs change region has added pressure on an already limited housing as community demographics fluctuate. Spokane Valley's supply and contributed to rising housing costs. While millennial population (25-34 years) almost doubled, rents have grown more than 15% since 2010 in the city, growing substantially from 10%to 15%of the population home prices increased by more than 48%. The escalating total (from 12,148 to 21,144 persons). Millennial cost of housing is a top concern for people finding very population growth could explain the decline in Spokane few options of housing affordable at their income level. Valley's median age to 35.2 years by 2018,a rate below Home-ownership is increasing becoming out of reach the Washington State and Spokane County's median age and when people cannot find housing fitting within of almost 38 years. (County Trends Section). their financial means,they can end up becoming cost burdened, meaning they pay more than one-third of their >Another growing sector is the senior population (65+). gross income for housing. During 2012-2018, seniors grew from 13%to 15%of the total population settling at an estimated total of 20,910 >Affordable housing problems have not affected persons, a total similar to the millennial population sector. all households evenly. Low and moderate-income Spokane County projections from 2020 to 2030 estimate households have been disproportionately affected. In fact, that the 65+ population will expand from 18%to 22%of over 65%of extremely low-income households renting the total population — a trend that is consistent with other and owning were severely cost burdened, meaning paying communities across the country. Homeownership rates more than 50%of their income on housing. In addition, increase as age increases and younger and older people 83%of low-income renters (30-50%), 56% low-income Housing Needs Assessment I City of Spokane Valley 3 Executive Summary home owners,and over one-third of moderate-income (60-120%AMI)that can mostly be met through single- (50-80%) owners and renters were cost burdened, family attached housing (e.g.,townhomes and quad meaning paying more than 30%of their income on homes) and housing serving senior's needs. housing. Overall,the low-to-moderate income households (less than 80%of AMI)tend to be more cost-burdened. (Affordability Section). Median Income Levels* When examining household income levels,the Area Spokane Valley's housing stock mostly consists of Median Income(AMI) and Median Family Income (MFI) single-family detached homes (66%) and lacks housing are helpful benchmarks for understanding what different diversity needed to accommodate future demand households can afford to pay for housing expenses. particularly associated with aging baby boomers and Since housing needs vary by family size and costs vary young households forming. The city has a low supply(9%) by region, HUD produces a median income benchmark for different family sizes and regions on an annual basis. of"missing middle" housing (e.g.,townhomes,duplexes, These benchmarks help determine eligibility for HUD quad homes,and cottages)which allows more seniors housing programs and support the tracking of different to downsize and remain in their community,while also housing needs for a range of household incomes. providing more options for working families to get a foothold in great neighborhoods. (Housing Section). • The median income value(100%) primarily used for this analysis is an annual income of$65,200 for a family of Between 2012 and 2018,the share of 2 and 4-person four(Spokane County rate for 2018). households grew in Spokane Valley,while the number • Below 30%of AMI is extremely low income(under of 1-person households fell. In contrast,the City of $19,560),30 to 50%of AMI is very low income($19,560- Spokane's share of 1 to 3-person households grew. This $32,600),50 to 60%of AMI is low income($32,600 trend shows Spokane Valley's housing tilting towards $39,120),60 to 80%of AMI is moderate income 2-bedroom housing and larger family-friendly housing ($39,120 $52,260),80 to 120°i°AMI is middle income with at least 2 bedrooms. (Demographics Section). ($52,260-$78,240),and above 120°i°AMI is high income (above$78,240). •Spokane Valley's workforce, including around 51,305 To put these numbers into perspective,a dishwasher workers, increased by 11%from 2010-2017. Growth in earns an estimated$26,580 per year on average and would be very low income.A pharmacy tech earns$40,940 industry sectors with salaries below 100%AMI is fueling annually and would be moderate income in the cities of demand for moderate-to middle-income housing. Spokane and Spokane Valley metropolitan area. •As a result of the shifting demographics in Spokane Income levels tend to vary throughout a lifetime and homeownership rates tend to increase as income Valley,at least 6,660 housing units are needed by 2037. increases. If units are allocated based on recent income distribution trends,the majority of new housing units needed through *Source of AMI:Spokane County/US Housing and Urban Development(HUD),2018,and Occupational Employment 2037 would be for households earning over 100%AMI Statistics, US Bureau of Labor,2019,Spokane-Spokane Valley (56%of total units),and one-third of the total should be Metropolitan.https://static.spokanecity.org/documents/chhs/ programs/homeinvestment/2018-spokane-home-income- below 80%AMI. Overall,the findings indicate increased and-rent.pdf demand for moderate to middle-income housing options 4 City of Spokane Valley I Housing Needs Assessment National Housing Trends Key National Demographic Trends Associated with Housing Nuclear family households,the predominant type of In addition,around one-third of Americans between household of the mid 20th Century,shrunk from 40% in 18-34 years are living in their parent's homes (as of 1970 to 20% in 2018 while the share of single-person 2018) and the median age for first marriage increased households increased from 15% in 1970 to 28% in 2018, to almost 30 in 2016. This trend could decrease housing to take over as being the most prevalent household type. demand for 18-34 aged persons or at least delay it. This trend could lead to fewer persons per household which would increase demand for housing units. America is aging,and the number of seniors will Nationwide,the Hispanic/Latino population is predicted continue to grow over the next few decades to an to be the fastest growing racial/ethnic group over the estimated share of around 22%over age 65 by 2050. next few decades and these households tend to include This is a big increase since only around 16%of US multiple generations,requiring more housing space. (and Washington state) residents were over 65 in 2018. Over the coming decade, minorities will make up a larger Seniors are projected to outnumber children for the first share of young households and constitute an important time ever by 2035. source of demand for both lower-cost rental housing and home-ownership opportunities. Note:The COVID-19 pandemic has affected the production of housing in many regions and the ability to pay for housing consistently which will likely exacerbate housing availability and stability. Parts of this analysis relied on pre-COVID data. Sources:AARP(2018)Making Room for a Changing America, U.S. Census Bureau Annual Social and Economic Supplements 1950 and 1970,2015 U.S. Census ACS, Washington State Office of Finance and Management, U.S. Census Bureau,2019. Housing Needs Assessment I City of Spokane Valley 5 Spokane ValleyHousingTrends 38,730 Number of Units Built by Year, 2010-2019 Loco Number of total housing units as of mid 2020 800 Source:Spokane County Assessor,2020 625 657 •E 600 0 43i 474 3,445 400 . 345 ce Z85- 12161220 267Average Numberof housing units z 200 145 119built between 2010-2019 I Source:Spokane County Assessor,2020 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 345 Source:Spokane County Assessor,2020 New housing units built on Housing Type Built by Decade, as of Mid-2020 average every year since 2010 8,000 Source:Spokane County Assessor,2020 •E 6,000 — 1 . O4 4000 1ilililil City Ratio of Housing Units o to Households 2,000 > Between 207 0-2019 z o Source:Washington State Office of '§) 0'9 0'9 dc" 019 019 019 019 oc" Finance and Management(OFM),2019, N(� °�� .\0h Nod °4' °?' �0� (1, \ ECONorthwest calculations.Note:The 'qc housing units to household ratio should be above one since healthy housing ■1 ■2 to 4 5 to 29 ■30 to 49 ■50 to 99 ■100+ markets should have more housing Housing Scale units to allow for vacancy, demolition, second/vacation homes,and broad Source:Spokane County Assessor,2020.Note:Housing with 5 or more units is absorption trends. Because Wash- considered multifamily and housing with 5 or less units is single-family ington State does not have a regional approach to planning for housing Share of HousingByT as of Mid-2020 production,ECONorthwest compared Type, this city ratio to the Spokane County Housing Type Average Age %of Housing ratio of 1.07 to determine the amount of housing underproduction. Single-family Detached 46 66% Apartment/Condo 36 20% Single-family Attached 38 9% Mobile/Manufactured Home 38 5% Source:Spokane County Assessor,2020.Note:Single-family attached includes duplexes, triplexes,and quad homes. 6 City of Spokane Valley I Housing Needs Assessment Spokane ValleyHousingTrends Age of Housing by Type V. 1 L ,,, l'INIP`-„. -4,41 - --ivirbie...... ...:,,i. _, Or' .4-14,„ .2 . 4%-•,--0 in a- It. 7 diess, .01.1.41. re iir. itrat -- 0 . •I400, ll lit- k 1 v A '1* 60 AL aill lli 1P I J kot Single-Family Detached Single-Family Attached Apartment Average Year Built `AI Pre-1940 1940-1959 1960-1979 1980-1999 2000-2020 Source:Spokane County Assessor,2020 Type of Housing Built by Decade, as of Mid-2020 Mobile/manufactured home 46 40 13 (n= 1,702) Detached single-family 6 23 28 23 19 (n=25,655) Condominium 41 44 14 (n=774) Attached single-family 8 49 15 26 (n= 3,442) Apartment 57 41 (n= 7,157) 0% 25% 50% 75% 100°%a Share of units Year Built Pre-1940 1940-1959 1960-1979 1980-1999 2000-2020 Source:Spokane County Assessor,2020. Housing Needs Assessment I City of Spokane Valley 7 Spokane ValleyHousing Trends > Overall, Spokane Valley lacks Housing Type housing diversity particularly due 7 to low supplies of single-family ' IS * I"'; o9 -� attached housing (comprising -- � , 9% of the total housing) such �� '• 4' s tr as town homes, triplexes, and f •`"'•771 •' ` {aj. _ 'I! a ., _ • i�• .., " 7 e-�'� cottages in single-family areas. • �•. r � ` ;`. �' • s`1 r a•♦• o, ., - • o- • — The city could encourage the * �` • ` ' r• `• •• :` • ' I _ development of a variety of ^• = • •4 rfN i. l y e 4►,1 housing types and sizes to �- • '• ' 1;�1# b °ro a accommodate the diverse « --�, �.�,I, - e, , _v, ktki needs of residents through their � - ��• changes in age and family size. : ' •> ,,, Housing Type 5iL M V\f-.x acO l- • Detached single-family .Ik Housing Units Built as of . •4 ti�;,y,tir.-�.,.'-`'•" Attached single-family Mid-2020i=tip'"' Mobile/manufactured home Decade Percent ofii Apartment Units • Condominium Source:Spokane County Assessor,2020 Before 1940 4°i° 1940's 6% Housing Unit Density 1950's 11% 6% 1960's 1970's 20°i° ,�''�_ 1980's 11°i° �,. 1990's 18°�° _ i-.� miiur s 2000's 14°i° , W 2010'S 10% e7 . i .` t '. :;o! -:I lt1.1 m 4 Source:Spokane County Assessor,2020. 4 , ; — 1-- _ " , 1,1 ' �� i -� ` ti. IA 4- . ;,..*k, ''' -":-.,-',,,:i*'?4,, —1: ) 6 �. 4 11 k - ' Unit Count Change in number of households .= el.,Fr x � —� 1 2012 2018 • 2-4 :.•"` j'IrO Households 36,365 38,478 t:a `.41;s ;p. .. • s 20 ti<" r ' ' • 21-60 Source:OFM,retrieved in 2020 60+ Source:Spokane County Assessor,2020 8 City of Spokane Valley I Housing Needs Assessment Spokane ValleyDemographics 7O Change in Household Size, 2012 & 2018 /O 5,000 Change in population 4,000 3,876 2010 2018 u) 3,000 2,671 Population 89,755 95,810 2,000 Source:OFM,retrieved in 2019. o 1,000 418 0 0 12% H 1,000 z -2,000 -1,903 Change in median renter -3,000 Household income 1 2 3 4 People per Household 2012 2018 Source: PUMS (2012,2018) Median $34,417 $38,498 Income Income Distribution by AMI, 2012 & 2018 60% 56% Source: PUMS(2012,2018).Note:All values are in 2018 inflation-adjusted dollars. -2 50°%° 46% 0 0 40% 0 25% = 30% Change in median owner 20°�° 13%8°,° io%10°�© 19° �°16°f° 12%10% household income z 100 ' III , ® I I I 0% 2012 2018 0-30% 30-50% 50-80% 80-100% 100%+ Median Household Income as a%of AMI Income $61,873 $77,299 ■2012 2018 Source: PUMS (2012,2018).Note:All values Source: PUMS (2012,2018) are in 2018 inflation-adjusted dollars. Income Distribution by AMI and Tenure, 2018 48% Renter 17% 18% 20% 11% 34% Increase in median home sales price 2010 2020 Median Owner Gf,'J 6% 13% 10% 67% Sales Price $202,461 $300,000 Source:Spokane County Assessor,2020. 0% 20°I° 40% 60% 80% 100% Values are in 2020 inflation adjusted dollars. Notes:A household would need to earn over Share of Households 100%AMI to afford the 2020 median home Household Income as a%of AMI sales price. The Zillow Home Valley Index ■0-30% 30-50% ■50-80% ■80-100% ■>100% shows a 59%increase between 2010-2020 to $283,374 for middle price-tiered homes. Source: PUMS,2018 Housing Needs Assessment I City of Spokane Valley 9 Spokane Valley Housing Affordability Share of Cost Burdened and Severely Cost Burdened Cost Burdened Households by Tenure, 2018 >A household who pays more than Owners 30% of their income on housing. loop I 8' 76i. ■Cost Burdened I Severe!yCost Burdened Severely Cost Burdened T >A household who pays more than o 50% of their income on housing. 0 3 % s I II 1 C 3% 1 ,663 centers Number of income restricted 1°°�` 9s y1% housing units as of mid-2020 TD 76%0 $6% obi Source: ECONorthwest analysis of public o affordable housing data.Note:Restricted to 4 025% low and moderate household incomes. 6% 11 $ ccs 0 15 50/o cn 0-• .30-E+?o. SO- L% 80-100% 100%Household Income as a%of AMI Increase in average rent for Source: PUMS,2018.Notes:Low and moderate-income households below 2-bedroom apartment 50%AMI tend to be more cost burdened and higher incomes above 100%AMI 2010 2020 less since their larger income go further to cover expenses. Owners tend to be less cost burdened due to mortgage lending stipulations;however it can occur Average $983 $1,131 when households with mortgages see income decline. Cost burden does not Rent consider accumulated wealth and assets. Source:Costar.All values are in 2020Infla- tion-adjusted dollars.Notes:Averagerage rents Housing Units Affordable by AMI and Tenure, 2018 for a 2-bedroom apartment in Spokane - []caner County increased by 73%during the same 15,000 time period. This 2020 average rent would be 0 affordable to those earning 65%AMI or more. L .),,.•so, I'',1.1.1 -c 10,000 6 6';: re.1.16,'. z 5,000 1 5.2% 0 2-bedroom apartments were Renter vacant as of mid-2020 u) 115,000 Source:Costar, Bureau of Labor Statistics. 0 mow 8,U-1 Notes:On average during the last decade,the b vacancy rate was 5.4% for 2-bedroom apart- -cS 6,059 ments. This is a standard rate of vacancy, z 5,000 indicating that the supply for this product type etas il . _ 14PS should be adequate to meet demand. This trend is similar to county and state rates. 0-30% 30-50% 60-80% 80-100% >100% Household Income as a %of AMI Source: PUMS,2018 10 City of Spokane Valley I Housing Needs Assessment Spokane ValleyHousingAffordability Financially Attainable Housing Types Another way to evaluate housing needs is to consider the different types of housing generally affordable to different household incomes in comparison to the current housing stock. As shown in the below exhibit,the 2018 area median income was $65,200 for a family of four in Spokane County(100%AMI). • Housing types affordable to households below this median annual income tend to be limited to apartments, manufactured homes,multiplexes (duplexes,triplexes,and quad homes) and townhomes. Much of this housing is rented,particularly when priced for lower income households earning below 80%AMI and most of the housing below 50%AMI (extremely low and very low income)tends to be government subsidized. • Around 44%of all the City of Spokane Valley households in 2018 need housing priced below the median income (100°%o AMI),yet this housing is inadequate since only 34%of the current housing stock includes multiplexes, townhomes,apartments,and manufactured homes. • Housing above the median income is predominantly newer construction and owner-occupied. This housing typically includes single-family detached homes,higher-priced single-family attached homes,and condominiums. Households earning above the median income tend to have more housing options available to them especially when considering that most of the current housing stock is single-family detached (around 66% in the City of Spokane Valley). Most Spokane Valley residents living in single-family detached housing own their home (86%) rather than rent(ACS 1-Year,2018). If your household earns ... $19,560 $32,600 $52,260 $65,200 $78,240 (30%of AMI) (50%of AMI) (80%of AMI) (100%of AMI) (120%of AMI) Then you can afford ... $489 $815 $1,304 $1,630 $1,956 PER MONTH PER MONTH PER MONTH PER MONTH PER MONTH Housing types generally affordable to these households are ... Single-Family manufactured homes in parks/on lots cottage cluster small-lot single-family large-lot single-family Single-Family Attached •n duplex,tri-plex,quad-plex,townhomes higher-priced products •�• � 1 • 1� Multifamily ■nn 1111 low-amenity apartments(rental) apartments(5+units) condominium r •1111= • II 1111= ■ — Common characteristics ... - LESS EXPENSIVE MORE EXPENSI Predominantly renter occupied&existing construction Predominantly owner occupied&new construction Government subsidized Source: ECONorthwest.Note:All values are in 2019 inflation-adjusted dollars. Housing Needs Assessment I City of Spokane Valley 11 Spokane ValleyHousing Needs Forecast 109,913 Housing Units Needed Through 2037 Underproduction Future Need Housing Need Projected population by 2037 (medium projection) 1,463 5,197 6,660 Source:*Population Projections Appendix Source: PUMS,2018;*Appendix;ECONorthwest Calculation. Note:Underproduction is the estimated number of housing units needed to 742 satisfy the housing shortfall over the last decade. Future need is the number of housing units needed from 2020 to 2037(based on the OFM forecast).. Average annual population Housing Units Needed as a Share of Existing Stock growth projected from 2018 Existing Units Housing Need %of Existing Units to 2037 38,730 6,660 17% Source:OFM,2019;*Population Projections Appendix;ECONorthwest calculation Source:Spokane County Assessor,2020;ECONorthwest Calculation 6,66o Housing Units Needed by AMI Through 2037, Based on 2018 Trends Projected number of units AMI #of Units %of Units needed by 2037 0-30% 550 8% Source:OFM,2019;*Population Projections Appendix;ECONorthwest Calculation 30-50% 625 9% 351 50-80% 1,039 16% Average number of new 80 100°i° 686 10°i° units needed to add 100%+ 3,760 56% annually from 2019 to 2037 Source: PUMS,2018;*Appendix;ECONorthwest Calculation Source:OFM,2019;*Population Projections Appendix;ECONorthwest Calculation.This number is higher than the 345 average HUD Affordability Level by Housing Type, 2018 housing units built from 2010-2019. AMI Studio 1-bed 2-bed 3-bed 20 30% $342 $366 $440 $509 Increase in annual housing 50% $570 $612 $734 $848 production to reach 2037 80% $912 $978 $1,174 $1,356 housing need forecast *City of Spokane Valley Appendix 100% $1,140 $1,222 $1,468 $1,695 A:SEPA Analysis 2017-2037 Comprehensive Plan Source: HUD,2018.Notes:The dollar values are for Spokane County and the AMI values were adjusted to include the family size that would be appropriate for the housing type. These are fair market rent values. 12 City of Spokane Valley I Housing Needs Assessment Spokane ValleyEmployment Trends Employment Trends Understanding Spokane Valley's workforce profile and commuting trends helps provide insights on the housing needs of workers today and into the future. Factors such as job sector growth and the city's commuting patterns may have implications for how many people are able to both live and work within the city. If such factors indicate many people are commuting into the city for work, it could 014.. be possible that the city does not have enough housing to accommodate its workforce or enough housing matching Spokane Valley their needs and affordability levels. 11. ill Drive time This employment profile for Spokane Valley highlights trends associated with workforce and wage growth. Transit time • As shown in the employment table,an estimated total of 51,305 people are part of the workforce in the City *Transit and drive time of 45 minutes or less,departing at 7:00 of Spokane Valley as of 2017. Overall jobs grew by AM, mid-week around 11%from 2010 - 2017 in the city. Source: US Census LODES database,2017 and census block • Among this total,the largest share works in retail geometries, 2010;Spokane Transit Authority database; trade (almost 20%of total), manufacturing (13%),and ECONorthwest Calculations. health care/social assistance sectors (12%). • Removing small job sectors (below 5%of the total), This analysis demonstrates how a large majority of jobs the employment sectors experiencing high increases are more accessible by driving an automobile rather than in job growth between 2010-2017 were educational taking public transit. In total, 260,178 jobs are within a services (120%)and construction sectors (45%), both 45 minute drive from the City of Spokane Valley while with an average salary below$50,000,which could far fewer jobs,estimated at 63,115,are located within indicate increasing demand needed for housing below the 45 minutes transit shed. One quarter of the jobs 100%AMI (such as moderate-income housing). are available via transit compared to driving within 45 minutes or less from the original location. The denser Access to Employment* urban areas within the small orange area could be analyzed for potential opportunities to include housing Transit and auto access to regional employment was development that is more transit-oriented. Mapping out derived using 45-minute travel sheds for each mode. commute sheds can be useful for estimating the extent of ECONorthwest calculated the number of jobs available the regional housing market since most employed home within these travel sheds in each industrial sector catego- buyers and renters tend to search for units with their ry for the Spokane County region (2-digit NAICS). commute in mind. The transit travel sheds originated from every transit stop within the city while the auto travel sheds originated from the center of all block groups in the city. Housing Needs Assessment I City of Spokane Valley 13 Spokane ValleyEmployment Trends Spokane Valley Employment Numbers Access to Regional Employment Industry(2-digit NAILS Code) 11 Employees% #Change %Change Average Salary %Jobs by %Jobs by (2017) (2010-2017) (2010-2017) (2018) Auto Transit Agriculture, Forestry, Fishing and Hunting 1.1% 513 777% $34,444 88% 19% Mining,Quarrying,and Oil and Gas Extraction 0.2% 35 69% $31,467 93% 14% Utilities 0.6% 46 19% $69,936 92% 21% Construction 6.1% 978 45% $46,683 93% 15% Manufacturing 13% -172 -3% $46,532 96% 16% Wholesale Trade 7.1% 684 23% $44,029 98% 24% Retail Trade 19.6% -278 -3% $33,904 97% 27% Transportation and Warehousing 3.9% 375 23% $49,020 97% 10% Information 0.8% -127 -23% $40,373 97% 24% Finance and Insurance 4% 343 20% $43,927 99% 36% Real Estate and Rental and Leasing 1.2% 59 10% $31,836 97% 30% Professional,Scientific, and Technical Services 2.8% 289 26% $48,292 97% 31% Management of Companies and Enterprises 1.2% 293 87% $46,964 98% 24% Administrative and Support and Waste Management and 7.8% 600 18% $31,520 97% 29% Remediation services Educational Services 7.1% 1,978 120% $48,057 93% 22% Health Care and Social Assistance 12.2% -409 -6% $41,440 98% 23% Arts, Entertainment,and Recreation 0.3% -116 -42% $34,583 71% 9% Accommodation and Food Services 7.5% 299 8% $28,307 97% 26% Other Service 2.5% -102 -7% $31,734 96% 24% Public Administration 0.9% -188 -28% $52,425 97% 13% Source: US Census LODES database,2017 and census block geometries,2010;ECONorthwest. Note:Median earnings was sourced from ACS 2018 5-year estimates at the tract level,joined to jurisdictional boundaries and summarized as the median for each industry by jurisdiction. Several estimates are missing, likely due to insufficient numbers of employees within that industry/jurisdiction pair. The estimated total number of Spokane Valley employees in 2017 is 51,305. The 2019 average annual salary for Spokane County was$50,234(includes all industries)and this means housing below 80%of the AMI would be affordable to those earning this average salary. 14 City of Spokane Valley I Housing Needs Assessment Spokane ValleyCommutingTrends Approximately 32% of Spokane Commuting Flow, 2017 Valley's workforce lived and worked in Spokane Valley in 2017. This share increased above 2010 levels (26 i). 00d _ , OLr3(lvehittli-Ealf Fa Around 40,029 workers (74%) of , the total City of Spokane Valley ,_r. ,. ane Valle workforce live elsewhere and 4Q,fl2.9 3fl,47fi commute into Spokane Valley for work while 30,476 workers j ilk (26%) live in Spokane Valley and 14,019 commute elsewhere for their work. X Among those working outside ) n Source:US Census LODES database,2017;Census On the Map.Note:Dark of Spokane Valley, 37% work in green arrow is showing persons commuting into town(40,029)and the light Spokane, 5% work in Liberty Lake, green arrow(30,476)shows persons commuting out of town. 2% work in Seattle, and 2% work in Coeur d'Alene, Idaho. Around 1% of the workforce commutes to Commuting Trends, 2017 Airway Heights, Post Falls Idaho, Seattle 64% 1111 , and Cheney. The remaining 19% Spokane 56% commutes to other locations. Bellingham 52% •Living and working in city Yakima 48% Living in city,working outside The high rate of commuting to the Coeur d'Alene,ID 46% City of Spokane Valley could be due Olympia 36% to a shortage of affordable housing Spokane Valley MISM or suitable housing not meeting the Tacoma 30% needs of the workforce or it could Cheney 21% 1 mean they prefer living elsewherePost Falls,ID 20% in the region. Medical Lake pm ill Airway Heights 12% Liberty Lake ME gill 0% 20% 40% 60% 80% 100% Source: US Census LODES database,2017;Census On the Map Housing Needs Assessment I City of Spokane Valley 15 Spokane CountyTrends 80/O Change in Household Size, 2012 & 2018 5,000 4,228 4,347 Change in population 4000 3,876 > Between 2010 and 2018 0 3,000 2,363 2,671 2,078 . 2,000 982 1863 171 2010 2018 0 . 1,000 418 Population 471,221 507,950 0 0 -1,000 Source:OFM,retrieved in 2020 z -1,29fi 2,000 — -1,903 -3 000 7 O/ 1 2 3 4 O People per household Spokane County Spokane •Spokane Valley Change in number of households Source: PUMS(2012,2018) > Between 2012 and 2018 Income Distribution by AMI, 2012 & 2018 2012 2018 60% ° 54 ra Households 196,529 209,897 -2 50% 46% 0 Source:OFM,retrieved in 2020 ° 40% 0 = 30% 0 0 21 % ° 20% 15°r° 16% 15% 10/e la 12% 11% 11%g°r°a IChange in median renter Ooa I I I Household income 0-30% 30-50% 50-80% 80-100% 100%+ > Between 2012 and 2018 Household Income as a%of AMI ■2012 ■2018 111.1 2012 2018 Source: PUMS (2012,2018) Median $28,726 $34,749 Income Income Distribution by AMI and Tenure, 2018 Source: PUMS (2012,2018).Note:All values are in 2018 inflation-adjusted dollars. 9 O/0 Renter 21% 19% 18%a 9% 33% Change in median owner household income Owner il 6% 14% la% 66% > Between 2012 and 2018 2012 2018 0% 20% 40% 60% 80% 100% Median Income $68,833 $74,969 Household Income as a%of AMI Source: PUMS (2012,2018) ■0-30% 30-50% ■50-80% ■80-100% ■>100% 16 City of Spokane Valley I Housing Needs Assessment Spokane CountyTrends 13°/a Population by Age, 2012 & 2018 Spokane County Spokane Spokane Valley Change in average rent for 100% 2-bedroom apartment 14. 16% 15% 13% 15% 90% > Between 2010 and 2020 80% 13% ,3 14% 13% 2010 2020 CO 70% -0 Average ,73 $968 $1,094 ▪ 60% 27% 2fi% 25% 28i 27% Rent co 0 50% Source: Costar.Note:All values are in 2078 = inflation-adjusted dollars. a) 13% J a) 40% 12% 14% 15% 10% 15% (0 (n▪ 30% 11% 9% 12% 9° 7% 10% 500/p 16% 16%2°% 15% 19% 18 14% 10% Change in median home6% 6% 7% 0% sales price 2012 2018 2012 2018 2012 2018 > Between 2010 and 2020 •Under 5 years ■5 to 18 years ■18 to 24 years 25 to 34 years ■35 to 44 years ■45 to 64 years ■65 years and older 2010 2020 Source:ACS(201 2,2018); PUMS 1-Year Estimates Median $184,000 $275,000 Sales Price Source:Spokane County Assessor,2020. Cost Burdened and Severely Cost Burdened by Note:All values are in 2078 inflation-adjusted Tenure, 2018 dollars. Owners co 100% 91% ■Cost Burdened .SeverelyCostBurdened = 80% 74% N Housing Units Built by o 60% 56% Decade, as of Mid-2020 i 40, 38% O 25% CD Decade Percent of Units 20% I 11% 16% O o% 5% o% Before 1940 11% `� 0% 1940's 5% 1950's 8% 0 Renters 0 100% 1960's 5% = 86% 83% S1 80% 1970's 15% 0 66% = 60% 1980's 10% 0 147% 39% a) 40% 1990's 19% ▪ 20% 13% 13% 9% 2000's 17% 0% 3% ° .M 2010's 9% 0-30% 30-50% 50-80% 80-100% 100%+ Household Income as a%of AMI Source:Spokane County Assessor,2020 Source: PUMS,2018 Housing Needs Assessment I City of Spokane Valley 17 Spokane CountyTrends Commuting Flow, 2017 About 82%, or 139,710, of Spokane County residents live and work in Spokane County. About 18%, or 31,388 of Spokane County residents work outside Spokane County. lk ( I 4-- Q S kane Most of Spokane County 45,3k3�3 Spokane 31,388 residents work in City of Spokane CO or City of Spokane Valley. 139,71D s 1 f fj' Source: US Census LODES database,2017;Census On the Map.Note:Dark green arrow is showing persons commuting into town(45,333)and the light green arrow(37,388)shows persons commuting out of town. Cities Where Spokane County Residents Work, 2017 Coeur d'Alene, ID 1% Medical Lake,WA I 1% Cheney, WA 12°%o Airway Heights,WA 1 2% Seattle,WA ' 2% Liberty Lake,WA 3% Spokane Valley,WA 18% All Other Locations 24% Spokane, WA 47% 0% 20% 40% 60% Source: US Census LODES database,2017;Census On the Map 18 City of Spokane Valley I Housing Needs Assessment APPENDIX B HOUSING NEEDS ASSESSMENT METHODS AND DATA SOURCES ECONorthwest ECONOMICS • FINANCE • PLANNING DATE: September 28, 2020 TO: City of Spokane Valley FROM: ECONorthwest SUBJECT: HOUSING NEEDS ASSESSMENT METHODS MEMO Background and Purpose Two cities in Spokane County, Washington—the City of Spokane Valley and the City of Spokane—gained funding through the Washington State Department of Commerce HB 1923 grant to develop housing action plans. These housing action plans include a housing needs assessment, results from public engagement, analysis of key policy options, and recommendations for housing strategies to meet housing needs now and into the future up until 2037. An initial step in the housing action plan development process is to analyze the best available data that helps define the range of unmet housing needs and the depth of housing affordability needs. This analysis should answer questions about the availability of different housing, who lives and works in the different cities, and what range of housing is needed to meet pent up demand into the future. Housing analysis is an important exercise since housing needs tend to continually evolve based on changes in the broader economy, local demographics, and regulatory environment. The housing needs assessments (Task 3) for the Cities of Spokane Figure 1. Study Area Spokane County Valley and Spokane provide an Source: ECONorthwest 7c, analysis of the housing supply, demand, and needs in each city and housing trends associated with Spokane County. Overall, assessments on housing needs Jo help inform strategies to meet '� ✓�' these needs. = ` a3J _ =rity of Spokane ami ty of Spokane Valley - The results of the housing context -y�r�• _ f40.4 assessment were shared with each city via a "fact packet" containing Map Key data and analysis surrounding uJ City Boundaries their existing housing stock and ®Urban Growth Areas future housing needs. This PUMABoundaries r, East Central_Greater Spokane Valley memorandum accompanies these O North Central-Spokane City Outer-Cheney City,Spokane County results to provide additional I♦South Central-Spokane City Spokane County information on data sources and -- — - analysis methods. ECONorthwest I Portland I Seattle I Los Angeles I Eugene I Boise I econw.com 1 Defining the Study Area The Housing Needs Assessment focuses on the Cities of Spokane and Spokane Valley and provides key findings associated the broader, Spokane County context. The results compare the City of Spokane Valley with Spokane County and the City of Spokane to provide a more complete picture of the county-wide housing landscape while also offering insights on localized versus regional trends, and a more nuanced view of housing market dynamics. Most of the findings associated with the demographic trends were described using the U.S. Census Bureau's Public Use Micro Sample (PUMS) data from 2012 through 2018. As shown in the above study area map, the PUMS data findings are provided in specific geographic areas. Public Use Microdata Areas are statistical geographic areas defined for the dissemination of Public Use Microdata Sample (PUMS) data The Spokane Valley demographic trends are mostly based on values within the East Central-Greater Spokane Valley PUMA (5310503) while the City of Spokane demographic trends mostly are based on the combination of the following PUMAs: North Central-Spokane City PUM (5310501) and South Central—Spokane City North PUMA (5310502). Most of the Spokane County demographic trends are based on the combination of the following PUMAs which cover the entire area of Spokane County: 5310501, 5310502, 5310503, and 5310504. Data Sources ECONorthwest primarily relied on 2019 data from the Washington Office of Financial Management(OFM) to evaluate housing and demographic trends. Where OFM data was unavailable ECONorthwest relied on the U.S. Census Bureau's Public Use Micro Sample (PUMS) data from 2012 and 2018. The PUMS Census data provided several advantages for the analysis of demographic trends. The PUMS dataset provides more detailed information on housing characteristics (at the household level) and this helped ECONorthwest conduct analyses that would otherwise be unfeasible with other datasets that are aggregated such as the 5-year American Community Survey (ACS) data. With the PUMS data, ECONorthwest was able to create "cross-tabs" that look at the relationship between multiple housing characteristics. The analysis summarizing community and household demographic trends primarily relied on the ACS PUMS 1-Year Data for 2012 and 2018 (source link: https://www.census.gov/programs-surveys/acs/data/pums.html). In addition to using OFM data on housing trends and existing housing types by size, we supplemented this analysis with Spokane County Assessor data. For housing market data on rents and sales prices, we relied on data from the Spokane County Assessor (retrieved in 2020) and CoStar (retrieved in 2020). CoStar is a proprietary data source commonly used for market analysis in the real estate industry. In addition, we used the county assessor data to describe housing types, ages, and housing density. The Spokane County Assessor Data includes parcel (housing lot) level information which is very fine-grained and detailed. This dataset, offered in ECONorthwest 2 a Geographic Information System format,needed to map trends, shows parcel specific information on the home type,home sales,home value, and use. For the housing demand analysis, we relied on the population projections forecasted for the 2037 forecast year which are provided in Volume V, Appendix E Population Projections City of Spokane Comprehensive Plan. The projections are based on the OFM medium series forecast for 2037 and applies the historic growth rate from 2003 through 2015 to forecast the future population of the cities and the unincorporated urban growth area. The employment trends analysis was based on several different datasets. The Longitudinal Employer-Household Dynamics (LEHD)program at the US Census Bureau provides data describing statistics on employment, earnings, and job flows. Analysis Methods Total Housing Units Needed ECONorthwest calculated future housing needs as the current underproduction of housing plus the future needs based on 2037 household projections. Without accounting for past and current underproduction, development targets focused solely on future housing needs will continue to underproduce relative to the actual need. Figure 2.Total Needed Housing Units Current Future Under- 4. Need Total Units production Current Underproduction Using population forecast from OMF and the Shaping Spokane report, and selected Census information, we can estimate both the current underproduction and future housing need. For this analysis we calculated the total future housing need as the current underproduction of housing plus the future need based on the 2037 household projections. Current underproduction of housing was calculated based on the ratio of housing units produced and new households formed over time. The average household size in each city is calculated and converted to a ratio of total housing units to households. This ratio is compared to that of the region as the target ratio. If the ratio is lower, then we calculated the underproduction as the number of units it would have needed to produce over time, to reach the target ratio. ECONorthwest 3 Washington State does not have a regional approach for housing production. This approach to underproduction is simple and intuitive while using the best available data that is both local and most updated. This analysis does not differentiate between renter and owner households and relies on average household size to convert population counts to household counts. One drawback of this approach is that it does not identify the underproduction at different levels of affordability. Future housing need is calculated based on the forecasted growth. To calculate future housing need, we use a target ratio of 1.14 housing units per new household. This ratio is the national average of housing units to households in 2019. It is important to use a ratio greater than 1:1 since healthy housing markets allow for vacancy, demolition, second/vacation homes, and broad absorption trends. Total Units Needed by Income Once we arrive at the total number of units needed by 2037, the next step is to allocate the units by income level. We first look at the most recent distribution of households by income level (using PUMS to determine area median income or "AMI") in the Spokane County subregion. We then account for current and future household sizes at the city level to better understand nuances of how housing need by income can shift over time as household sizes change and subsequent changes to housing affordability. Because forecasting incomes at the household level over time can be challenging at best, and misleading at worst, this data evaluates housing need using current income distributions forecast forward. The forecast housing need by income category at both the city level and at the subregion is likely to vary depending on policy choices made over the next two decades. That is to say that if cities choose to take less action on increasing housing production and affordability worsens due to demand outpacing supply, the forecast need for lower income households is likely to be less because those low income households that are most at risk from housing price changes are more likely to be displaced from the subregion. The ultimate income distribution in 2037 will be the result of regional housing trends and policy decisions made at the local level. We then apply each distribution of households by income to the total units needed to get the share of new units needed by income level. Employment Analysis An employment analysis was conducted for two reasons. First, employment analysis and trends in job growth by industry is a requirements for local housing action plans. Secondly, findings from access to employment analysis can help inform housing action strategies such as those related to development allowances in urban centers. Understanding Spokane Valley's workforce profile and commuting trends will help provide insights on the housing needs of workers today and into the future. Factors such as job sector growth and the city's commuting patterns may have implications for how many people are able to both live and work within the city. If such factors indicate many people are commuting into the city for work, it could be ECONorthwest 4 possible that the city does not have enough housing to accommodate its workforce or enough housing matching their needs and affordability levels. We developed city-level employment estimates by 2-digit NAICS codes using the U.S. Census Bureau's Longitudinal Employer-Household Dynamics (LEHD) Origin-Destination Employment Statistics (LODES) data. For each city,the employment estimates show the total number of residents working in each 2-digit NAICS sector in that city, the change in employment in that sector in that city since 2010, and the 2018 average wages for the residents in that city in that sector. Access to Employment Transit and auto access to regional employment was derived using 45-minute travel sheds for each mode. ECONorthwest calculated the number of jobs available within these travel sheds in each industrial sector category for each city. We measured access to employment for both transit and auto use,using a preset limit of 45 minutes to generate isochrones (travel sheds). We used ESRI Services to create drive-time isochrones, simulating traffic conditions typical of 7:00AM, Wednesday. Transit Isochrones We created isochrones originating from every transit stop within the jurisdiction. Each transit stop was also weighted by the population within a half-mile distance (straight-line). These isochrones were then joined to LODES job points at the Census Block Level, and the total number of jobs by NAICS industry was calculated for each isochrone. For each jurisdiction, the total number of jobs reachable by transit(and walking) within 45 minutes was calculated as the weighted mean number of jobs within the isochrones,using the transit-stop population as weights. Auto Isochrones For drive-time isochrones, we used a similar method as the transit isochrones. Instead of transit stops,however, we used block group centroids as the isochrone origin points, and the associated block group population estimates provided the weights with which we calculated the average number of jobs reachable by the "average resident." Share of Jobs Accessible Once we calculated the total number of jobs available by 45-minute transit or auto travel from each city, we calculated the share of total jobs in that industry. Caveats Wage estimates by industry from ACS are not available for every industry,usually due to low numbers of survey samples. Many of these estimates, especially for industries with low numbers of workers, show relatively high margins of error and should be treated as rough approximations. ECONorthwest 5 APPENDIX C HOUSING POLICY FRAMEWORK AP MAUL AOLONGR MEMORANDUM To: Chaz Bates, City of Spokane Valley Date: November 4, 2020 Revised January 29, 2021 From: Matt Hoffman Project No.: 1932.01.01 Ben Johnson,AICP RE: Housing Policy Framework Review The City of Spokane Valley(City)is developing a Housing Action Plan (HAP) to evaluate current and future housing needs and identify strategies to meet these needs.This memorandum meets the housing policy framework review (Review) requirements defined by Revised Code of Washington (RCW) 36.70A.600(2) for completing a HAP. This Review identifies existing housing goals, policies, and strategies from the 2017 Spokane Valley Comprehensive Plan (Comp Plan) as well as housing programs and incentives currently available to encourage greater housing supply and the development of affordable housing in the city. Figure 1: Context Map This Review contains three sections: • Section 1:A review of the Comp Plan Housing Element goals and policies • Section 2: Regulatory review j' CDI e„ • Section 3: Summary of findings City of Spokane Valley The information will be used alongside the housing needs assessment and input from community members and stakeholders in developing strategies and policies to meet the M epake city's unique housing needs and to complete the HAP. a A I 4 2815 2nd Avenue,Suite 540, Seattle,WA 98121 www.maulfoster.com R:\1932.01 City of Spokane Valley\Documents\01_2021.01.29 Policy Memo\Mf Policy-Regulatory Memo v3.docx Chaz Bates, City of Spokane Valley Project No. 1932.01.01 November 4, 2020 Revised January 29, 2021 Page 2 SECTION 1. COMPREHENSIVE PLAN POLICY AND GOALS REVIEW In its Comp Plan,the City has identified three goals COMMUNITY SNAPSHOT and four priorities specifically related to housing. • Land Area:38.5mi2 Other elements of the Comp Plan, particularly the • Population:95,810 Land Use element,deal with several other goals and • Total Employment:46,573 policies related to housing. • Key Employment Industries: - Retail Trade (19.6%) Four housing themes identified in the Comp Plan - Health Care/Social Assistance(12.2%) are evaluated in this section. For each theme, the - Manufacturing (13.0%) Comp Plan goals, policies, and strategies are • Median Age:35.2 presented, followed by a description of actions • Educational Attainment taken by the City since the adoption of the Comp - High School or Higher: 91.9% Plan to advance housing objectives. Each theme - Bachelor's or Higher:20.9% concludes with an assessment of the progress • Median Household Income:$48,274 achieved by the City to date. A complete list of Sources:Washington OFM(2019);Employment Security housin related oals olicies and strategies is Deparfment/LMEA;U.S.Bureau of Labor Statistics,Local g g P g Area Unemployment Statistics;U.S.Census ACS(2014);U.S. provided in Attachment A. Census LEHD(2014). Housing Theme 1 : Ensure a Range of Housing Options for Residents Comp Plan Policies, Goals, and Strategies During the development of the Comp Plan, community members identified a need for a greater diversity of housing types to serve people at all income levels and stages of life. The following Comp Plan goals and policies relate to housing variety: • H-G1:Allow for a broad range of housing IAbbreviation Key opportunities to meet the needs of the Abbreviation Definition community. H Housing Element • H-P2: Adopt development regulations that LU Land Use Element expand housing choices by allowing G Goal innovative housing types,including tiny P Policy homes, accessory dwelling units, Goals= broad statements of purpose. prefabricated homes, cohousing, cottage Policies=staff direction. housing,and other housing types. Strategies=initial actions. • LU-P14: Enable a variety of housing types. Demographic shifts identified in the housing needs assessment underscore the importance of H-G1 and the related policies. Spokane Valley's millennial population (ages 25 to 34) almost doubled, growing substantially from 10 percent to 15 percent of the population total (from 12,148 to 21,144 persons) between 2012 and 2018. These households will continue to seek starter homes and homes Chaz Bates, City of Spokane Valley Project No. 1932.01.01 November 4, 2020 Revised January 29, 2021 Page 3 for growing families. On the other end of the spectrum, the senior population (65 and over) is expected to grow by approximately 11,500 people between 2020 and 2040. This age group could generate greater demand for living assistance and low-maintenance middle housing options such as townhomes. In addition to the policies and goals listed above, the Comp Plan featured a strategy to "continue to evaluate new housing typologies to meet market needs." One example of how this strategy is being implemented is through the HAP,which is planned to be finalized by June 30,2021. Actions Taken In June 2016, the City implemented new zoning regulations to allow for a variety of housing types targeting smaller and more affordable housing options for first-time home buyers,young families, and renters not eligible for subsidized housing. They are also referred to as "missing middle housing types."Examples of these housing types can be found in Attachment B. The 2016 regulations allowed ADUs, cottage housing,duplexes,manufactured homes on both Missing Middle Housing Types Defined Missing middle housing types provide diverse individual lots and in home parks, and housing options, such as duplexes, fourplexes, townhouses. Duplexes were permitted in the cottage courts, and multiplexes. These house- denser residential (R) districts, Residential-3 (R- scale buildings fit seamlessly into existing 3), and Multifamily Residential (M R) and residential neighborhoods and support mixed-use districts.The other alternative housing walkability, retail, and public transportation options. They provide solutions along a types, including cottage housing, ADUs, and spectrum of affordability to address the manufactured homes,were allowed in residential mismatch between the available U.S. housing and nonresidential zoning districts throughout stock and shifting demographics, as well as the the city, if developments complied with the growingeSource: demand scamidd e walkability. om supplemental development regulations. New duplex developments in the city since 2016 raised concern among residents about the negative impacts duplex development may have on the character of certain existing single-family neighborhoods. As a result, the City amended its zoning regulations during the 2020 annual Comp Plan update. The revisions prohibit cottage housing, townhomes, and assisted-living facilities in R-3 single-family residential districts. Duplexes, ADUs, and manufactured homes are still permitted under the supplemental use regulations in the R-3 district. The 2020 amendment increased the allowable density for detached single-family homes from six dwelling units per acre to eight dwelling units per acre while maintaining the allowable density for ADUs and manufactured homes.The minimum lot size for a duplex was increased from 10,000 square feet to 14,500 square feet. These new restrictions in the R-3 district were offset by creating a new residential zone, R-4, that allows greater density and alternative housing types,specifically targeting areas served by transit.When Chaz Bates, City of Spokane Valley Project No. 1932.01.01 November 4, 2020 Revised January 29, 2021 Page 4 viewed comprehensively,these revisions to the zoning regulations address the goals of allowing for a range of housing types,creating density around mixed-use areas,and protecting existing neighborhood character. Overall, a broader range of housing options can be built in different zones (including duplexes, cottage housing, ADUs, townhouses, manufactured homes) in more areas than allowed before 2016. Evaluation of Progress The City has advanced H-G1, as construction of a variety of missing middle housing types is now permitted in the Single-Family-Home Dominant city. Since 2016, most of the new housing units have been The current overall distribution of multifamily apartments and duplexes; other product types housing options in the city is such as cottage housing, townhomes, ADUs, and weighted heavily toward single 66 manufactured homes have not been introduced to the family t homes,e totali dwellingh comprise as percent of the units as market.It is important to understand that development type of mid-2020 (approximately 25,665 allowances in zones will only be delivered when both single-family units out of 38,787 total market demand supports targeted housing types and there 1units,Spokane County Assessor). is enough zoned capacity with the right site characteristics. Since 2016, a total of 1,941 units have been constructed, with 42 percent of new units (808) being multifamily apartments. Attached single-family homes and homes with more than one unit but fewer than five have represented 22 percent (427 units) of the total units constructed (Figure 2). Figure 2: Housing Option Unit Distribution Total Dwelling Units Total Built Since 2016 Condominium,2% ADU,0% 1 Apartment, 111 Apartment, Attached single;- 42% family,9% Attached single- ---00001e- Condominium,0% family,22% Mobile/manufactured home, 4% ADU,2% Mobile/manufactured home,2% Source:Spokane County Assessor,ECONorthwest,Maul Foster&Alongi,Inc. Before 2016,only 13 percent of the city's housing stock represented one of the missing middle housing types. Since 2016,nearly 25 percent of all new dwelling units have been missing middle housing types (as shown in Table 1.) Chaz Bates, City of Spokane Valley Project No. 1932.01.01 November 4, 2020 Revised January 29, 2021 Page 5 Table 1: New Housing Types Constructed since 2016 Type Units Percent of Subtotal Percent of Overall ADU 30 6.1% 1.5% a Cottage 0 0.0% 0.0% Duplex 384 77.9% 19.8% Triplex/Fourplex 17 3.4% 0.9% c-� D Townhomes 26 7.3% 1.3% = Manufactured Homes 36 5.3% 1.9% Subtotal 493 100% 24.5% Apartment 808 42.5% Single Family 640 33.0% Overall Built Since 2016 1,941 Source:Spokane County Assessor,ECONorthwest,Maul Foster&Alongi,Inc. Table 1 shows that since 2016, the market has responded to demand and delivered more attached single-family units. The majority-78 percent—have been duplexes. Despite policies supporting the construction of broadened housing options, built housing has largely been limited to single-family homes,multifamily apartments, and duplexes. This could be related to a slower adoption of these housing types by local developers and lack of education on new housing products such as ADUs,townhouses, and cottage housing. Housing Theme 2: Improve Housing Affordability Comp Plan Policies, Goals, and Strategies The current Comp Plan includes a goal to allow for a diversity of housing options that are affordable to households at all income levels.Housing affordability remains relevant todayH-G2 as well as two of the housing policies in the Comp Plan address the development of affordable housing. • H-G2 Enable the development of affordable housing for all income levels. • H-P3 Use available financial and regulatory tools to support the development of affordable housing units. • H-P4 Enable the creation of housing for resident individuals and families needing assistance from social and human services providers. In addition to the policies and goals, the Comp Plan lays out several strategies for improving housing affordability: • Identify low- and moderate-income housing needs. • Streamline permitting procedures based on feedback from businesses and landowners, developers, etc. Chaz Bates, City of Spokane Valley Project No. 1932.01.01 November 4, 2020 Revised January 29, 2021 Page 6 • Evaluate parking standards and reduce the amount of required parking if feasible. Actions Taken Selected recent actions taken by the City to help address housing affordability are described below. A more detailed list of implemented housing-supportive programs is available in Attachment C. Sales and Use Tax Funds for Affordable and Supportive Housing Purposes In February 2020,the City adopted Ordinance 20-002 to incorporate a sales and use tax for affordable and supportive housing. This ordinance and its subsequent incorporation into the Spokane Valley Municipal Code (SVMC; Section 3.06) authorized the City to receive a rebate of a portion of state sales and use tax collected in the city, in the amount of 0.0073 percent, which can be used only for qualifying expenses related to affordable and supportive housing. This sales tax option is a credit against the state sales tax rate of 6.5 percent, so it will not increase the tax rate for consumers. The City has estimated the annual increase of funds from this program to be approximately$178,000. These funds can be used for acquiring,rehabilitating, constructing, or operating and maintaining new affordable housing units.' They cannot be used to fund construction or operation of a homeless shelter,but instead are reserved for longer-term low income,affordable, and supportive housing.The City can use these funds independently, or they can be pooled in partnership with other regional organizations to pay for a larger regional affordable housing development. Funds can be spent on projects each year, or they can be used as a source of repayment of bonds sold to construct an affordable housing capital project. Per state law, cities with populations under 100,000 may use the funds to provide rental assistance to tenants. The city is projected to exceed 100,000 people in approximately three years and is seeking input from the state on whether it may use the funds in this manner once its population exceeds 100,000. Housing Needs Gap, Housing Action Plan The housing needs analysis included an assessment of the gaps between the currently available housing and the housing needed today and into through 2037. The assessment showed that the city has underproduced housing by around 1,463 housing units over the past decade and would need 5,197 new housing units built by 2037 to meet the estimated demand. Not only is there a shortage in the number of housing units available, but the housing needs analysis also showed a mismatch in the type of housing units available. Around 44 percent of all the city households need housing priced below 100 percent of the area median income (AMI),yet this housing is inadequate since only 34 percent of the current housing stock includes housing types affordable for incomes below the AMI, such as less expensive detached single-family homes (ADUs, manufactured homes, cottage), attached single-family homes (duplexes and townhomes and multifamily 1 RCW 82.14.540 Affordable and supportive housing-Sales and use tax. Chaz Bates, City of Spokane Valley Project No. 1932.01.01 November 4, 2020 Revised January 29, 2021 Page 7 developments). When examining household income levels, the AMI is a measure helpful for understanding what different households can afford to pay for housing expenses. Figure 3 illustrates the type of home a household may afford based on its income. Examples of housing types can be found in Attachment B. Figure 3: Financially Attainable Housing Types allir If your household earns ... $19,560 $32,600 $52,260 $65,200 $78,240 f30%ofAMII ISO%ofAMl) 18d/roofAMl) 1100%ofAMI) j120%ofAMl) Then you can afford ... $489 $815 $1,304 $1,630 $1,956 Housing types generally affordable to these households are ... Single-Family Detached 1111- manufactured homes in parks/on lots cottage cluster small-lot single-family laree•lot single family v. 4.6 Single-Family Attached 4 ,• •■1•■1:: duplex,trl•plex,puad-pie.,tovmnomes hll;hrrpri<rd products 1 1• Multitam' • MI 1111 Iew.amenity apartments(rental) apartments(5•undsl cor.rcm,nmm • 1111 Common characteristics... LESS EXPENSIVE MORE EXPENSI 1111 Predominantly renter occupied 6 e.rsting construction predominantly owner occupied 6 new construction Government subsld red Mat JIM Source:ECONorthwest Note:All values are in 2019 inflation-adjusted dollars. As a component of the HAP, the housing needs assessment achieves the Comp Plan strategy of identifying low-and moderate-income housing needs.Table 2 shows the quantity of estimated housing units needed between 2020 and 2037 and the breakdown of needed housing based on household income levels. Chaz Bates, City of Spokane Valley Project No. 1932.01.01 November 4, 2020 Revised January 29, 2021 Page 8 Table 2: Total Housing Units Needed by AMI through 2037 AMI No. of Units %of Units 0-30% 550 8% 30-50% 625 9% 50-80% 1,039 16% 80-100% 686 10% 100%+ 3,760 56% Total Units Needed 6,600 Source:ECONorthwest,Spokane Valley Housing Needs Assessment Summary Report,October 2020. Table 3 provides context on home prices ranges and rent affordability thresholds for households in Spokane County. Table 3: Spokane County Housing Affordability Ranges Household Income Level Low End of Range— High End of Range— Rent (percent of AMI) Home sale affordability Home sale affordability Affordability 30% $93,000 $135,000 $805 50% $133,000 $196,000 $1,006 60% $173,000 $247,000 $1,207 80% $183,000 $272,000 $1,274 100% $195,000 $285,000 $1,305 Source:HUD,2020,ECONorthwest Calculations.The AMI(100 percent)used for the below analysis is$71,700 annual income for a family of four.This is exclusive of transportation,utility,and other household expenses.Lower-end terms assume a 5 percent down payment,a 4.5 percent interest rate over 30 years,$800 per month for insurance,and 0.5 percent private mortgage insurance.Upper-end terms assume a 20 percent down payment,a 3.5 percent interest rate over 30 years,$800 per month for insurance,and no private mortgage insurance. As the HAP process continues, the project team will work with the City to continue evaluating potential housing types and to identify next steps and priority strategies. The recent building pattern data show that duplexes and multifamily apartments are being built;however, other housing types are being built at a much slower pace (townhomes and ADUs) or not at all (cottages). Interviews with nonprofit and for-profit developers will also help to identify existing barriers to development of affordable housing types and inform the next steps of the HAP. Urban County Consortium The City, along with Spokane County and other municipalities in the region (except for the City of Spokane),is a member of the Urban County Consortium.An interlocal agreement enables the county to manage several state and federal affordable housing and homelessness funding sources, including The U.S. Department of Housing and Urban Development (HUD) HOME program, Community Development Block Grants, and document recording fee revenues generated through the Homeless Housing Assistance Act. These funds are distributed throughout the county to developers and service providers based on a competitive request-for-proposals process. City representatives are members of the advisory board that provides oversight on the use of these funds. Chaz Bates, City of Spokane Valley Project No. 1932.01.01 November 4, 2020 Revised January 29, 2021 Page 9 The City is currently evaluating the feasibility of assuming control of its Primary Subsidy Programs The primary programs used to support construction, portion of the document recording fee rehabilitation or acquisition of affordable housing revenues from the Urban County include: Consortium. The primary advantage • HUD Section 202 provides housing for very-low-income would be the City's direct oversight of elderly persons. homelessness funding, enabling better • HUD Section 811 provides housing for persons with communication about how homelessness disabilities. in the city is being addressed. • Low-Income Housing Bond/Tax Credit program Disadvantages include administrative provides affordable rental housing for low- and g moderate-income tenants. costs not covered by the Homeless Housing Assistance Act program and Of the 1,663 subsidized units in the city, 1,010, or 59 it possible duplication of current efforts by progranm. HUDt, are fsu suppounded rts p8 units, orart by 24 pere dcent of the/tax d the Cityof Spokane and the coun program. ppp P tY• total units, with remaining units having an unidentified subsidy source. Addressing Homelessness Addressing and preventing homelessness has been a topic of discussion in recent Spokane Valley City Council meetings as the City evaluates its participation in the Urban County Consortium. The Comp Plan currently does not include any goals, policies, or strategies that address homelessness in the city. Creating such Comp Plan goals,policies, and strategies may help to direct City staff working on this issue. Limited availability of property where emergency housing uses are permitted has been a barrier to locating housing for people experiencing homelessness in the Spokane Valley. If the City identifies additional emergency or transitional housing as a priority, it will be important to consider and clearly identify where this type of use will be permitted. Currently, transitional housing is allowed only as a conditional use in the multifamily residential zones. Evaluation of Progress Subsidized Affordable Units An inventory of the City's stock of subsidized, rent-restricted affordable housing was conducted in July 2020. The results are shown in Table 4. As of mid-2020, 1,544 units targeted for households earning less than 80 percent of AMI had been constructed. A 119-unit multifamily development is under construction.When that development is completed,the total count of rent-restricted affordable housing units will increase to 1,663 units. Rent-restricted affordable units account for four percent of the 38,787 total housing units in the city. Chaz Bates, City of Spokane Valley Project No. 1932.01.01 November 4, 2020 Revised January 29, 2021 Page 10 Table 4: Spokane Valley Rent-Restricted Housing Units* by Building Age Year Built Properties %of Total No. of Low-Income Units %of Total Pre-2006 17 73.9% 1,026 61.7% 2006 1 4.3% 287 17.3% 2009 1 4.3% 37 2.2% 2014 1 4.3% 24 1.4% 2017 1 4.3% 51 3.1% 2019 1 4.3% 119 7.2% 2021** 1 4.3% 119 7.2% Total: 23 100.0% 1,663 100.0% Source:the Washington State Housing Finance Commission,HUD's Multifamily Housing Portfolio,the USDA Rural Development Multifamily Housing Program(no properties in Spokane Valley),the Spokane Housing Authority,ECONorthwest. *These data likely capture a robust share of the total rent-restricted affordable housing in the city. **Construction expected to be complete by mid-2021. The Total Housing Units Needed by AMI through 2037 (Table 2) shows that 2,900 units,or 43 percent of the 6,600 total projected units needed through 2037, are for households earning at or below 100 percent of AMI. Table 5 demonstrates that the city currently has a shortage of rent-restricted units supporting households earning less than 50 percent of AMI, and especially for households earning less than 30 percent of AMI. The target for new units supporting households earning less than 30 percent of AMI by 2037 (shown in Table 2) is 550 units. The city currently has only approximately 60 rent-restricted units in this income bracket. This underscores the challenge faced by the City to encourage an increase in supply for homes attainable for these households through 2037. Table 5: Current Spokane Valley Affordable Housing Units by Income Level Affordability Units with Listed Estimated %of Total Level Rent Data* Total Units** 0-30% 40 4% 60 30-50% 292 26% 436 Over 50% 781 70% 1,167 Total: 1,113 100% 1,663 Source:the Washington State Housing Finance Commission,HUD's Multifamily Housing Portfolio,the USDA Rural Development Multifamily Housing Program(no properties in Spokane Valley),the Spokane Housing Authority,ECONorthwest *Rent-restricted units with targeted AMI strata identified. **Extrapolated estimate of the number of rent-restricted units in each affordability level strata.This estimate assumes that the distribution of known units is the same for the unknown portion,to arrive at a total representing the total number of low-income units in the city. Table 5 does not account for naturally occurring affordable housing and includes only units subsidized using state and federal sources. Naturally occurring affordable housing—dwelling units that are attainable to households at different affordability levels without subsidy—are not included. Most existing naturally occurring affordable housing units will be in the 50 percent to 80 percent AMI range, which will partially help and which makes a case for preservation. Because affordable housing can be both difficult and expensive to build, strategies to support naturally occurring affordable housing and the preservation of affordable housing should be considered in addition to building new rent-restricted affordable housing. Chaz Bates, City of Spokane Valley Project No. 1932.01.01 November 4, 2020 Revised January 29, 2021 Page 11 Market Rate Rental The above tables summarize the status of the subsidized rental housing market in the city and demonstrates that the demand for these units is persistent. Regarding market rate multifamily rental units,Figure 4 shows that the average current asking rental rate for market units that are not subsidized is typically attainable for households earning at least 100 percent of AMI. The exception is for two- bedroom units where households earning 80 percent of AMI can afford the average asking rate. Figure 4: Monthly Rent Payments by HUD Affordability Level $2,000 ■Affordabilty at 30%AMI •Affordabilty at 50%AMI 0 Affordabilty at 80%AMI ■Affordabilty at100%AMI _ •Current Asking Rent ■■■Current Asking Rent Level +, $1,500 c a) — E _ >. 1 -c C O 2 $500 °^° N + dam'Id „mrn „ ,,,, I $ IdI .7.41 . Studio 1-bed 2-bed 3-bed Source:HUD,ECONorthwest,CoStar. The current overall vacancy rate for units in multifamily developments is 5.4 percent. This represents a low vacancy rate and demonstrates that the rental market is not overly constrained. A five percent vacancy implies a balance between housing supply and demand. Figure 5 shows that two-bedroom units (3,012 units) Figure 5: Multifamily Unit Availability Studio Units and one-bedroom units (1,732 units) are the most 3-Bed Units 321 units 849 units 22.1%Available prevalent multifamily unit type. The current vacancy Units 3.1%Available_ rate for these unit types is at or near the balanced rate of five percent. These data show that studio units 1 Bed Bed units 50IIII 1-%Available have a 22.1 percent vacancy rate,representing a lack of demand, and that the three-bedroom units have a low vacancy rate of 3.1 percent. 2-Bed Units 3,012 units 4.5%Available This market observation is bolstered by a demographic finding from the housing needs Source:costar. assessment,which found: "Between 2012 and 2018, the share of 2- and 4-person households grew in Spokane Valley,while the number of 1-person households fell.In contrast,the City of Spokane's share of 1- to 3-person households grew. This trend shows Spokane Valley's housing tilting towards 2-bedroom housing and larger family-friendly housing with at least 2 bedrooms." Chaz Bates, City of Spokane Valley Project No. 1932.01.01 November 4, 2020 Revised January 29, 2021 Page 12 Attached single-family units such as townhomes and detached single-family units such as ADUs available for rent also supplement the rental market.As previously noted,nearly 450 of these types of units have been developed since 2016, and most of these are available for rent. Additional supply of these missing middle housing types is needed to improve housing attainability for all income-level segments, especially for households earning over 60 percent but under 120 percent of AMI. Offering incentives for missing middle housing and modifying the SVMC could assist in filling the gap for these needed housing types. Housing Theme 3: Enhance Distinctive Neighborhood Character/ Support Neighborhood Commercial Comp Plan Policies, Goals, and Strategies The city's current development pattern is primarily auto-oriented, as illustrated by its average Walk Score rating of 30 (indicating that most errands require a car). Comparatively, the City of Spokane's Walk Score is 49, indicating more walkable neighborhoods. Several goals and policies in the Comp Plan encourage neighborhood conveniences and mixed-use residential development. • H-G3 Allow convenient access to daily goods and services in Spokane Valley's neighborhoods. • LU-P7 Protect residential neighborhoods from incompatible land uses and adverse impacts associated with transportation corridors. These goals and polices may not directly encourage the development of new housing units, but they do support the type of development and neighborhood services that help make communities healthy and vibrant. Actions Taken Retail commercial is permitted in most nonresidential zones but is not allowed in residential zones. Conversely, residential development is permitted in the neighborhood commercial (NC), mixed use (MU), and corridor mixed use (CMU),which support the intent of H-G3. The City established transitional regulations (SVMC 19.75) to protect residents in less intensively zoned areas that abut more intensive zones from development that takes place in those intensive zones. These transitional regulations influence setbacks and building heights. The City also modified its zoning regulations in 2020 to create a new single-family residential urban (R-4) zoning district. This code modification was a response to community input and the City's goal to increase housing options and density in areas near transit and services. The new R-4 zone is concentrated between East Broadway Avenue to the north, North Sullivan Road to the east, East Eighth Avenue to the south, and North Park Road to the west.The R-4 zone creates a buffer zone Chaz Bates, City of Spokane Valley Project No. 1932.01.01 November 4, 2020 Revised January 29, 2021 Page 13 that permits more diverse housing between the R-3 zone and the more intense CMU zone abutting Sprague Avenue.A map of the city's zoning districts can be found in Attachment D. Evaluation of Progress Most of the city's commercial properties are located along the principal arterials and are generally not neighborhood facing. Commercial land uses, including retail and services, are conveniently accessed by automobile,and are located along transit lines,but there are few examples of neighborhood-scaled commercial developments. The city has 16 areas of NC-zoned parcels generally located at key intersections along collector and minor street intersections. Most of these properties are improved with residential units and do not include commercial uses. There are 56 parcels totaling 43 acres zoned NC in the city. Of that total,26 parcels are vacant or undeveloped and ten parcels have commercial improvements. There are development opportunities for neighborhood commercial uses in the NC zone; however, the market has not responded with new commercial or mixed-use developments since this zone was expanded throughout the city in 2017. Housing Theme 4: Encourage the Creation of Mixed-Use Destinations Comp Plan Policies, Goals, and Strategies The Comp Plan cites the Kendall Yards area of Figure 6: Mixed-Use Examples Spokane as an example of a mixed-use destination development that combines housing, retail, and Kendall Yards,Spokane amenities in a walkable community connected to West of Jefferson Mixed Use Building, Planned Completion 2021 transit. Another identified example of this type of multi-phased, mixed-use development is the River District in Liberty Lake. The Comp Plan notes that a certain level of residential density is needed to support new businesses in these areas. Multi-phased, r•, ' mixed-use developments also provide opportunities I i t for mixed-income housing. Source:Inland Northwest Business Watch/Baker Construction. • LU-G3 Support the transformation of River District Town Center, Liberty Lake commercial,industrial,and mixed-use areas Town center vision with housing above commercial into accessible districts that attract economic activity. I pronto • LU-P13 Work collaboratively with landlords and developers that seek to provide mixed use residential projects. Source:Shoesmith Cox Architects. Chaz Bates, City of Spokane Valley Project No. 1932.01.01 November 4, 2020 Revised January 29, 2021 Page 14 • LU-P16 Maximize the density of development along major transit corridors and near transit centers and commercial areas. Actions Taken The City's mixed-use zones (MU and CMU) allow for concurrent development of residential and commercial space. These uses may be developed side by side or on top of each other, with the commercial space on the ground floor. Planned residential developments (PRDs) also permit mixed- used developments in residential zoning districts on projects of at least 5 acres. Evaluation of Progress The CMU and MU zones comprise nearly 2,600 acres and 3,116 total housing units, of which 1,899 are multifamily. All these units are in two- or three-story walk-up apartments that do not include commercial uses. Several other areas in the City could support a multi-phased mixed-use development. For example, the Desmet Court multifamily development is under construction on 10 acres in the MU zone located near I-90 and North Sullivan Road. This garden-style apartment project will maximize the allowable density for this zone and result in approximately 300 rental units at a density of 30 units per acre. No commercial space is included in this project. SECTION 2. REGULATORY REVIEW Zoning Regulations The information below summarizes the SVMC Title 19 zoning, and more details on the SVMC can be found in Attachment D. Permitted Uses Table 6 shows the residential uses allowed in the city's residential and nonresidential zones. Residential uses featuring a "P" in the zoning district column are permitted outright,while those with an "S" are subject to supplemental code requirements.2 The City has five residential zones (R-1, R-2, R-3, R-4, and MFR) that are specifically intended to support residential development; however, residential development is also permitted in nonresidential zones. • Single-family homes are permitted in all five residential zones, the two mixed-use zones (MU and CMU),and the NC zone. • Duplexes are permitted in R-4,MFR,and the two mixed-use zones,while multifamily residential uses are also permitted in the MFR zone and the mixed-use zones. Duplexes are 2 SVMC Chapter 19.40 Alternative Residential Development Options. Chaz Bates, City of Spokane Valley Project No. 1932.01.01 November 4, 2020 Revised January 29, 2021 Page 15 also permitted in the R-3 zone under the supplemental use regulations (SVMC 19.40.060) requiring a minimum lot size of 14,500 square feet. • Townhouses and cottages are permitted under the supplemental use regulations in the R-4, MFR,MU, and CMU zones. The NC zone also permits townhouses. Table 6: Permitted Uses Matrix—Residential Uses Residential Zones Nonresidential Zones Residential Use Type Mixed Use Commercial Industrial R-1 R-2 R-3 R-4 MFR MU CMU NC RC IMU Dwelling, accessory S S S S S S S S S units Dwelling, caretaker's S S S S S residence Dwelling, cottage S S S S Dwelling, duplex S P P P P Dwelling,industrial accessory dwelling unit S S Dwelling, multifamily P P P Dwelling,single-family P P P P P P P P Dwelling, townhouse S S S S S Manufactured-home S S S park SVMC 19.60.050 Permitted Uses Matrix. P=Permitted. S=Supplemental Use Regulations. Site-Development Standards The City has five residential zoning districts ranging from Single-Family Residential Estate (R-1), the least dense zone that allows for lots of at least 40,000 square feet and one dwelling unit per acre, to MFR,which has no minimum lot size and allows up to 22 dwelling units per acre.No density bonuses are currently allowed, except for PRDs that set aside 30 percent of the development for open space. Table 7 details the dimensional standards for these residential districts. Chaz Bates, City of Spokane Valley Project No. 1932.01.01 November 4, 2020 Revised January 29, 2021 Page 16 Table 7: Residential Standards Standard R-1 R-2 R-3 R-4 MFR Front and Flanking 35' 15' 15' 15' 15' Street Yard Setback E Garage Setback 35' 20' 20' 20' 20' D E c Rear Yard Setback 20' 20' 10' 10' 10' Side Yard Setback 5' 5' 5' 5' 5' Open Space N/A N/A N/A N/A 10%gross area Lot Size 40,000 sq.ft. 10,000 sq.ft. 5,000 sq.ft. 4,300 sq.ft. N/A D Lot Coverage 30% 50% 50% 60% 60% '>7 Density 1 du/ac 4 du/ac 6 du/ac 10 du/ac 22 du/ac 2 Building Height 35' 35' 35' 35' 50' SVMC 19.70.020 Permitted Uses Matrix. Like the MFR zone,the CMU and MU zones allow for the full range of residential development from single-family residential to multifamily. Residential development in these nonresidential zones must comply with the density and dimensional standards of the MFR zone shown in Table 7.The exception is single-family development in the NC zone, which must comply with the density and dimensional standards of the adjacent single-family residential zone. Transition Regulations PRDs As mentioned earlier in the document, The flexible zoning requirements of PRDs are intended to the City has transitional regulations that encourage imaginative design and the creation of apply to properties where a more permanent open space and a variety of housing types, and to maximize the efficiency in the layout of streets, intensive zoning district abuts a less utility networks, and other public improvements and intensive zone. These code provisions infrastructure. place additional limitations on ground PRDs are allowed in all five residential zones for projects floor uses and regulate setbacks on totaling at least 5 acres. Use and dimensional effected properties. requirements shown in Tables 6 and 7 apply, with some exceptions. Parking Standards • For projects of 10 acres or larger,commercial uses that are allowed in the NC zone are also permitted. Off-street parking requirements range • A 20 percent residential density bonus can be applied from one stall per unit for ADUs up to and two- in exchange for dedicating 30 percent of the total two stalls per unit for one- project area for open space. family homes and townhomes. The • Townhome setbacks may be reduced on one side required parking spaces for residential from 5 feet to 2 feet. uses (SVMC 22.50) can be found in • Zero-lot line townhomes are also permitted (SVMC Attachment D. 19.40.100.A). Chaz Bates, City of Spokane Valley Project No. 1932.01.01 November 4, 2020 Revised January 29, 2021 Page 17 Subdivision Regulations Residential subdivisions that require dividing the land into nine or fewer lots may utilize the City's short subdivision process, while those creating ten or more lots are subject to the full subdivision process. Short subdivisions are subject to Type II review procedures,while subdivisions require more stringent Type III review;these reviews are discussed below. Permit Procedures and Environmental review The City has three distinct permit review processes,depending on the size and nature of the proposed project,which are summarized in Table 8,below.Type I is the least intensive review,where permitting decisions are made administratively and notice of application to other agencies and public hearings are not required. Type II review processes are also made administratively. Preapplications are not required, except for short subdivisions and binding site plans, and a notice of public hearing is not required. Type III review processes are decided by a hearing examiner and all review processes are required,including a preapplication conference and a public hearing. Table 8: Required Application Procedures Pre- Counter- Fully Notice of Final Final Application Decision application complete complete Notice of public decision Decision Type Authority application and timeline conference determination determination hearing noticeThe *** Department 0 X X N/A N/A X 60 days The *II Department **O X X X N/A X 120 days III Hearing X X X X X X 120 days examiner X Required,0 Optional,N/A Not Applicable. *Does not apply to SEPA threshold determinations. Refer to SVMC 21.20.070(B)(2) for noticing requirements. **Except for short subdivisions and binding site plans,which require a preapplication meeting. ***Timeline after the fully complete determination,fully complete determination is issued within 14 days of receiving the application. SMC 17.80.070. ADUs and residential building permits that do not require State Environmental Policy Act (SEPA) review are subject to Type I review. Projects requiring a SEPA determination and short subdivisions (nine or fewer lots) are subject to Type II reviews.Type III review is reserved for subdivisions (ten or more lots), PRDs, and conditional use permits,which are required for cottage housing and ADUs in industrial zoning districts. Chaz Bates, City of Spokane Valley Project No. 1932.01.01 November 4, 2020 Revised January 29, 2021 Page 18 Table 9: Assignment of Development Application Classification (portion) Type Land Use and Development Application Accessory dwelling units Type I Building permits not subject to SEPA Binding site plan—preliminary and final SEPA threshold determination Type II Short subdivision—preliminary and final Preliminary short subdivision, binding site plan—change of conditions Conditional use permits (cottage housing,industrial ADUs) Type Ill Planned residential developments (PRD) Subdivisions—preliminary SMC 17.80.030. SEPA Review The City adopted the maximum allowable SEPA flexible thresholds for residential development in 2016 (SVMC 21.20.040.B). This provides a SEPA review exemption for developments of up to 30 single-family units and 60 multifamily units. This helps to reduce permit processing times and environmental review requirements for projects that fall below these thresholds. In 2016,the City exempted residential and mixed-used infill developments in the following four areas of the city (SVMC 21.20.040.C) from SEPA review: • Carnahan Infill Development: Up to 698 new dwelling units. • East Sprague Infill Development: Up to 282 new dwelling units. • Mirabeau Infill Development: To qualify for an exemption, this area is subject to participation in a voluntary developer agreement based on a Mirabeau traffic study conducted by the City. • East Broadway Infill Development: Up to 852 new dwelling units. In addition, developments that meet the criteria established for each area are not required to go through SEPA review, reducing the time required for permitting and environmental analysis in these areas as well. The City is considering ending the SEPA infill requirement of its process as it evaluates adopting transportation impact fees. Chaz Bates, City of Spokane Valley Project No. 1932.01.01 November 4, 2020 Revised January 29, 2021 Page 19 SECTION 3. SUMMARY OF FINDINGS Barriers to Development of Existing Housing Types The housing development process is defined in the SVMC and in practice by City staff. There is sufficient development capacity on land in the city to support a range of new housing, and the zoning regulations provide some flexibility for developers to deliver housing at a pace to meet the identified housing needs assessment objective of at least 6,600 housing units by 2037, or around 351 units per year. For reference, between 2010 and 2019 an average of 345 housing units were built per year. The city is primarily a large-lot,single-family community.While residents have voiced appreciation for those characteristics,a survey conducted for this project identified a desire for more housing choices, including townhomes, ADUs, and cottages. Spokane Valley should continue to support robust housing growth and advance strategies in support of housing growth for a diversity of housing types and affordability levels in order to meet its target. Several barriers impact the delivery of housing in general and specific types of housing, and some barriers, such as market acceptance of housing types or the risk of prolonged appeal processes, are beyond the City's control. The following considerations are intended to help the City lower barriers to development. These recommendations will be assessed further in the development of the HAP. Comp Plan Policies and Goals • Consider policies that address housing displacement risk by encouraging housing accessibility, equity, and mixed-income housing. • Draft a housing policy that emphasizes the City's commitment to address homelessness. • Consider a land use policy that incentivizes the development of townhomes and cottages in the R-4 zone. • Develop a goal to continue engaging with the city's residents and the development community on the opportunities for and barriers to developing a range of new housing types. Regulatory • Further amend the SVMC to support mixed-use housing. Develop incentives for mixed-use projects that include commercial on the ground floor. • Ensure that the SVMC is prepared to encourage construction of modular homes for all types of housing. • Identify barriers to ADU development and modify the SVMC to incentivize infill development. Chaz Bates, City of Spokane Valley Project No. 1932.01.01 November 4, 2020 Revised January 29, 2021 Page 20 • Conduct subarea planning processes,including a Planned Action Environmental Impact Statement. The resulting Planned Action Ordinance would streamline permit processes for needed missing middle residential development types. Affordable Housing Funding and Incentives Outside of the flexibility allowed in its zoning regulations, the City has limited incentives to support the development of a range of housing types that are attainable for a broad variety of household incomes. The following incentives are for the City's consideration and may be studied further as part of the HAP process: • Adopt the multifamily property tax exemption incentive promoting mixed-income developments. • Evaluate the use of public funds and partnerships to increase construction of affordable housing and mixed-income developments. Examples of public funds include HB 1590 and a voter-approved property tax levy (RCW 84.52.105), both of which support affordable housing creation. • Share stormwater charges and permitting fees between the City and developers of low- income housing. • Consider waiving the sales tax related to construction materials for projects that provide affordable housing. • While not necessarily an incentive, funds from a voter-approved affordable housing levy could be used to support the development of affordable housing. • Develop incentives focused on affordable housing preservation to encourage naturally occurring affordable units. ATTACHMENT A COMPREHENSIVE PLAN HOUSING-RELATED GOALS, POLICIES, STRATEGIES, AND PRIORITIES Chapter 2 of the 2017-2037 Spokane Valley Comprehensive Plan lists the goals,policies,and strategies that will guide the City's efforts in realizing the community's vision. The Comprehensive Plan notes that: Adopted Vision Statement • Goals are broad statements of purpose. A community of opportunity where individuals and families can grow • Policies provide specific direction to City staff. and play, and businesses will • Strategies represent initial,concrete actions to effect flourish and prosper. implementation. The following captures verbatim the goals,policies,and strategies from Chapter 2 that are relevant to housing. The Community and Economic Development Priorities are included at the conclusion of each Comprehensive Plan Element. HOUSING ELEMENT Goals H-G1 Allow for a broad range of housing opportunities to meet the needs of the community. H-G2 Enable the development of affordable housing for all income levels. H-G3 Allow convenient access to daily goods and services in Spokane Valley's neighborhoods. Policies H-P1 Support voluntary efforts by property owners to rehabilitate and preserve buildings of historic value and unique character. H-P2 Adopt development regulations that expand housing choices by allowing innovative housing types, including tiny homes, accessory dwelling units, prefabricated homes, cohousing, cottage housing,and other housing types. H-P3 Use available financial and regulatory tools to support the development of affordable housing units. H-P4 Enable the creation of housing for resident individuals and families needing assistance from social and human services providers. Strategies • Identify low- and moderate-income housing needs. • Continue to evaluate new housing typologies to meet market needs. Community and Economic Priorities • Encourage the Creation of Mixed-Use Destinations: Regionally, Kendall Yards in Spokane has aroused interest as a relatively new style of development that embraces many of the tenets of a movement called new urbanism. Residents, as well as investors, have indicated interest in this type of development, which could anchor new regional retail, attract overnight visitors, amplify positive publicity, and create new mixed-use housing options. • Improve Housing Affordability: Substantial portions of the renter and homeowner population are cost-burdened by rent and mortgage payments. An increase in multifamily housing options would reduce the average rent for these units countywide,improving the livelihood of cost-burdened residents. Furthermore,providing housing options that meet the needs of local employees is critical to ensuring that local companies continue to have access to capable workers. • Ensure a Range of Housing Options for Residents:As the city's population ages and the proportion of households with children continues to decrease,the demand for smaller housing options will increase. During conversations with Spokane Valley residents, the desire for new housing typologies—including cottages and tiny homes—arose repeatedly. From an economic development standpoint,these typologies densify existing single-family neighborhoods while enhancing neighborhood character, and therefore provide a captive audience for neighborhood-serving retailers that create new jobs in the community and draw visitors from nearby towns. • Enhance Distinctive Neighborhood Character: The Spokane Valley community expressed a strong desire for more neighborhood amenities,such as nonchain restaurants, boutiques, and local entertainment. These commercial features thrive in walkable, high- density residential communities and may best be provided through mixed-use development, where multifamily units can improve the financial feasibility of the development project. ECONOMIC DEVELOPMENT ELEMENT Goals Relevant to Housing ED-G1 Support economic opportunities and employment growth for Spokane Valley. Policies Relevant to Housing ED-P10 Enable the creation and retention of home-based businesses that are consistent with neighborhood character. LAND USE ELEMENT Goals Relevant to Housing LU-G1 Maintain and enhance the character and quality of life in Spokane Valley. LU-G2 Provide for land uses that are essential to Spokane Valley residents, employees, and visitors. LU-G3 Support the transformation of commercial, industrial, and mixed-use areas into accessible districts that attract economic activity. LU-G4 Ensure that land use plans, regulations, review processes, and infrastructure improvements support economic growth and vitality. Policies Relevant to Housing LU-P7 Protect residential neighborhoods from incompatible land uses and adverse impacts associated with transportation corridors. LU-P9 Provide supportive regulation for new and innovative development types on commercial,industrial,and mixed-use land. LU-P13 Work collaboratively with landlords and developers that seek to provide mixed-use residential projects. LU-P14 Enable a variety of housing types. LU-P15 Encourage development in commercial and mixed-use zones by reducing parking requirements. LU-P16 Maximize the density of development along major transit corridors and near transit centers and commercial areas. Strategies Relevant to Housing • Streamline permitting procedures based on feedback from business and landowners, developers, etc. • Evaluate parking standards and reduce the amount of required parking if feasible. • Collaborate with the private sector to ensure the successful redevelopment of vacant land at Mirabeau Point. Community and Economic Priorities • Support neighborhood retail.The market trend indicating demand for more retail space is mirrored by the community's desire for an increased number of neighborhood amenities. Spokane Valley residents reported significant demand for walkable retail options in the community, both to enhance the quality of life and to develop distinctive neighborhood identities. • Enhance local identity. The community has expressed a desire to develop more unique neighborhood character.This includes encouraging the types of development that support small, independent businesses, including mixed uses and greater density of housing in certain areas. At the same time,the quality of the city's single-family neighborhoods must be preserved. PUBLIC/PRIVATE UTILITIES ELEMENT Goals Relevant to Housing U-G1 Coordinate with utility providers to balance cost-effectiveness with environmental protection,aesthetic impact,public safety,and public health. Policies Relevant to Housing U-P2 Promote the development of citywide communication networks using the most advanced technology available. ATTACHMENT B HOUSING TYPE DEFINITIONS AND EXAMPLES Single-family: A building, manufactured or modular home or portion thereof, designed exclusively for single- family residential purposes, with a separate entrance and facilities 1 I , a m e. for cooking, sleeping, and ;niL ��=- F 1: sanitation. - Ma r 0 1',; L I�C�DEEED 0 -- - w - f Image Credit: RYN Built Homes Source:Spokane Valley Municipal Code,Appendix A r i Definitions Duplex: An attached building designed exclusively for occupancy by two families, with separate entrances and individual facilities for cooking, sleeping, and sanitation, F I711 but sharing a common or party wall or stacked. - 7 i1 _ A-1.-41 _\' 07,4 ii f% .; Image Credit: Keller Williams Spokane Source:Spokane Valley Municipal Code,Appendix A Definitions Townhouse: A single-family dwelling unit constructed in groups of three or more attached units in which _ -` each unit extends from "_� foundation to roof, open on at �' least two sides. ,, rL= 1_Lt - - �- _ ir If 1 I, i 1 Urn l IS IN ■r i . .jil : Source:Spokane Valley Municipal Code,Appendix A .e+M-,T;. R'• ?ealtor.com Definitions Cottage: A small single-family dwelling unit _ '4• �< 'ti• developed as a group of dwelling t -"r.-- +r.:+ .4c �� 1 • units clustered around a common + ! - .c.: J area pursuant to SVMC 19.40.050 '�%;M - • -�►; . as now adopted or hereafter I: . • N. I - - amended. .'w. •� 7�' „ t4.rn -, ii :- , - II• •III • $. ,M- +4• �t S Image Credit:The Cottage Company Source:Spokane Valley Municipal Code,Appendix A Definitions Accessory Dwelling Unit: A freestanding detached ,x: / structure or an attached part of a '' structure that is subordinate and incidental to the primary dwelling M ' 11114.f unit located on the same M / _._ property, providing complete, �dy , independent living facilities ..,. "111111111111iiiiiiiiiiiiiimio, Ni 1 exclusively for a single n �- housekeeping unit, including ' ` ., `---� 4 1 ►,4 permanent provisions for living, c ; ' I —� sleeping, cooking, and sanitation. eit.,„4. ; ► ,, I1_1I NM an 9 --4:'-'1'.1°. -11:\.'''-'.:, -- ---11 1 ' Source:Spokane Valley Municipal Code,Appendix A ' - ti' Image Credit: Lina Menard Definitions. Manufactured (mobile) home: t g i _ � '7% A preassembled dwelling unit ,- s� 6 ,, transportable in one or more '- M �� �1 :,A sections, which is built on a n. t.v' , -' w' permanent chassis and is ^,1 °', .7 �'� designed for use with or without a "�w ; g, permanent foundation when attached to the required utilities �^� _` u ,-7"� . r certified by the Washington State 1 iii® Iirig N:` _ 1,, .�l .b� l` Department of Labor and ' � ' i '" I I 1 � i 1 ,. Industries. The term ______ - —`+�- - �3 "manufactured home" does not - include a recreational vehicle. .4* -'7;,,l4je:e-r;"-'' ,.7'`s-.''':0''_'7'_;.,-4,;,'1.4';,'''r,-4 i" ` a f'Ciiieit ` Image Credit: Keller Williams Spokane Source:Spokane Valley Municipal Code,Appendix A ^'g � "�+' `�q,ii" Definitions. Multifamily: _ A building designed for occupancy by three or more families, with separate entrances IIIF and individual facilities for cooking, sleeping, and sanitation. -: '� Townhouses are not considered multifamily development. '' = -� " r „moo ,,, ,..._ ,,,,,L . -, ' L �,,`" `Y Image Credit:Costar Source:Spokane Valle-Municipal Code,Appendix A I -4 ior ,,_ ,..., - i.. Definitions. Modular construction: Residences constructed entirely in ;,� factories and transported to their �/ I� 1 sites on flatbed trucks. They are , r% ` built under controlled conditions �">~ . and must meet strict quality- � bf control requirements before they � - ,i �, f , r are delivered. They arrive as block .�-``�` I ,-.1 ^..-` segments and are neatly , assembled, using cranes, into homes that are almost `k H indistinguishable from � " ` comparable ones built on site.' , ". ° I I .N, ° a ' 1 '� - EmmaS E "" _ Image Credit:Timberland Homes 1 Nick Gromicko,Modular vs.Manufactured Homes,National Association of Certified Home Inspectors,accessed 12/23/20,https://wwwnachi.org/modular-manufactured-homes.htm. ATTACHMENT C LIST OF ACTIVE HOUSING-SUPPORTIVE PROGRAMS EXISTING HOUSING CODE AND PROGRAMS Program Description Housing Diversity Alternative Residential In June 2016,the City of Spokane Valley (City) implemented new zoning regulations to allow for a variety of new housing types Development Options: targeting smaller and more affordable housing options.' The new housing included accessory dwelling units, cottage development, duplexes, manufactured homes on both individual lots and in home parks, and townhouses. Duplexes were permitted in the denser • Accessory dwelling units residential districts (R-3 and Multifamily Residential) and mixed-use districts.The other housing types were allowed in a variety of districts • Industrial accessory throughout the city, provided they complied with the new supplemental development regulations.This zoning change led to a dwelling units significant increase in the number of new duplexes being permitted in the city. • Cottage development • Duplexes New duplex development in the city raised some concern among residents.As a result,an amendment is proposed, as a part of the • Manufactured homes 2020 comprehensive plan updates,that would prohibit cottage housing,townhomes, and assisted-living facilities in R-3 districts. It • Townhouses would also add supplemental use regulations to duplexes in R-3 zones.The proposed amendment would create a new residential zone, R-4,that would allow greater density and alternative housing types in areas served by transit. Streamlined Permitting State Environmental Policy The City has adopted the maximum allowable SEPA flexible thresholds standards for residential development,exempting Act (SEPA) Exemption— developments of up to 30 single-family units and 60 multifamily units.2 This can limit permit processing times and environmental review Flexible Thresholds requirements for projects that fall below these thresholds. SEPA Exemption—Infill The City has implemented an exemption from SEPA review for residential and mixed-use infill developments in four areas of the city.3 Development Developments that meet the criteria for each area are not required to go through SEPA review, reducing the time required for permitting and environmental analysis. Housing Sales and Use Tax for In February 2020,the City adopted a sales and use tax for affordable and supportive housing.Transactions are taxed at a rate of Affordable and Supportive 0.0073 percent of the selling price or value.The funds can be used for acquiring, rehabilitating,constructing, or operating and Housing maintaining new affordable housing units.4 HHAA document recording surcharges are authorized by two statutes: Revised Code of Washington (RCW) 36.22.179 and RCW 36.22.1971.The recording fee funds must be used for homeless services to further the goals of the local homeless housing plan. Currently, HHAA recording fees generated from activity in Spokane County support countywide homeless housing programs. Because the City of Spokane receives a direct allocation,two HHAA funds are administered locally—one by Spokane County (the County) and Homeless Housing Assistance other by the City of Spokane. Act (HHAA) Funds The County hosts an HHAA request-for-proposal (RFP) process for homelessness service providers to apply for funds. In November and December 2019,the County held an RFP process for its 2020 funding cycle to allocate more than$1.3 million to homelessness service providers with contracts spanning 18 months. Funding decisions were reviewed and approved by the Housing and Community Development Advisory Committee,which includes three representatives from the City. 1 SVMC Chapter 19.40 Alternative Residential Development Options. 2 SVMC Section 21.29.040 Categorical exemptions. 3 Ibid. 4 RCW 82.14.540 Affordable and supportive housing-Sales and use tax. Program Description LIHTC is the longest-running and only current federal funding source for the development of new affordable housing. In Washington, the program is administered by the Washington State Housing Finance Commission. LIHTC funds can also be used to rehabilitate existing affordable housing developments.A successful LIHTC application results in a tax credit being assigned to the project.This credit can be either retained by the developer to offset their tax obligations or sold to an equity investor to provide immediate funds for the development.The affordable units created are required to remain affordable for 30 years.Twelve projects in Spokane Valley Low Income Housing Tax have taken advantage of LIHTC, creating 675 affordable housing units since 2000.5 Credits (LIHTC) The application and selection process for LIHTC is extremely competitive,with far more applicants than funding available.The Housing Finance Commission allocates funding to geographic pools,which limits the number of applications that can be funded each cycle in Spokane County.As a result of recent changes to Washington State LIHTC policies,the County is currently developing a pre- application process to select one application per funding round to recommend for funding.6 The County manages the region's Affordable Housing Trust Fund. Revenues for the fund are generated from a document recording Affordable Housing Trust fee of$10 authorized by RCW 36.22.178.The statute allows the County to use 60 percent of the revenue generated from the recording Fund fee for building,operation,and maintenance of housing serving households making at or below 50 percent of the area median income.The County uses these funds to support new and existing affordable housing projects across the county. Federal HOME funds and Spokane Valley is a member of an Urban County Consortium that allows the Spokane County Housing and Community Development Community Development Division to administer federal HOME and CDBG funds.The County does this based on their Annual Action Plan and guidance from the Block Grants (CDBG) Housing and Community Development Advisory Committee.The funds are typically offered through a competitive RFP to solicit affordable housing project proposals from other service providers.The County anticipates receiving$1.65 million in CDBG funds in 2020. Eviction Rent Assistance The County manages the Eviction Rent Assistance Program Grant that is intended to prevent evictions by paying past due,current, Program and future rent.The program serves households that earn at or below 50 percent of the area median income and that have not paid or partially paid one month of rent. Subsidized Housing and The Spokane Housing Authority owns and manages 846 units of affordable housing units in the region.They also manage Section 8 and Housing Voucher program grant-based housing voucher programs.The waitlist for the housing voucher program is currently closed because of high demand and limited funding. 5 HUD,"LIHTC Database,"2018,https://lihtc.huduser.gov. 6 Spokane County,"2021 9%LIHTC Metro-Pool Prioritization Pre-Application process,"accessed Sept. 17,2020,https://www.spokanecounty.org/4690/9-LIHTC. ATTACHMENT D ZONING CODE REFERENCE CITY OF SPOKANE VALLEY ZONING DISTRICTS Comprehensive Plan Land Use Designation Zoning District Code Zoning District Single-Family Residential R-1 Single-Family Residential Estate Single-Family Residential R-2 Single-Family Residential Suburban Single-Family Residential R-3 Single-Family Residential Single-Family Residential R-4 Single-Family Residential Urban Multifamily Residential MFR Multifamily Residential Mixed Use MU Mixed Use Corridor Mixed Use CMU Corridor Mixed Use Neighborhood Commercial NC Neighborhood Commercial Regional Commercial RC Regional Commercial Industrial I Industrial Industrial Mixed Use IMU Industrial Mixed Use SVMC 19.20.010 Zoning districts RESIDENTIAL PERMITTED USE TABLE Residential Mixed-Use Commercial Industrial R-1 R-2 R-3 R-4 MFR MU CMU NC RC IMU I Residential Dwelling, accessory S S S S S S S S S units Dwelling, caretaker's S S S S S residence Dwelling, cottage S S S S Dwelling, duplex S P P P P Dwelling, industrial accessory dwelling unit S S Dwelling, multifamily P P P Dwelling, single-family P P P P P P P P Dwelling, townhouse S S S S S Manufactured home S S S park SVMC 19.60.050 Permitted Uses Matrix P=Permitted. S=Supplemental Use Regulations. RESIDENTIAL STANDARDS TABLE R-1 R-2 R-3 R-4 MFR(1) Front and Flanking 35' 15' 15' 15' 15' Street Yard Setback Garage Setback(2) 35' 20' 20' 20' 20' D Rear Yard Setback 20' 20' 10' 10' 10' E Side Yard Setback 5' 5' 5' 5' 5' Open Space N/A N/A N/A N/A 10%gross areas Lot Size 40,000 sq. ft. 10,000 sq.ft. 5,000 sq.ft.(6) 4,300 sq.ft. N/A(4) Lot Coverage 30% 50% 50% 60% 60% •X Density 1 du/ac 4 du/ac 6 du/ac 10 du/ac 22 du/ac Building Height(5) 35' 35' 35' 35' 50' -I Where MFR abuts R-1, R-2,or R-3 zones,development shall comply with the provisions of Chapter 19.75 SVMC, Transitional Regulations. (hyperlink to existing code) -2 Attached garages,where the garage door does not face the street, may have the same setback as the primary structure. -3 Open-space requirement does not apply to single-family development in the MFR zone. -4 Single-family residential development in the MFR zone shall have a minimum lot size of 2,000 square feet per dwelling unit.Only one single-family dwelling shall be allowed per lot. -5 The vertical distance from the average finished grade to the average height of the highest roof surface. -6 Duplex development in R-3 zone shall have a minimum lot size of 14,500 square feet. SVMC 19.70.020 Permitted uses matrix ZONING MAP • igg rx� ,. .. .. . . er : ;#4.::..t.x.....1::.:..t,.,:?.,!..,::::...:;,,:-;,_...1`.-- L oplr . ,,9, r■ • 111146 • . ■IrAPIS i;,&i.":1•11.1111 111 Mk. I _ ;` U�- ' w■■■■�me .... Dishm" r`' 'SVallene .w Veradale Grer�acres - i 4 • . iii. . . 2, /j,,/ C 1 , //�/////// 1 El Zoning iig :�.4 RI R2 :;I �. - R3 `i/ R2 R3 :::itiiiii %%% /�/\\,...s • • MF // \ � NC Iiiiiiitiiil ��,j/ /�• /,„ Yellowstone Pipeline j�/�/ MU CMU •• :i/1�// SEPA • Infill � RC �/� es • IMU iiiili '� I SUPPLEMENTAL STANDARDS FOR ALTERNATIVE RESIDENTIAL DEVELOPMENT OPTIONS Accessory Dwelling Units (ADUs) Definition: a freestanding detached structure or an attached part of a structure that is subordinate and incidental to the primary dwelling unit located on the same property,providing complete,independent living facilities exclusively for a single housekeeping unit, including permanent provisions for living, sleeping, cooking, and sanitation. See "Residential, use category." Site • One ADU is allowed per lot. • One off-street parking space is required. Building • Must be similar in appearance to single-family home in finish, roof pitch, trim, and windows. • The entrance should be located on the side or rear of the unit. • Must be at least 300 square feet. • Cannot exceed 50 percent of the habitable square footage of the primary unit. • Footprint cannot exceed 10 percent of the lot area or 1,000 square feet, whichever is greater. • Cannot have more than two bedrooms. Other • Located behind the front building setback line and placed on a permanent foundation. • Preserve all side yard and rear yard setbacks for a dwelling unit. • Not allowed on lots containing a duplex,multifamily dwelling, or accessory apartment. • The owner must occupy either the primary dwelling unit or the ADU as their permanent residence for six months or more of the calendar year and at no time receive rent for the owner-occupied unit. • A deed restriction shall be recorded with the Spokane County auditor to indicate the presence of an ADU, the requirement of owner occupancy, and other standards for maintaining the unit as described in the Spokane Valley Municipal Code (SVMC). Industrial ADUs Definition: A dwelling unit within a primary building located in the industrial zone for occupancy by a person or family for living and sleeping purposes. Site • An industrial ADU may be developed in conjunction with either an existing or new building. • The maximum number of allowed industrial ADUs is ten per site. • One off-street parking space for each ADU is required in addition to the off-street parking required for the primary use. Building • The ADU, excluding any garage area,is prohibited on the first floor of the building. • The ADU unit shall not have more than two bedrooms. Permit Type • Industrial accessory dwelling units shall require approval of a conditional use permit pursuant to Chapter 19.150 SVMC. Cottage development Definition:A small single-family dwelling unit developed as a group of dwelling units clustered around a common area pursuant to SVMC 19.40.050 as now adopted or hereafter amended. Site • The design of a cottage development shall take into account the relationship of the site to the surrounding areas. The perimeter of the site shall be designed to minimize adverse impact of the cottage development on adjacent properties and, conversely, to minimize adverse impact of adjacent land use and development characteristics on the cottage development. • The maximum density shall be two times the maximum number of dwelling units allowed in the underlying zone. • Where feasible, each cottage that abuts a common open space shall have a primary entry and/or covered porch oriented to the common open space. • Buildings shall meet the following minimum setback standards: — Twenty-two-foot front yard setback. — Ten-foot rear yard setback. — Five-foot side yard setback. • Common open space is required and shall meet the following criteria: — Four hundred square feet of common open space per cottage. — Setbacks and private open space shall not be counted toward the common open space. — One common open space shall be located centrally to the project, with pathways connecting the common open space to the cottages and any shared garage building and community building. — Cottages shall surround the common open space on a minimum of two sides of the open space. — Community buildings may be counted toward the common open space requirement. • One and one-half off-street parking spaces for each cottage are required. Building • Cottages shall not exceed 900 square feet, excluding any loft or partial second story and porches.A cottage may include an attached garage,not to exceed an additional 300 square feet. • The building height for a cottage shall not exceed 25 feet. • The building height for any attached garage or shared garage building shall not exceed 20 feet. • Buildings shall be varied in height, size, proportionality, orientation, rooflines, doors, windows, and building materials. • Porches shall be required. Other • ADUs are prohibited. • All other SVMC provisions that are applicable to a single-family dwelling unit shall be met. • SVMC Title 20, Subdivision Regulations. The design requirements of SVMC 20.20.090 are waived. Permit Type • Cottage development shall require approval of a conditional use permit pursuant to Chapter 19.150 SVMC. Community buildings • Community buildings are encouraged in cottage developments. Community buildings shall meet the following criteria: — They shall be clearly incidental in use and shall not exceed 1,000 square feet. — They shall be no more than 20 feet in height. — They shall be commonly owned and maintained by the property owners. Duplexes Definition: An attached building designed exclusively for occupancy by two families, with separate entrances and individual facilities for cooking, sleeping,and sanitation,but sharing a common or party wall or stacked. See "Residential,use category." • Duplex development in the R-3 zone shall have a minimum lot size of 14,500 square feet. Duplex development in nonresidential zones shall meet the requirements set forth in SVMC 19.70.050(G). Manufactured homes on individual lots Definition: A preassembled dwelling unit transportable in one or more sections, which is built on a permanent chassis and is designed for use with or without a permanent foundation when attached to the required utilities certified by the Washington State Department of Labor and Industries.The term "manufactured home" does not include a "recreational vehicle." Homes built to 42 U.S.C. 70 Sections 5401 through 5403 standards (as they may be amended) are regulated for the purposes of siting in the same manner as site-built homes, factory-built homes, or homes built to any other state construction or local design standard,provided that the manufactured home shall: • Be set upon a permanent foundation,as specified by the manufacturer, and that the space from the bottom of the home to the ground be enclosed by concrete or an approved product that can be either load-bearing or decorative. • Comply with all local design standards,including the requirement for a pitched roof with a slope of not less than 3:12, applicable to all other homes in the neighborhood in which the manufactured home is to be located. • Be thermally equivalent to the State Energy Code. • Otherwise meet all other requirements for a designated manufactured home as defined in RCW 35.63.160. SVMC 19.40.070 does not override any legally recorded covenants or deed restrictions of record. An existing single-wide manufactured home may be replaced with a new single-wide manufactured home when replacement is initiated within 12 months of the date of damage representing less than 80 percent of market value, or removal of the existing habitable manufactured home. Manufactured homes with dimensional features that match or closely match the predominant manufactured home type within a manufactured home subdivision may be placed in the manufactured home subdivision without regard to the age of the manufactured home (Ord. 16-018 5 6 (Att. B), 2016). Manufactured home parks Definition: A site having as its primary use the rental of space for occupancy by two or more manufactured(mobile) homes,and the accessory buildings,structures,and uses customarily incidental to such homes. See "Residential,use category." Manufactured home parks shall require approval of a binding site plan and site plan review pursuant to SVMC Title 20, Subdivision Regulations,and Chapter 19.130 SVMC, Site Plan Review. Manufactured home park density shall be consistent with the zoning classification in which they are located, not to exceed 12 units per acre. A minimum of five manufactured-home spaces shall be required per park. Manufactured home parks shall provide at least 10 percent of the gross area of the park for common open space for the use of its residents. Each manufactured home space shall have direct frontage on a public or private street. The minimum setbacks shall be pursuant to Table 19.40-1. Minimum setback from the Minimum setback from the property lines of individual in boundary of the manufactured park spaces home park Front Side Rear Side Rear Right-of- Yard Yard Yard Yard Yard Way Manufactured homes 5' 5' 5' 10' 10' 20' Patio covers, decks, landings, 5' 5' 5' 5' 5' 20' awnings Carports 5' 5' 5' 5' 5' 20' Townhouses Definition:A single-family dwelling unit constructed in groups of three or more attached units in which each unit extends from foundation to roof,open on at least two sides. See"Residential,use category." In zero lot line developments approved as part of a planned residential development, zero setbacks along one side are allowed, provided a 2-foot maintenance easement is recorded as part of the subdivision plan. Townhouses located on individual lots shall meet minimum rear, front, and side yard requirements (where applicable), minimum area requirements, maximum lot coverage, and building height requirements shown in Table 19.70-1. Townhouses are subject to the following requirements: • No more than six dwelling units shall be attached in one continuous row or group. • A townhouse unit shall not be constructed above another townhouse unit. • There shall be a side yard on each side of a contiguous row or group of dwellings of not less than 6 feet. Townhouses included in a condominium development may limit the lot to the building footprint, provided that the yard area shared in common with all units is equivalent in area to the yard required by the underlying zone (Ord. 16-018 § 6 (Att. B), 2016). Homeowner or property owner association required In a cottage development or manufactured home park,a property owners'or homeowners'association shall be established for the purpose of ownership, maintenance, and management of open spaces, common areas,buildings,and private streets as required by the provisions of the SVMC (Ord. 16-018 § 6 (Att. B), 2016). PERMIT PROCESSES Permit Type and Land Use Application Pre- Counter- Fully Notice of Final Final Application Decision decision Decision application complete complete Notice of public Type Authority application and timeline conference determination determination hearing notice *** The department O X X N/A N/A X 60 days The II* department O** X X X N/A X 120 days III Hearing X X X X X X 120 days examiner X Required 0 Optional N/A Not Applicable *Does not apply to SEPA threshold determinations. Refer to SVMC 21.20.070(B)(2) for noticing requirements. **Except for short subdivisions and binding site plans,which require a preapplication meeting. ***Timeline after the fully complete determination;fully complete determination is issued within 14 days of receiving the application. Accessory dwelling units 19.40 Type I Building permits not subject to SEPA 21.20.040 Floodplain development 21.30 Binding site plan—preliminary and final 20.50 Binding site plan—change of conditions 20.50 SEPA threshold determination 21.20.060 Shoreline conditional use permit 21.50 Type II Shoreline nonconforming use or structure review 21.50 Shoreline substantial development permit 21.50 Shoreline variance 21.50 Short subdivision—preliminary and final 20.30, 20.40 Preliminary short subdivision, binding site plan—change of conditions 20.30 Conditional use permits 19.150 Type Ill Planned residential developments 19.50 Subdivisions—preliminary 20.30 REQUIRED PARKING SPACES Table 22.50-1—Required Parking Spaces for Specific Uses Use Required Parking Residential Dwelling, accessory units 1 per dwelling unit Dwelling, multifamily,studio,and one bedroom 1 per dwelling unit, plus 5%of total for guests Dwelling, multifamily,two or more bedrooms 1.5 per dwelling unit, plus 5%of total for guests Dwelling, one-and two-family, townhouse 2 per dwelling unit Manufactured (mobile) home park 2 per dwelling unit plus 5%total for guest parking Group Living Assisted living facility/convalescent/nursing home 1 per 4 residents plus 1 per staff on largest shift Community residential facility 1 per 4 residents Dwelling, congregate 1 per sleeping room https://www.codepublishing.com/WA/SpokaneValley/#!/SpokaneValley22/SpokaneValley2250.html#22.50 APPENDIX D SUMMARY OF COMMUNITY ENGAGEMENT I MAUL AOLONGR MEMORANDUM To: Chaz Bates Date: March 4,2021 From: Kate Elliott Project No.: 1932.01.01 Matt Hoffman RE: City of Spokane Valley Housing Action Plan Public Engagement Summary SUMMARY OF PUBLIC ENGAGEMENT Maul Foster & Alongi, Inc. (MFA) led a public engagement process to gather stakeholder input to inform the Housing Action Plan (HAP) as it was developed. These efforts engaged key stakeholders including community members, workers, businesses, nonprofit organizations, service providers, housing developers and housing managers,and others to understand their priorities related to housing in the City of Spokane Valley (City). Their priorities were foundational in developing the HAP. The Community Engagement Plan (CEP) for the City of Spokane Valley's HAP was developed in accordance with the Washington State Department of Commerce's Guidance for Developing a Housing Action Plan (Public Review Draft). The summary below outlines the findings from the community engagement efforts which included an online survey and stakeholder interviews. Project updates were provided to our key stakeholders and the general public using email and listsery updates,media updates and media interviews,and an article in the city magazine which is mailed to every address in the city. The purpose of the project updates was to ensure the community was aware of project status, milestones, upcoming engagement opportunities, and ways to get involved and provide input. COMMUNITY ENGAGEMENT APPROACH The CEP details the goals,approach,and methodology that were conducted for this project.The final CEP is included in Attachment A of this summary. The engagement effort was developed around the goal of understanding the community's housing priorities including opportunities and challenges. The plan focused on providing background information necessary for the public to understand the purpose, need, and value of a HAP and the importance of providing diverse, affordable housing to support inclusive neighborhoods. Chaz Bates Project No. 1932.01.01 March 4,2021 Page 2 Community input was used to shape the direction of the HAP's strategies and recommendations. Draft strategies and recommendations were then reviewed by staff and the City Council,and the final HAP, once prepared, will be distributed to the public for further comment and refined based on feedback prior to adoption. A list of the outreach tactics used in development of the HAP is summarized in the table. Table: List of Outreach Tactics Month Outreach Tactics Summer 2020 • Community engagement plan • Project web page,materials,and "on-hold" message for the City of Spokane Valley general phone line • Stakeholder interviews • Community and partner update describing the HAP purpose, need, and process Fall 2020 • Community survey#1 about the current state of housing and housing needs(Survey was live 9/21-10/19) • Website updates regarding project status Winter 2020-21 • City magazine article about the HAP (quarterly magazine mailed to all addresses in November 2020) • Council/Commission check-ins with opportunity for public input • Website updates regarding project status • Community and partner update on project status COMMUNITY ENGAGEMENT FINDINGS In September and October 2020,MFA conducted an online public survey and stakeholder interviews. The survey garnered 124 responses. Following the survey, MFA conducted stakeholder interviews with 15 housing-related professionals involved in the development of housing, management of housing,and programs that support housing ownership and affordable housing.The interviews helped expand on the themes identified from the survey responses to help build out the context for the community's priorities around housing. SURVEY FINDINGS The following sections summarize the responses and sentiment in the community survey. The survey was fielded using SurveyMonkey from September 21 to October 19,2020 and received 124 responses. The Spokane Valley community was well represented,and demographics of those that took the survey aligned closely to the overall makeup of the city. Survey demographics can be found in Figures 1 through 3 in Attachment B of this summary. COVID-1 9 impacts to housing At the time of the survey, 13 percent of responses noted impacts to their housing situation due to the COVID-19 pandemic, and an additional five percent said they expect to be impacted in the future. C:\Users\cbates\AppData\Local\Microsoft\Windows\INetCache\Content.ou look\HBQOH6P9\Community Engagement Summary Memo.docx Chaz Bates Project No. 1932.01.01 March 4,2021 Page 3 Respondents noted a number of reasons they were unable to keep up with rent or housing payments including losing jobs, changes in income, and businesses shutting down. The figure summarizes this input. Figure: Impacts of COVID-19 Has COVID-19 impacted your housing situation? Open Ended Question:How COVID-19 has or is expected to impact the housing situation? Changes in income making it unlikely I can afford the yearly rental increase every time lease is renewed 16 e Delay of the spring market,shortage of materials and it has enabled to stay at home and collect more money than they would if they worked,exacerbating the labor shortage I am now working out of my house,instead of the office. I have lost my job,have been trying to fknd another job,and depleted my savings to make ends meet. Impacted management of rental properties Job loss will affect business 102 Lost my job,need to move,prices are ridiculous and I can't find anything affordable that isn't falling to pieces. My home has become my office, if that counts. We have seen an increase of tenants contacting our office due to inability to pay rent.Tenants are facing eviction once the moratorium expires. We own a small business,a restaurant and it has been shut down since mid March making it impossible to pay rent. •Yes E No,but I anticipate it will. Wife laid off work for 12 weeks 111 No Owners and renters in Spokane Valley The survey asked whether the respondents owned or rented their homes. All respondents answered this question and 75 percent were owners-56 percent owned with a mortgage and 19 percent owned free and clear. Renters accounted for 23 percent of the responses. The other three respondents either occupied their unit without payment of rent or they did not have stable housing. Barriers to renting in Spokane Valley Only 25 of the 124 respondents (20 percent) identified as renters. This question allowed respondents to select more than one choice. The 25 respondents provided a total of 31 responses. Of these 31 responses, 77 percent said finding affordable housing in the city was a barrier to renting. Challenges included not being able to find affordable housing (61 percent identified this as a barrier), 10 percent identified as a barrier not being able to find housing that accepted housing vouchers, and six percent said past evictions, or no ADA-available units was a barrier. The remaining 23 percent of renters did not experience any barriers to renting. Figure 4 of Attachment B includes a summary of this data and further demographic information. Barriers to purchasing a home in Spokane Valley This question asked if respondents had recently tried to buy or bought a home and allowed respondents to select more than one answer.The 102 responses include renters and homeowners. Of C:\Users\cbates\AppData\Local\Microsoft\Windows\INetCache\Content.Outlook\HBQOH6P9\Community Engagement Summary Memo.docx Chaz Bates Project No. 1932.01.01 March 4,2021 Page 4 this total,23 percent said affordability was a barrier,and 18 percent could not afford a down payment. Others noted difficulty finding the right type of housing, being outbid, or not finding a place in the location they wanted. Less than half of the respondents did not encounter any barriers (45 percent,or 29 of 64). Figure 5 of Attachment B includes a summary of this data and further demographics. Types of housing in Spokane Valley Of the 124 respondents, 109 indicated the type of housing that they currently live in. Single-family homes accounted for 80 percent of where respondents live, while the next most common housing type was multifamily homes at 13 percent. Figure 6 of Attachment B includes a summary of this data and further demographics. Favored housing types for Spokane Valley Respondents were also asked what type of housing they would like to live in. Of the 124 respondents 107 provided at least one answer. Respondents could select more than one housing type and a total of 159 housing types were selected. Single-family homes were the most desired housing type at 60 percent of responses, though nearly all the respondents (90 percent) included single-family homes as one of their choices. The next most favored were: • Cottages: 16 percent of the total responses with 24 percent of the respondents selecting this choice. • Townhomes: Nine percent of the responses with 13 percent of the respondents selecting this choice. • Duplex: Seven percent of the responses with 10 percent of the respondents selecting this choice. Figure 7 of Attachment B includes a summary of the 159 responses and further demographics. Housing options with the greatest need Respondents were asked what kind of housing options are in greatest need in Spokane Valley. Of the 124 respondents, 93 provided at least one answer. Respondents could select more than one type of housing and a total of 206 responses were provided. Of the 93 respondents, 73 percent felt more affordable ownership housing options were the greatest need.The other two most frequently selected needs were the desire for more affordable housing for seniors,with 48 percent selecting this choice, and the desire for more flexibility for single-family homeowners to build accessory dwelling units, such as backyard cottages,with 44 percent selecting this choice. Figure 8 of Attachment B includes a summary of the 206 responses and further demographics. C:\Users\cbates\AppData\Local\Microsoft\Windows\INetCache\Content.ou look\HBQOH6P9\Community Engagement Summary Memo.docx Chaz Bates Project No. 1932.01.01 March 4,2021 Page 5 Open-ended questions Impacts to the quality of living in Spokane Valley When asked about issues or challenges that impacted their quality of life,responses ranged from lack of affordable housing to pesky neighbors. Respondents noted that higher drug, crime, and homelessness areas are often also lower income housing areas. The desire for recreation and parks was mentioned several times.A list of quotes from this open-ended question can be found after Figure 8 of Attachment B. Ways the City can improve housing When asked about how Spokane Valley can improve housing for the community most respondents noted either a need for encouraging the development of more affordable housing and promoting more housing choices. A list of quotes from this open-ended question can be found after Figure 8 of Attachment B. Primary reason for living in Spokane Valley The final question asked respondents why they lived in the Spokane Valley. Many respondents were either born and raised or work in the area. Responses indicated that apart from train traffic, the Spokane Valley is a quiet community with less vehicle traffic and fewer challenges associated with bigger cities. Good schools and great quality of life were noted many times, as well as ease of access to Interstate 90. A list of quotes from this open-ended question can be found after Figure 8 of Attachment B. STAKEHOLDER INTERVIEWS The stakeholder interviews generated a wealth of information, and the content of each interview was analyzed to identify similar and distinct key themes and insights, all of which informed the HAP. The 15 interviewees, listed below, included housing developers, nonprofit service providers and developers, and housing advocates. Their experiences provided insights into housing challenges and opportunities specific to Spokane Valley and directly informed the development of the housing polices. 1. Dennis Crapo,Diamond Rock Construction 2. Lanzce Douglas,Douglas Properties 3. Deb Elzinga, Community Frameworks 4. Jim Frank, Greenstone 5. Michelle Girardot, Habitat for Humanity 6. Rob Higgins, Spokane Association of REALTORS 7. Julie Honekamp, SNAP 8. Ray Kimball,Whipple Engineering 9. Jonathan Mallahan, Catholic Charities 10. Jennyfer Mesa,Latinos en Spokane C:\Users\cbates\AppData\Local\Microsoft\windows\INetCache\Content.ou look\HBQOH6P9\Community Engagement Summary Memo.docx Chaz Bates Project No. 1932.01.01 March 4,2021 Page 6 11. Dave Roberts, Spokane Housing Ventures 12. Ben Stuckart, Spokane Low Income Housing Consortium 13. Todd Walton,Inland Group 14. Darin Watkins, Spokane Association of REALTORS 15. Joel White, Spokane Home Builders Association Summary of Findings Development process Input from the developers interviewed was that development process in Spokane Valley is working efficiently for permitting and constructing new single-family and multifamily housing. Interviewees indicated positive experiences working with building officials and Spokane Valley staff navigating the permit process. The fee schedules are in line with the market. However, those involved with developing affordable housing noted there would be an added benefit to an otherwise challenging development pro forma if the city reduced or waived fees for affordable housing projects. Competitive and limited affordable housing funding sources Federal, state, and local funds for affordable housing are limited and highly competitive and there is limited funding available for distribution to projects annually. There are only two qualified census tracts in the city, 117.02 and 118.00. Affordable housing developments in qualified census tracts that apply for low-income housing tax credit funding receive a boost in the amount of tax credits they can receive. These tax credits are important for making regulated affordable housing projects feasible. Opportunities to encourage housing development Several interviewees noted that there is very limited inventory for starter homes,and the gap in missing middle housing in Spokane Valley is real. A range of ideas were offered based on the interviewees' professional experience and their conversations with the community.The following bullets summarize the ideas: Low-Income Households • Rent deposits and documentation requirements can be hurdles for portions of the population. Consider programs or policies that address this hurdle. • Down payment assistance for first time home buyers. • Acknowledge equity and race in the comprehensive plan to position the city to address housing equity. • Consider a city compliance office to collect and address compliance incidents. • Limited equity co-ops are a means to create wealth and home ownership for long-term tenants. Challenges include patient investors and gap financing. The other model often noted is shared equity. These programs do not require city intervention. The city may C:\Users\cbates\AppData\Local\Microsoft\Windows\INetCache\Content.ou look\HBQOH6P9\Community Engagement Summary Memo.docx Chaz Bates Project No. 1932.01.01 March 4,2021 Page 7 provide resources and information, and/or provide financial support for limited equity co-ops if it creates a housing fund. Programs and Incentives • Provide housing around state and federally supported transportation investments.Planned Action Environmental Impact Statements may provide additional incentives for developing housing in these areas by reducing the project-level permitting process. • Several interviewees noted the potential benefits of implementing a multifamily tax exemption program. • Create a Planned Residential Development track for smaller lots (less than five acres) that provide affordable housing and/or missing middle housing types. • Offer nonprofits the first right of refusal to develop affordable housing units on city- owned properties or properties with a lien. • Brownfields may provide land opportunities not sought by market-rate developers. Outreach and Partnerships • A regional communications campaign dispelling housing myths and showing the positive benefits of healthy homes. • Partner with neighborhood groups or support the creation of one that is focused on Spokane Valley. SNAP (Spokane Neighborhood Action Partners) is a model. • Seek partnerships with private entities seeking philanthropic endeavors.A local example is a project in northeast Spokane that was built by Spokane Housing Ventures in partnership with Empire Health Foundation. Traditional affordable housing funding sources were used as was support from the foundation. Threats to housing development and preservation of affordable units Several interviewees mentioned threats to housing development and the need to preserve affordable units.A range of ideas were offered based on the interviewees'professional experience and their many conversations with the community. The following bullets summarize the ideas: • Lumber prices have gone up by more than 120 percent over the past year. There is not anything the city can do about this,but these increased costs directly impact housing prices. • Labor shortages impact development costs. It was noted that encouraging more trade jobs through apprenticeship programs or partnerships could help grow the workforce that may reduce labor availability and related development cost impacts. • Vintage affordable housing units that need rehabilitation could be an area of focus. The rehabilitation costs require debt, and the financial package may require higher incomes. C:\Users\cbates\AppData\Local\Microsoft\Windows\INetCache\Content.ou look\HBQOH6P9\Community Engagement Summary Memo.docx Chaz Bates Project No. 1932.01.01 March 4,2021 Page 8 The unintended consequence is a loss of units that serve the 30 percent or less AMI households. • One developer shared about a single-family subdivision that was subject to public comment and SEPA review being held up because of protest from nearby residents despite complying with local code. External forces driving developers from Spokane County Developers that have been active in Spokane County indicated that they are seeking development opportunities in northern Idaho where the housing market is similar but where there is significantly less state regulation.Interviewees noted the diminishing availability of large tracks of unimproved land in Washington and the increasing cost of land relative to Idaho as driving forces. There was a strong desire to expand the Urban Growth Boundary to provide more land to develop housing. Several interviewees cited that the energy code revisions adopted by Washington will add costs to home development.These measures,which take effect in 2021,increase development costs which are passed through to the home buyer. Finally, Washington state's condominium laws create a disincentive to develop this type of attainable housing due to insurance requirements. Condominium law reform is needed to encourage development of higher density condominium buildings that may offer affordable home ownership options. PRE HAP-ADOPTION OUTREACH Community input was used to shape the direction of the HAP's strategies and recommendations. Draft strategies and recommendations were then reviewed by staff and the City Council, and the final HAP, once prepared,will be posted on the HAP project web page (https://www.spokanevalley.org/HAP),distributed to the public for further comment,and refined based on feedback prior to adoption. C:\Users\cbates\AppData\Local\Microsoft\Windows\INetCache\Content.ou look\HBQOH6P9\Community Engagement Summary Memo.docx ATTACHMENT A COMMUNITY ENGAGEMENT PLAN City of Spokane Valley Housing Action Plan Community Engagement Plan Background In 2019, the Washington State Legislature passed Engrossed Second Substitute House Bill 1923 (E2SHB 1923) encouraging all cities planning under the Growth Management Act to adopt actions to increase residential building capacity. Of the options provided by E2SHB 1923, the city opted to complete a housing action plan. The Washington State Department of Commerce (Commerce) provided grant funding for the development of a housing action plan. Source: City of Spokane Valley (City) RFP. The goal of a housing action plan is to encourage construction of additional affordable and market rate housing in a greater variety of housing types and at prices that are accessible to a greater variety of incomes. To do this the City will quantify existing and projected housing needs for all income levels, develop strategies to increase the supply of housing while minimizing displacement of low-income residents. Source: E2SHB 1923. An important part of the Housing Action Plan (HAP) is gathering input from the community and key stakeholders. This community engagement plan (CEP) outlines the goals, key messages, tactics, and an implementation schedule for the City to effectively engage its audiences for the purposes of developing its HAP. The community views City efforts positively. Like many Washingtonians, the Spokane Valley community would benefit from additional information about the current housing situation and the background on why the state passed E2SHB 1923. The Housing Action Plan CEP is designed to engage with stakeholders and solicit their input and engage with the broader community to gather feedback and increase awareness of housing needs and opportunities in the community. Due to the rapidly changing COVID-19 situation, this plan uses web-based technologies, online tools, and virtual meetings. This CEP for the City's HAP was developed in accordance with Commerce's Guidance for Developing a Housing Action Plan (Public Review Draft). Outreach and engagement goals • Integrate with City staff in the HAP planning process • Foster a two-way dialogue with stakeholders and community members • Allow stakeholders and the broader community to feel heard, informed, involved, and invested in • Build trust between the City and the community throughout the engagement process Key messages • In 2019, the Washington State Legislature passed a bill (E2SHB 1923) encouraging cities to adopt actions to increase residential building capacity. • The goal of this HAP is to encourage construction of a greater variety of housing types at prices that are accessible to a greater variety of incomes. • When complete, the HAP will include information on the existing housing stock in the City, projected housing needs for all income levels, and strategies to FINAL 7/15/2020 1 increase the supply of housing while minimizing displacement of low-income residents. • The development of the HAP is funded by a grant from Commerce. Key milestones Q2 April-June 2020 • Project initiation • Deliverable 1 Community Engagement Plan 6/30/2020 Q3 July-September 2020 • Stakeholder interviews • Community survey #1 • Deliverable 2 Housing Needs Assessment Report 7/30/2020 • Council/Commission check-in #1 Q4 October-December 2020 • City magazine article due Oct. 15 • Community survey #2 • Greater Spokane Valley Chamber of Commerce informational meeting • Council/Commission check-in #2 • Deliverable 3 Recommended policy and code changes 12/31/2020 • Deliverable 4 Housing Strategies report 12/31/2020 • Deliverable 5 Implementation Plan 12/31/2020 Q1 January-March 2021 • Deliverable 6 Housing Action Plan 2/01/2021 • Council/Commission final presentation Q2 April-June 2021 • Deliverable 7 Adopted Housing Action Plan 5/31/2021 FINAL 7/15/2020 2 Audiences, goals, and tactics Audience Goals Tactics City staff • Involved and invested in the • Surveys plan and its outcomes • Interviews • Extend engagement • City Council briefings opportunities for staff participation City Council and • Informed on project purpose, • City Council briefings Planning goals, and timeline • Interviews Commission • Opportunities to communicate • Surveys with the public through • Email updates engagement activities • Early understanding of public perceptions City residents, • Allow stakeholders and the • City Council briefings homeowners, and broader community to feel • Interviews landowners heard, informed, involved, and • Surveys invested • Email updates • Build trust between the City and • Project web page the community throughout the • Media outreach engagement process • City magazine article • "On-hold" message • Chamber event • Social media posts Partners (e.g. County, • Involved and invested in the • Interviews community resource plan and its outcomes • Surveys groups, housing • Aware of opportunities to • Email updates developers and other provide feedback and share • Project web page housing-related partners, information • Chamber event Spokane Homebuilders) Local and regional media • Kept consistently updated • Media outreach throughout process • City Council briefings • Informed about the Housing Action Plan purpose, goals, and timeline • Know the city is listening and wants to engage with its community • View the HAP as an important piece of the local planning and development Engagement tools The following tools are recommended for the City to educate and engage with the community throughout the HAP development. The format or list may change in response to COVID-19. FINAL 7/15/2020 3 Project materials • Display or presentation materials (e.g. PowerPoint) • Informational fact sheet in translated languages • Materials posted on the City's web page • News releases for local newspapers at key milestones (local media covers city news with weekly and monthly papers and a weekly podcast) • City magazine (published twice annually, mailed to all 50,000 households) • Oct. 15, 2020 content deadline for November publication; notify Jeff of page requirements, use ECONorthwest graphics • "On-hold" messages play when people call the City, updated quarterly • Stakeholder lists (City has developed) Web-based tools • Project-specific public facing web page that includes all project materials, engagement opportunity information, project contact information (email and distribution list sign up), and is regularly updated • City homepage banner to drive traffic to project page • Host web page on City website platform • Sample web pages • City of Spokane Housing Action Plan project web page— Project fundamentals • City of Tacoma Affordable Housing Action Strategy project web page— 30 second overview video • City of Lynnwood Housing Action Plan project web page— embedded survey link • Email updates using existing distribution lists for project updates and engagement opportunities (Existing listservs include media list, Comprehensive Plan update distribution list, Bicycle and pedestrian plan distribution list, developers' forum list, City Planner list) • Online surveys to share information and request public feedback at key project milestones • Social media posts at key milestones and to solicit participation in online engagement activities • Facebook, 4,000 followers; ability to boost posts • Twitter, 1,000 followers • Linkedln: 1,150 followers • Instagram: 375 followers Events • Stakeholder interviews FINAL 7/15/2020 4 • City Council and/or Planning Commission meetings—online and recorded • Existing city-sponsored community events—online and recorded o Greater Spokane Valley Chamber of Commerce informational meetings (target third or fourth quarter; Chamber does Zoom meetings in lieu of in- person) Roles and responsibilities Maul Foster & Alongi's (MFA) communications staff, led by Charla Skaggs and Kate Elliott, will develop and assist with the implementation of this community engagement plan and related materials and content. City staff will be responsible for distributing notification letters and emails, posting web content, repurposing drafted content for social media posts, translating materials, serving as the primary point of contact for general public inquiries, and managing event and media relations including developing and distributing news releases and responding to media inquiries. As the community engagement plan is implemented, responsibilities for specific tasks will be determined through ongoing conversations, recognizing budgetary and time limitations for city staff. Outreach tactics and schedule (Schedule and tactics for planning purposes only and subject to change) Month Outreach Tactics Roles 2020 June • Draft and final community engagement plan • MFA draft, city review • Stakeholder identification • City lead July • Develop project web page and record "on-hold" • City lead message • Stakeholder interviews • MFA conduct • Email/web update to describe Housing Action Plan • MFA draft content purpose, need, and process • Community information web page and survey #1 about housing needs assessment • MFA draft content • Media outreach regarding survey #1 • Council/Commission check-in #1—PowerPoint • City lead Presentation • City lead August • Email/web update sharing housing needs • MFA draft content assessment report findings and feedback • City lead • Media outreach regarding findings September October • City magazine article, content due Oct. 15 • MFA draft content • MFA draft content • City lead FINAL 7/15/2020 5 Month Outreach Tactics Roles • Community information web page and survey #2 about policy and code changes • Media outreach regarding survey #2 November • Email/web update sharing policy and code • MFA draft content changes feedback • Council/Commission check-in #2—PowerPoint • City lead Presentation • Media outreach regarding findings • City lead December • Email/web update sharing housing strategies report • MFA draft content findings and implementation plan strategies • Media outreach regarding findings • City lead 2021 January • Email/web update sharing draft Housing Action • MFA draft content Plan • Media outreach regarding draft Housing Action • City lead Plan February • Council/Commission check-in #3—PowerPoint • City lead Presentation March • Email/web update sharing final Housing Action Plan • MFA draft content and feedback received • Media outreach regarding final Housing Action • City lead Plan and feedback received April May • Email/web update announcing plan adoption • City lead • Media outreach regarding final plan and adoption • City lead COVID-1 9 implications for engagement Social distancing measures enacted during the COVID-19 outbreak have significant implications on the outreach processes outlined in this community engagement plan. As of mid-June, the situation is still rapidly evolving. MFA and city staff will coordinate regularly and follow all government-recommended measures to discourage in-person gatherings of people to help reduce the spread of the virus. Although the duration and intensity of social distancing measures continues to change, this plan assumes no in-person gatherings of 10 or more people through summer 2020. FINAL 7/15/2020 6 ATTACHMENT B DEMOGRAPHIC CHARTS SUMMARY OF SURVEY RESPONSES The following figures summarize the demographics of the respondents that participated in the City of Spokane Valley (City) Housing Action Plan (HAP) survey. Selected quotes from three open-ended questions asked in the survey follow Figure 8. FIGURE 1: RESPONDENT AGE BY ZIP CODE 18 to 24 25 to 34 35 to 44 45 to 64 65 to 85 D.N.R. Ta to I 99016 5 2 2 9 99027 2 2 99037 3 1 9 99206 4 S. 7 27 99212 1_ 5 3 12 99216 1 ! 1 -3 21 Don't Pive in CoSV 1 2 18 D.N.R. 2F6 26 Total _ 9 33 40 15 26 124 1% 95c, 345n 41% 1540 18 to 24 25 to 34 35 to 44 45 to 54 65 to 85 V r• or 99216 99216 li 6 9'. 99206 9'9206 (9� (7) I lid I 12 \\mfaspdx-fs1\final_dir.net\1932.01 City of Spokane Valley\Documents\01_2021.03.04 Memo\Attachment B Demographic Charts_.docx Page B-1 FIGURE 2: RESPONDENT INCOME BY ZIP CODE Less than$20,000 $20,000-$30,090 $30,000-$45,009 $45,000-$60,000 $60,000-$109,000 $100,000. D.N.R. Grand Total 99016 2 2 3 1 1 9 99927 1 1 2 99637 1 1 1 1 1 4 9 99206 1 27 99212 12 99216 2 1 21 Don't live in CoSV 2 18 D.N.R. 2c 26 Total 5 5 15 20 20 20 31 124 54 n 7 i. 2240 Less than$20,000 $20,000-$30,000 $30,000-$45,000 $45,000-$60,000 $60,000-$100,000 $100,000+ D-N.R.=Did not respond iii' 4 sR , it IF __. 99 lgl l I I I 1 , , 1 _ii____ .. ,,___ \\mfaspdx-fs1\final_dir.net\1932.01 City of Spokane Valley\Documents\01_2021.03.04 Memo\Attachment B Demographic Charts_.docx Page B-2 FIGURE 3: RESPONDENT RACE BY ZIP CODE American Indian or Alaska Native Hawaiian or Pacific r Hispanic orLatinx Mixed D.N.R. Grand Total Native Islander 99016 - 1 9 99027 - 2 99037 2 1 9 99206 1 2--: 1 1 1 27 99212 10 1 _ 12 99216 1 ;1 21 Don't live in CoSV 18 D.N.R. 26 124 c;4� 4c_, 4cp. 1eb 1c., American Indian or Alaska Native Hawaiian or Pacific DM.R.=Did not respond White Native Hispanic or Latinx Mixed Islander 1111,99216 r =12 (]9 99106ri Li- 5 (M) ilif ll\\mfaspdx-fs1\final_dir.net\1932.01 City of Spokane Valley\Documents\01_2021.03.04 Memo\Attachment B Demographic Charts_.docx Page B-3 FIGURE 4: BARRIERS TO RENTING If you have tried to rent or recently rented a home in Spokane Valley, what barriers did you encounter? Barriers-Rent ▪Couldn't find a place I could afford Couldn't find en ADA accessible unit Nobody would rent to me because of past evictions ▪Couldn't find a rental that would accept Section B housing-.I did not encounter any barriers Overall Responses Overall Responses Overall Responses DS 10 a 2u 5II 10 M . II EN A 111 2 2 Aill - � 0 eesstnan $zD,Dw _- $3o,DDD- _cca- __ _ �__�»,Doo+ o.N.a. 0 __`' 35 to=- -_.__- O.N.R. $20,0D0 $30,000 $45,00g $6C,DCS siac,ccc. Responses by Zip Code "Other"Responses ‘O•a'M•INI�'INN'INN _ _ , Bad credit and IllIIN,! sigh deposits jI., ._,;„,„,_.,,....___ Felony .,__ , L. , ro. -T- 2 r' i 1 I:o F-.n�traeIM,p Responses,7:p ..,a. -1 0.N.R.=Did not respond \\mfaspdx-fs1\final_dir.net\1932.01 City of Spokane Valley A Documents\01_2021.03.04 Memo\Attachment B Demographic Charts_.docx Page B-4 FIGURE 5: BARRIERS TO OWNING If you have tried to buy or recently bought a home in Spokane Valley, what barriers did you encounter? ▪Couldn't find an ADA accessible unit Couldn't find the type of home I need Didn't have enough money for a down payment .I did not encounter any barriers ▪Couldn't-get financing Couldn't find a home in toe location tta: .•.a-tec to Lie in Couldn't€nda place Im-uld afford Overall Responses Responses by Age Range Responses by Income Range m 30 a FA - 20 Vi 10 : . . iuil .. 0 . 111 Less than $20,000- $30,000- 345,000- $60,000- $100,000+ D.N.R. .2 =_ 18 1o24 25 to 34 35 to-4 :.a s? 65 to35 D.N.2. 320002 $30,000 545,009 $03,000 $100,000 Responses by Zip Code "Other"Responses Have not been able to afford to even look right now. ' I/ � I am a director of a local Housing counseling agency and many of my clients are struggling to find affordable homeownership if - — I spent many years on the Community Frameworks board,and \ �, � - lealizethe affordable housing crisis. I would like to help out in ', ° -1• I any way possible INp - - ..- 3921 I Out bid on every house even when offer was above list l The pricinc ng ri._. _I . There are homes ' 0 'JAW ,i�` a 5500,POP range.Those prices do not reflect Spokane I They sold so fast we couldn't even get a bid in We had to increase our desired maximum price by$SOk. 'honor P.OpenSlreet iap Responses n Z p Cade 3 E - 25 D.N-R.=Did not respond \\mfaspdx-fsl\final_dir.net\1932.01 City of Spokane Valley A Documents\01_2021.03.04 Memo\Attachment B Demographic Charts_.docx Page B-5 FIGURE 6: HOUSING TYPES, CURRENT What type of housing do you currently live in? •Si-ogle semi Home Cuplex Townhome f.tulti`arily Manu`aom ec Home C.N.?. D.N.R.=Did rot respond Overall Responses Responses by Age Range Responses by Income Range 122. n. 102 39 80 I EO a 20 10 40 20 ■ 0 0 Less than $20,009- $30,000- $45,000- $60,000- $190,000+ 0.'LR. 14 0 18to24 25 to 3, 35`0?- 45 to 5- 655c85 0.0 R. $20,000 $30,000 $45,000 $60,000 $100,000 People/Bedroom Count by Housing Type --.-- --. = - _._c'e i- 3peopie in 2 people In 4people in 4people in 4 pe 4re _ people I - S. - peoplei- _._. ssss ._:-- - _---- s L.es ss s E.,: .--:._..r -. .. -r 3 bedrooms 4 bedrooms 2 bedrooms 3 bedrooms 46ec =-_. ._- -_. .. =._: .. .: -. _.- ..-: . .. .-eedree \\mfaspdx-fsl\final_dir.net\1932.01 City of Spokane Valley A Documents\01_2021.03.04 Memo\Attachment B Demographic Charts_.docx Page B-6 FIGURE 7: HOUSING TYPES, ASPIRATIONAL What type of housing would you most like to live in? Home Type Single Family Home ®G,__.e. Tow nhome Multifamily Cottage Accessory Dwell l ne Unit Group Living Other Overall Responses Responses by Age Range Responses by Income Range 150 33 yF i C 20 04 100 k 10 _G 4 $ _, —� 5 to- Su 2 � L 0 25 - z 1 -an �— $20,000- $30,000- 545,000- $50,060- 5_03,033+ BPI. IS re 2L 25 to 4L 35 tc4L 3,.,.5 65 to S5 D-N.R. __-. 20 $30,000 $45,000 $50,000 5100,00D Responses by Zip Code "Other"Responses V Am � ' Farm with acreage Shop/house II��■� ` i '11 -- - A new mobile home Condominium �.. 1. liii r` Single family home with land for does-,,,i)1 ) personal agricultural use. '± Any place that is affordable is Zero lot line Single Family i daptr, l,n.,+c.ee \, I)N-R-=Did not respond \\mfaspdx-fsl\final_dir.net\1932.01 City of Spokane Valley ADocuments\01_2021.03.04 Memo\Attachment B Demographic Charts_.docx Page B-7 FIGURE 8: HOUSING OPTION NEEDS What kind of housing options do you think are in greatest need in your community? ^ More affordable ownership housing options_ 14C More flexi bil ityfor sing le-family homeownersto build'accessory dwelling o - units"such as backyard cottages. 1611 "...411411r 10C 30 Affordable housing for seniors. Apartments and othersmal ler rental housing. Short-term housing for migrant workers. =6 Larger homes fah-housing large or extended families. 20 ‘ 00401 Respondent Comments Affordable houses for rent- Cost of homes are increasing-Would like to move to a different area but prices are too high far a single family home r=:_•e nd c= homes on large lots Our rental proper-_s less than 1000 sq feet rents for$1300 mo.Never half enough to buy so more rentals.easier pathway to ownership less apts. Shelters or more support for those struggling with not having a place to live so we are not forcing our community to go downtown fora place to sleep,especially in the winter Single family homes for sale,less rentals. Single family homes ranch style-all one floor There is no shortage of housing. People want free housing and that is not reasonable \\mfaspdx-fsl\final_dir.net\1932.01 City of Spokane Valley A Documents\01_2021.03.04 Memo\Attachment B Demographic Charts_.docx Page B-8 QUESTION: ARE THERE ANY ISSUES OR CHALLENGES THAT IMPACT QUALITY OF LIFE IN YOUR NEIGHBORHOOD? • "My neighborhood is great but worry for friends who can't find an affordable rental in a safe neighborhood." • "Getting too many duplexes in the neighborhood,not enough single housing." • "Need more affordable housing options of all types." • "Old trailers and messy trashy houses." • "They are breaking up the large parcels and putting in high density housing. It has created way more traffic than the road and neighborhood was designed to support. It is making my once quiet neighborhood noisy and obnoxious." • "It is a mixed neighborhood and the renters do not take as good of care as the owners." • "Need more parks, especially with basketball courts for teens and zip lines for the kids." • "Stop building low-income housing. It will lower the price of other houses around and that's not fair. And also brings alcohol, drugs and homeless to that area." • "Recreation. Need more areas to have biking/walking trails that connect to the Appleway Trail and Centennial Trail. Need more neighborhood hubs with restaurants, shops and recreation." QUESTION: HOW CAN SPOKANE VALLEY IMPROVE HOUSING FOR OUR COMMUNITY? • "I wish I know. The biggest problem currently is lack of inventory in houses for sale and houses for rent. Apartments are popping up all over but not a lot of alternatives for those that don't want to live in an apartment." • "Help with affordable housing options in the form of `sweat equity' type units and/or first-time home buyers assistance (i.e. silent second mortgage, etc.)" • "By not regulating so tightly the ability to put ADUs on properties. We wanted to do this but getting electrical and the "hammer head" drive back to the spot was cost prohibitive. A parking spot is required for the ADU if it is separate from the house...Trying to put in a place for my elderly mother has been awful. We have been unable to find what we need somewhere else so we are going to have to build an addition." • "Keep plenty of open spaces and parks,while allowing more density in land use." • "Help with affordable housing for some our most vulnerable citizens as well as more support for those struggling with no housing." • "Incentivize low income,middle income, and mixed income housing." \\mfaspdx-fs1\final_du.net\1932.01 City of Spokane Valley\Documents\01_2021.03.04 Memo\Attachment B Demographic Charts_.docx Page B-9 • "Allow single dwelling home owners to build tiny homes in their yards." • "More options for low income people to have a home instead of lumping us all together in crappy apartment complexes where problems are compounded by being around other low income people that can't get a foot up. Need a city-wide option like the Scattered Sites project that SHA is ending." • "We honestly just need more housing. There very much seems to be a lack of affordable homes available or being built." QUESTION: WHAT IS THE PRIMARY REASON YOU CHOSE TO LIVE IN SPOKANE VALLEY? • "Love the area. Lots of green areas.A touch of city with a touch of country." • "Large lots, family friendly,live and let live,less government." • "Low density living, quality school system and low traffic." • "It was sense of community,less traffic,better schools, easier shopping,less people...that, for the most part,is gone." • "The schools,the views, close to everything." • "I've lived in the Spokane Valley, City of Spokane, North Idaho, Cheney, etc. and the Spokane Valley just feels like home. There are community events anyone can participate in and Spokane Valley actually listen to the citizens instead of doing whatever they want, no matter what the citizens want." \\mfaspdx-fs1\final_du.net\1932.01 City of Spokane Valley\Documents\01_2021.03.04 Memo\Attachment B Demographic Charts_.docx Page B-10 APPENDIX E DEVELOPMENT FEASIBILITY AND MULTIFAMILY PROPERTY TAX EXEMPTION ANALYSIS ECONorthwest ECONOMICS • FINANCE • PLANNING DATE: February 1, 2021 TO: Maul Foster&Alongi (MFA), Matt Hoffman FROM: ECONorthwest, Tyler Bump, Jennifer Cannon, and James Kim SUBJECT: Evaluation of Key Housing Strategies for the Spokane Valley Housing Action Plan, Feasibility Analysis Introduction ECONorthwest in partnership with MFA is supporting the development of a Housing Action Plan (HAP) for the City of Spokane Valley to evaluate current and future housing needs and identify strategies to meet those needs. The HAP is largely made possible due to a Washington State Department of Commerce Housing Bill 1923 Grant. The overarching aims for the HAP are to include strategies to increase the supply of housing, and variety of housing types and actions to increase the supply of housing affordable to all income levels. The approach for developing a HAP began with an assessment of housing needs, public involvement, and analysis of the effectiveness of existing policies and potential updates to key regulations. All of this information collectively informs the strategic actions to be including in the HAP. A few of the housing strategies include modifications to existing development code and expansion of multifamily tax exemptions(MFTE)to encourage more housing variety and housing supply. ECONorthwest analyzed development feasibility of certain code modifications and the potential addition of MFTE program incentives to evaluate their effectiveness in improving the likelihood of development of townhomes and multifamily apartments.A development feasibility analysis tests the impact that various changes to development standards and incentive programs have on market-realistic development examples called prototypes. In addition, ECONorthwest provided Housing Action Plan content useful for describing the Multifamily Tax Exemption (MFTE) Program policy updates to consider. This memo provides the following Housing Action Plan sections: 1. Development Feasibility Analysis Findings 2. MFTE Program Overview 3. Development Feasibility Assumptions Section 1 : Development Feasibility Analysis This section describes the findings from evaluating a set of key planning tools, specifically the multifamily property tax exemption (MFTE) and regulatory changes including modifications to the allowed density in certain zones and changes to other development standards. These planning tools were selected due to their potential to boost housing production, especially housing priced for low-to middle-income households. • The multifamily tax exemption allows a local jurisdiction to incent diverse housing options in urban centers lacking in housing choices or workforce housing units. Essentially this program supports increased housing availability, possibly including ECONorthwest I Portland I Seattle I Los Angeles I Eugene I Boise I econw.com 1 affordable units, largely in mixed income developments conveniently located in urban centers. Washington State Chapter 84.14 RCW outlines the existing requirements for implementing a multifamily tax exemption (MFTE). This program exempts eligible new construction or rehabilitated housing from paying property taxes for either an 8-year or 12-year period of time. Only multiple-unit projects with four or more rental units are eligible for either the 8-or 12-year exemption, and only property owners who commit to renting or selling at least 20% of these units to low- and moderate-income households - earning less than 80% of the Area Median Income (AMI) - are eligible for the 12-year exemption. The City of Spokane Valley currently does not have a MFTE program established. Additional detail on the MFTE program is provided in Section 2. • The density of residential buildings is partly determined by the maximum density allowances that the municipal code sets for each zone. Density allowances differ by zone and sometimes are specific to the type of residential building. Residential density is important for housing development because it determines the number of units that can be built on a parcel. Minimum lot sizes can also influence residential development since it can prevent development on lots below a certain size. • The number and size of housing units that can be built on a parcel is also determined by requirements for non-residential uses or areas to be set-aside and not developed. Open space requirements (as well as setbacks and minimum landscape requirements) limit the residential building size on a parcel. The size of the building can also be limited by maximum lot coverage,which determines the largest share of a parcel that a building can be built on. • Residential density can increase both horizontally and vertically and the maximum building height determines how high the building can be built,thus can restrict the height of residential development. PURPOSE OF THIS ASSESSMENT The purpose of this analysis is to examine a set of key program changes and policy levers that can help "tip" project feasibility for the MFTE program and regulatory changes in the City of Spokane Valley. The analysis focused on the following: R-4 zone (Townhomes): • Increasing the residential density in the R-4 zone from 10 dwelling units per acre (du/ac) to 15 du/ac. • Increasing residential density in the R-4 zone to 22 du/ac. • Increasing the maximum lot coverage from 60%to 80%of the parcel for townhomes. • Decreasing the minimum lot size for townhomes from 4,300 square feet to 2,000 square feet in the R-4 zone. Multi-Family Residential (MFR)zone (apartments): ECONorthwest 2 • Increasing the residential density in Multi-Family Residential (MFR) zone from 22 du/ac to 40 du/ac. • Elimination of Open Space Requirements for Multifamily Apartments within 1/4 mile of City Parks. • Increasing the maximum lot coverage from 60%to 100%for multifamily apartments. • Increasing the maximum building height from 50 feet to 65 feet in the MFR zone. MFTE: • Test out the addition of a MFTE program offering a 12-year tax exemption that would require at least 20% of the units be set aside for households earning 80% of the AMI or less. In Spokane County,the AMI for a 4-person household is$77,400 in 2020.1 • MFTE program without any increase in residential density in MFR zone. • MFTE program with an increase in residential density to 40 du/ac in MFR zone. Summary of Development Feasibility Findings Below is a thematic overview of the findings from the development feasibility assessment. For more detail on the analysis,assumptions, and dollar values of the assessment results,please refer to the next section. • Based on existing development standards and land prices in Spokane Valley,townhomes have limited feasibility in R-4 zone and 3-story garden-style apartments are not feasible in MFR zone given current land prices. The value of new development is limited by development standards that limit the scale of development that is possible on a parcel. Increasing density allowances is the best way to encourage development of townhomes and apartments in Spokane Valley. • For garden-style apartments, the 12-year MFTE also makes projects more feasible, but it is not as impactful as increasing density allowances to 40 du/ac. • Decreasing open space requirements, increasing maximum lot coverage, or increasing maximum building height is unlikely to have any meaningful effect on housing development in the near future. Development Feasibility Assessment Financial pro forma models are used to estimate the impact on development feasibility resulting from potential changes to development standards and incentive programs.More specifically,this analysis evaluates the residual land value (RLV) to understand development feasibility and the value that a change to development standards or tax abatements might provide. RLV is an estimate of what a developer would be willing to pay for land given the property's income from leases or sales, the cost of construction, and the investment returns needed to attract capital for 1 Based on 2020 income limits in Spokane County.https://www.spokanehousing.org/wp- content/uploads/2020/07/Spokane_Utilities_Payment_Standards_2020_GD_HAP.pdf. ECONorthwest 3 the project. (These assumptions can be found in Appendix.) Figure 1 demonstrates in green the development value that is remaining after development costs and is available for acquiring land. Figure 1. Illustration of Residual Land Value, or Land Budget Source:ECONorthwest Land Budget Net Operating ,_111Income from Rents Hard Costs Parking Revenue (Construction Costs) Vacancy Rates Soft Costs Market (Impact Fees, Capitalization Rates Architectural Fees,etc.) DEVELOPMENT DEVELOPMENT COST VALUE While there are other quantitative methods for calculating regulatory and incentive changes,such as an internal rate of return (IRR) threshold approach, all of the potential methods share drawbacks regarding the quality of inputs and sensitivity to those inputs. An advantage of the RLV approach is that it does not rely on land prices as an input. Rather,observed land prices can be compared with the model outputs to help calibrate the model and ensure it reflects reality. Because RLV is essentially a land budget,higher values indicate better development feasibility. To understand the impact the various policies, we created an analysis model that employs the same financial considerations a real estate developer would use to determine if a proposed development is financially feasible. These financial calculations are referred to as a pro forma model. A pro forma considers the size of the building allowed by zoning and the revenue that building can deliver (from rents and sales prices) relative to the costs of constructing and operating the building. We ran the pro forma model on example developments (or prototypes) that are reflective of the types and scales of development in the Spokane Valley area. Three prototypes are evaluated in this feasibility analysis. 1. 3-story townhomes on a 0.3-acre lot.Townhomes are 2-bedroom or 3-bedroom units with about 1,400 square feet (sf) to 1,700 sf of net floor area, sharing walls with neighboring units, a one-car garage on the ground floor, and a driveway that can function as an additional parking stall. They are assumed to sell at about$421,000 per unit on average. 2. 3-story townhomes on a 1.0-acre lot. These townhomes are the same as above, but they are laid out on two rows and share a private alleyway. They are assumed to sell at about $429,000 per unit on average. ECONorthwest 4 3. 3-story, garden-style apartments on a 2.5-acre lot.Apartments have a mix of various sizes ranging from 600 sf for a studio unit to 1,300 sf for a 3-bedroom unit. Residents and their guests have access to surface parking and a shared lobby or common space area. The average rent is assumed to be$1,400 per month. Increase in Allowed Residential Density The current zoning standards for R-4 zone allows up to 10 du/ac.The assessment of development feasibility based on certain assumptions(in Appendix)results in RLV of$9.1 per square foot(psf) for townhomes on 0.3-acre lots and $6.8 psf for townhomes on 1.0-acre lots. In comparison, the average value of land in the R-4 zone is between$8.0 psf and$12.0 psf.2 Therefore,current zoning standards would allow some townhomes to be built in the R-4 zone, but they would not allow most townhomes to be built. Increasing the allowed density to 15 du/ac would allow an additional unit to be built on 0.3-acre lots and improve development feasibility by$5.2 psf. On 1.0-acre lots, the same density increase would allow 5 more units to be built and improve development feasibility by $9.1 psf. The increases in RLV are likely to make most townhome projects feasible since they raise the RLV above typical land prices($8 psf to$12 psf).Moreover,increasing the allowed density to 22 du/ac would improve development feasibility to $24.8 psf for townhomes on 0.3-acre lots and to $28.6 psf for townhomes on 1.0-acre lots. The current zoning standards for MFR zone allows up to 22 du/ac,which results in RLV of$19.8 for a 3-story, garden-style apartment. This value is slightly below the typical land prices in the MFR zone,which ranges between$20 psf and$24 psf.3 Therefore,private developers are unlikely to build 3-story apartments under the current zoning standards without a discount in the land price. To encourage the development of apartments in MFR zone, the City of Spokane Valley could increase the allowed density. For example, increasing the density allowance to 40 du/ac would raise the RLV of apartments to$42.9,which is significantly higher than the typical land prices.A policy lever that results in such a large increase in RLV may be warranted since some lands in the MFR can cost $30 psf. Increasing density allowance is a powerful tool to enable apartment development. 2 Land value is based on assessor's data of properties in R-4 zone that were sold in 2019 and 2020.The average land price was about$10 psf. 3 Land value is based on assessor's data of properties in MFR zone that were sold in 2019 and 2020.The average land price was about$22 psf. ECONorthwest 5 Figure 2. Feasibility Impact of Increasing Residential Density Source:ECONorthwest Note: Grey bars indicate feasibility under current development standards. Navy bars indicate feasibility under modified development standards.Green bars indicate the range of typical land prices. Residual Land Value per Square Foot $50 $42.9 $40 $30 $24.8 $28.6 $20 $19.8 $14.3 $15.9 $10 $9.1 $6.8 $- 10 du/ac 15 du/ac 22 du/ac 10 du/ac 15 du/ac 22 du/ac 22 du/ac 40 du/ac (3 units) (4 units) (6 units) (10 units) (15 units) (22 units) (55 units) (100 units) TH(0.3 Acre) TH(1.0 Acre) Apartment(2.5 Acres) 12-Year MFTE Program Another policy tool to enhance development feasibility is the Multifamily Tax Exemption(MFTE) program. This statewide program grants an exemption from state property tax for eligible multifamily properties with more than 4 residential units. Cities can adopt an 8-year program that allows tax exemptions for eight years. Cities can also adopt a 12-year program that allows tax exemptions for twelve years for properties that designate at least 20% of their units to be income-restricted.Cities in Washington typically set the income limit at 80%of the AMI for rental units. From developers' perspective the 12-year MFTE program temporarily Figure 3. Feasibility Impact of 12-Year MFTE Program reduces property taxes while with and without an Increase Residential Density Source:ECONorthwest temporarily reducing rental income.On net, the benefit of the reduced property Residual Land Value per Square Foot taxes outweighs the cost of lower rental $60 $55.2 income. $50 The 12-year MFTE program improves $40 the RLV of 3-story, garden-style $30 $26.5 apartments from$19.8 psf to$26.5 psf, $19.8 which is slightly higher than the $20 typical range for land prices. $10 Combining the 12-year MFTE program with an increase in density allowance 22 du/ac 22 du/ac with 40 du/ac with (from 22 du/ac to 40 du/ac)would without METE 12-Year METE 12-Year MFTE improve the RLV to$55.2 psf,well Apartment(2.5 Acres) above the typical range for land prices. ECONorthwest 6 Elimination of Open Space Requirements for Multifamily Apartments within '/4 mile of City Parks Under certain circumstances, open space requirements can be detrimental to development feasibility. Because open space takes up a portion of the lot's surface, it limits the number and size of units that can be built horizontally. It also competes for space with surface parking area. Even for multistory buildings that can accommodate more units vertically, open space requirements can limit development density once the buildings reach a certain height. However, all of the apartment prototypes analyzed under the current development standards or modified development standards described above have low enough maximum residential density so that open space requirements do not impact viability of developing the prototypes. Even with a density allowance of 40 du/ac, 3-story apartments are not expected to take up more than a third of the lot, leaving plenty of space for driveways, walkways, surface parking, landscaping, and open space. Eliminating or reducing the open space requirement would make very modest improvements in development feasibility.Any reductions in open space would likely be replaced with landscaping rather than more units because the limits on residential density do not allow more units to be built. The improvement in development feasibility can be approximated by the difference in the cost of building an open space area and the cost of landscaping. Other Modifications There are other suggestions for modifying the development standards that have not been analyzed with a pro forma model because they have no impact on development feasibility. First, increasing the maximum lot coverage does not affect development feasibility because residential density allowances in the current development standards and the modified development standards we are testing do not allow the lot coverage of developments to reach more than 40 percent. Although increasing the maximum lot coverage will be important when residential densities are higher, it is not likely to yield meaningful results in the near future. Similarly, a higher maximum lot coverage will be important if developers want to build apartments with structured parking, but such developments usually require density allowance of at least 60 du/ac. Second, increasing the maximum building height from 50 feet to 65 feet for multifamily apartments is relevant for developers of apartment buildings taller than 4 stories.The maximum density allowances in the current development standards can be reached with a 3-story or 4-story building, thus the increase in maximum height is not tested in the feasibility assessment. Third, decreasing the minimum lot size for townhomes from 4,300 square feet to 2,000 square feet is not directly tested because minimum lot size requirements are, in some ways, equivalent to maximum density requirements. A minimum lot size of 4,300 square feet implies 10.1 du/ac (= 43,560 square feet per acre /4,300 square feet per unit) and a minimum lot size of 2,000 square feet implies 21.8 du/ac (=43,560 square feet per acre /2,000 square feet per unit). These density ECONorthwest 7 limits are already tested in the feasibility assessment, though the 21.8 du/ac limit is tested as 22.0 du/ac. Minimum lot sizes can also be important for properties developed on small lots. However, because the smallest lot size tested in the feasibility assessment is 13,068 square feet (= 43,560 square feet per acre x 0.3), the reduction in minimum lot size is not relevant for the analysis. Summary of Feasibility Assessment by Prototype Townhomes are barely feasible or not feasible under the current development standards. Their RLVs are $9.1 psf on 0.3-acre lots and $6.8 psf on 1.0-acre lots. In comparison, the typical land price ranges between$8 psf and$10 psf.However,increasing the density allowances would make townhome projects feasible. For multifamily apartments, the 12-year MFTE program is not as effective as it would be to increase density allowances to 40 du/ac. The 12-year MFTE program raises RLV by $6.7 psf, whereas increasing the density allowance from 22 du/ac to 40 du/ac increases the RLV by $23.1 psf. Notably, the combined effect of the 12-year MFTE program and higher residential density is greater than the sum of the two policy changes enacted independently. This is because the net benefit of the 12-year MFTE program is multiplied by the increased number of units that becomes possible with greater density allowances. Figure 4. Feasibility Impact of Various Policy Changes for All Three Prototypes Source:ECONorthwest Residual Land Value per Square Foot $60 $55.2 $50 $42.9 $40 $30 $28.6 $26.5 $24.8 $20 $19.8 $14.3 $15.9 $10 $9.1- $6.8 $- 10 du/ac 15 du/ac 22 du/ac 10 du/ac 15 du/ac 22 du/ac 22 du/ac 22 du/ac& 40 du/ac 40 du/ac& 12-Year 12-Year MFTE METE TH(0.3 Acre) TH(1.0 Acre) Apartment(2.5 Acres) ECONorthwest 8 Section 2. MFTE Program Overview What is a Multifamily Tax Exemption (MFTE) Program? The MFTE program enables a jurisdiction to incentivize mixed-income housing development and diverse housing options in urban areas lacking housing choices. Washington cities with a population of 15,000 can adopt a MFTE program to stimulate new multifamily affordable housing development. This program exempts eligible new construction or rehabilitated housing from paying property taxes for either an 8-year or 12-year period of time. Developers seeking to take advantage of this program must be within one of the city's designated residential target areas which are often located in urban center or urban growth areas. If a jurisdiction offers the 12-year tax exemption,only property owners who commit to renting or selling at least 20%of these units to low- and moderate-income households are eligible per state law. In contrast, there is no housing affordability requirement for the 8-year tax exemption option.4 Cities around Washington are using the MFTE program differently. For example, many cities in the southern portion of King County focus on using the 8-year program option to encourage redevelopment in target areas without housing affordability requirements since the initial goal was to redevelop older properties with newer,higher quality housing. Some cities are using the program to promote housing rehabilitation projects (such as the cities of Tacoma and Port Orchard).For housing rehabilitation projects,only the value of eligible housing improvements is exempted from property taxes. If a jurisdiction has aging multifamily developments or underutilized buildings suited to residential uses, they should consider whether rehabilitated units should be included in the MFTE program. Some jurisdictions restrict program use to multifamily projects with over 10 units and some other jurisdictions have made multiple-unit projects with 4 or more units (such as quad homes or townhomes) eligible for tax exemptions (City of Seattle). The MFTE program is increasingly being used in Washington state with an estimated 26 cities and one county establishing this program since 2007 and around 424 developments receiving tax exemptions (JLARC,2019). Tax abatements positively impact the feasibility of projects where market-rate projects are feasible and can help cross-subsidize the affordable units. Cities considering a MFTE program should weigh the temporary loss of tax revenue against the potential attraction of new investment in target areas. State law does not prohibit MFTE from being paired with other incentives. Bonus units, incentives such as impact fee waivers, and the integration of a more flexible development agreement approach including performance requirements and a menu of corresponding incentives could help offset the costs incurred from affordable housing unit requirements and could be considered as a way to promote program usage. If the program requirements are not sufficiently mitigated by incentives, the profit required by the developer will not be actualized. The level of incentive necessary will vary greatly within a region and even vary within jurisdictions themselves depending on "submarket" conditions present at a site. Therefore, it's 4 Chapter 84.14 RCW provides MFTE guidance for Washington State. ECONorthwest 9 important to thoroughly evaluate—and constantly refine—the incentives to make sure that they are priced according to the market, or they will not produce housing. Program Example: City of Renton MFTE Renton, WA is similar in population size and growth rate to Spokane Valley. The City of Renton allows applications for 8-year or 12-year exemptions. If applying for the 12-year exemption, then 20%of rentable units must be for households at or below 80%AMI. If applying for ownership project, then 20%of units must be reserved for households at or below 120%AMI.5 Depending on the zone, the City requires a minimum of 10 or 30 housing units to be built to qualify for the exemption. Renton passed their MFTE program in 2007. As of 2019, the program has built 1,535 units including 92 affordable units. Renton's program has been successful in producing more market-rate units. Program Example: City of Spokane MFTE The City allows applications for 8-year or 12-year exemptions. If applying for the 12-year exemption, then they must reserve 20%of the housing units to renters with an income of no more than 115%AMI for moderate-income households and below 80% AMI for low-income households.6 If developing a mixed-use project, then 50% or more of the project must include residential uses. In 2019, the City updated its MFTE boundary to include Center and Corridor Zones, Residential Zones, and Commercial Zones (See Figure 5). MFTE projects are exempt from the minimum off-street parking if within the Center and Corridor Zones. To be considered, developers must apply for the program before construction. The City of Spokane passed their MFTE program in 2007. In the program's first four years, Spokane built 453 units.?As of 2019, the program has built 1,751 units including 509 affordable units. FIGURE 5. City of Spokane MFTE Boundary Y Z F rands Ave .291' FrAnnls A'JS_ .:eniral p, 2 a 2 Rowan Ave- Rowan Ave 7,, Rowan Ave A - A to-rim 2 ,r p Q t• _ Qveen _ A m A.ollesley Ave ¢ `v C/ellsslev Ave U Valley 5,0'4d Shadle a Far l: q Garland Age A Enveradha 2 Fmplra Ave Gnlf Chu 5.. Atldtelban .4 ril Shielr5 &idgeport Ave v, kliinnehaha nneh h ^' - _ Park iP:linnehn oce:nrrJe A,,,,, _ Euclid", LL Frederick Ave Ha'--k' G If Cvur7e ,u�Q/L - - d Felts Fink! i,3i 'm - spak:rre r.1 ne `v°y Indlan'a Ave- r .,I- .Ave 1 shay 43 Fra1 .A.F:I. 2 '. - Ileyes �..,A;,: - leilsslan Aver MlssQn Ave 'LG CI 1 _ — 3412.AVe aA+. f- 6C rF. a Irk I nV 2 1/ h✓r.; a Aent P� Inta;[ve Fur green, a Sh a,,Ag;tarliom flgilh::5R LL ii A IZI .+ _ _ Sprague Ave .a.? Di IJe 1.: — — p 3rd Ave P.k L'I.grli m `b Inkhan(ar vvn I"' I irk c 5tll Ave N E S Gclr Cnulse et�rvo _ rY Bth Ave 5yve. 9th Ave a I_IIPark 9 ` p w, 14th Ave �14th Ave v 160h Ave ,� .ran A..;• a rn 5 https://www.codepublishing.com/WA/Renton/html/Renton04/Renton0401/Renton0401220.html 6 https://my.spokanecity.org/economicdevelopment/incentives/multi-family-tax-exemption/ https://static.spokanecity.org/documents/projects/multi-family-tax-exemption-2017-incentive-evaluation/2012-mfte- data-and-code-guide.pdf ECONorthwest 10 Key Program Variations: • Housing rehabilitation versus new construction or both. • Restricting program to only multifamily projects with over ten housing units or loosening up this restriction to allow"missing middle"housing with over four units (must be at least four units, per state law). • Pair with other incentives such as impact fee waivers. • A few programs (cities of Bellevue and Seattle) are providing a greater incentive for those providing family-sized units with over two bedrooms since program applicants tend to construct or rehabilitate one-bedroom or studio housing units rather than provide housing with over two bedrooms (JLARC estimates that approximately 75%of the units created between 2007-2018 are studios or one bedroom). • MFTE Residential Targeted Areas can vary to include urban centers, mixed-use areas, transit-oriented development areas, or a mixture of these (RCW 84.14.040). • Time period of exemption: 8 year, 12 year, or both. • Depth of housing unit affordability(must be below 80%) and length of affordability (8 years, 12 years, or life of project). Policy Considerations: • MFTE is a property tax subsidy to underwrite the voluntary participation to set aside housing units, income-restricted. The capitalized value of the subsidy supports both the affordable housing provision and developer participation/risk. • More stringent restrictions could hurt participation in the program. • Making the program as user-friendly as possible, can broaden program usage. A housing liaison at the City or affordable housing nonprofit partner can help facilitate program usage. Benefits: • Tax abatements positively impact the feasibility of projects where market-rate projects are feasible. • Project can help cross-subsidize affordable units. • Can help broaden housing choices in the City. Drawbacks: • Requires regular reporting to the state which helps track program usage. • City must weigh the temporary loss of tax revenue against the potential attraction of new investment in targeted areas. ECONorthwest 11 • Reduces general fund revenues for all overlapping taxing districts,which could make it harder to promote the tool to partner jurisdictions that do not perceive the same project benefits. • May provide insufficient incentive to lead to affordability unless paired with other tools. ECONorthwest 12 Section 3: Development Feasibility Assumptions Apartment/Unit Assumptions Variable Assumption Unit of Measure Site Size TownhomeA 0.3 Acres Town home B 1.0 Acres Apartment 2.5 Acres Unit Mix Town home Studio 0% Percent of all units 1 Bedroom 0% Percent of all units 2 Bedroom 50% Percent of all units 3 Bedroom 50% Percent of all units Apartment Studio 21% Percent of all units 1 Bedroom 30% Percent of all units 2 Bedroom 38% Percent of all units 3 Bedroom 11% Percent of all units Leasable Unit Size Town home Studio 800 Square Feet 1 Bedroom 1,000 Square Feet 2 Bedroom 1,380 Square Feet 3 Bedroom 1,680 Square Feet Apartment Studio 592 Square Feet 1 Bedroom 745 Square Feet 2 Bedroom 1,004 Square Feet 3 Bedroom 1,248 Square Feet Blended Leasable Unit Size Town home 1,530 Square Feet Apartment 866 Square Feet Unit Efficiency Town home 100% Gross to net ratio Apartment 95% Gross to net ratio Blended Gross Unit Size Town home 1,530 Square Feet Apartment 912 Square Feet ECONorthwest 13 Operating Revenue and Cost Assumptions Variable Assumption Unit of Measure Revenue Townhome Sales Price $ 250 Per square foot Apartment Studio $ 1.96 Per leasable square foot, monthly 1 Bedroom $ 1.47 Per leasable square foot, monthly 2 Bedroom $ 1.28 Per leasable square foot, monthly 3 Bedroom $ 1.22 Per leasable square foot, monthly Blended Rent $ 1.47 Per leasable square foot, monthly Revenue Scaler 1.1 Town home B Premium 2% Percent of Sales Price Townhome A Sales Price $ 420,750 Per unit Townhome B Sales Price $ 429,165 Per unit Apartment Rent $ 1,404 Per unit, monthly Vacancy Rate Townhome 0% Percent Affordable Apartment 3% Percent Market Rate Apartment 4% Percent Operating Expenses Apartment $ 271 Per unit, monthly ECONorthwest 14 Development Cost Assumptions Variable Assumption Unit of Measure Hard Costs Townhome $ 130 Per square foot Apartment $ 120 Per square foot Utilities/lobby $ 100 Per square foot Parking Cost Garage $ 10,000 Per stall Surface $ 5,000 Per stall Stall Size Garage 350 Square foot per unit Driveway 234 Square foot per unit Surface 325 Square foot per stall impact Fee Townhome $ 1,260 Per unit Apartment $ 713 Per unit Other Development Costs Hardscape $ 15 Per square foot Open Space $ 10 Per square foot Landscape $ 5 Per square foot Soft Costs (including permitting) 20% Percent of hard costs Contingency Fee 5% Percent of hard and soft costs Developer Fee/Commission 3% Percent of development costs/sales price Target Returns Apartment 5.50% ECONorthwest 15 Affordability Policy Assumptions Variable Assumption Unit of Measure Taxes and MFTF Assumptions Property Tax Rate $ 11.93 Per thousand dollars of assessed value AV to MV ratio 95% Tax Abatement Discount Rate 7.00% PV of 12-Year Abatement 52% Percent Taxes Abated 100% Affordability Assumptions Set-Aside(12-year) 20% Percent of total units Set-Aside(IH) 20% Percent of total units Affordability Depth(12-year) 80% Percent of MFI Affordability Depth(IH) 80% Percent of MFI MFI (4 person household) $ 77,400 Income Toward Rent 30% Percent of income Affordable Rent $ 1,603 Per unit, per month Affordable Homeownership Budget $ 1,877 Per unit, per month Affordability Multiplier Studio 70% Percent of MFI 1 Bedroom 75% Percent of MFI 2 Bedroom 90% Percent of MFI 3 Bedroom 104% Percent of MFI TH Blended 97% Percent of MFI Apartment Blended 83% Percent of MFI Rental Utilities Allowances Studio $ 193 Per unit 1 Bedroom $ 206 Per unit 2 Bedroom $ 229 Per unit 3 Bedroom $ 252 Per unit Blended $ 217 Per unit Ownership Units Affordability Depth 100% Percent of MFI Homeowner's Insurance 0.3% Percent of Sales Price of Market Rate Unit Taxes and Other Fees 1.1% Percent of Sales Price of Market Rate Unit HOA Fees $ 40 Per unit, per month Mortgage Interest 4.00% Mortgage Term 30 Years Down Payment 20% Percent of Sales Price ECONorthwest 16 Policy Assumptions Variable Assumption Unit of Measure Open Space Townhome 0% Percent of Lot Area Apartment (current) 10% Percent of Lot Area Apartment (alternative) 0% Percent of Lot Area Minimum Lot Size Town home(current) 4,300 Square Feet Per Unit Townhome(alternative) 2,000 Square Feet Per Unit Apartment - Square Feet Maximum Lot Coverage Town home(current) 60% Percent of Lot Area Townhome(alternative) S0% Percent of Lot Area Apartment (current) 60% Percent of Lot Area Apartment (alternative) 100% Percent of Lot Area Maximum Density Town home(current) 10 DUA Townhome(alternative 1) 15 DUA Townhome(alternative 2) 22 DUA Apartment (current) 22 DUA Apartment (alternative) 40 DUA Parking Townhome 2.0 Stalls Per Unit Studio 1.0 Stalls Per Unit 1 Bedroom 1.0 Stalls Per Unit 2 Bedroom 1.5 Stalls Per Unit 3 Bedroom 1.5 Stalls Per Unit Blended 1.2 Stalls Per Unit Guest 5% Percent of Total ECONorthwest 17 APPENDIX F AFFORDABLE HOUSING FUNDING SOURCES ECONorthwest ECONOMICS • FINANCE • PLANNING DATE: February 5, 2021 TO: Maul Foster and Alongi, Inc. FROM: ECONorthwest SUBJECT: State, Local and Federal Affordable Housing Funding Sources for the Spokane Valley Housing Action Plan Washington State, Local and Federal Affordable Housing Funding Sources This section describes the main state, local, and federal affordable housing funding sources available to developers looking to construct affordable housing properties in the City of Spokane Valley.This section focuses solely on funding sources,not indirect financing sources that provide financial benefits to affordable housing projects via reduced costs. Many of the funding sources could be allocated by the federal government but are administered by state and local housing finance agencies. Washington State Funding Sources As shown below, the Washington State Housing Finance Commission offers several funding programs to build multifamily affordable housing. • The Low-Income Housing Tax Credit (LIHTC) program is the largest source of funding established for affordable housing and is an indirect subsidy (in the form of a reduced federal income tax liability) for private companies to invest in affordable housing. This program is administered by state and local housing finance agencies in accordance with U.S. Treasury Department stipulations. Generally, LIHTC recipients receive the credit over one decade and in exchange, the housing units must be kept affordable for at least three decades(states can stipulate a longer period).In Washington State,the Housing and Finance Commission provides two types of LIHTC programs: the 9% tax credit and the 4%bond tax credit program. o The 9% tax credit program is more valuable, but limited, and is awarded competitively through annual funding applications.' A few drawbacks are the competitive nature and the complex application process (can take several months) and reporting requirements. Large renovation projects tend to use the 9% option while smaller preservation and acquisition-rehab projects tend to take advantage of the 4%option. o The 4% bond tax credit program is less valuable for project financing, but the program is not always competitive. This option is available if more than half the project is financed with tax-exempt Multifamily Bonds. Any project that is able to make the funding program work can access the tax credits up to a certain bond I Source:Washington State Housing and Finance Commission,https://www.wshfc.org/mhcf/9percent/index.htm. ECONorthwest I Portland I Seattle I Los Angeles I Eugene I Boise I econw.com 1 cap across the state. These programs typically fund housing units that are affordable to households earning below 60% of AMI. Although the 4% bond tax credit program tends to not be competitive, there could be competition for the bonds during certain years when demand exceeds availability 2 • The 80/20 Private Activity Bond program can fund construction and development costs for eligible affordable housing projects (e.g., multifamily rental housing, limited equity cooperative, assisted living,single room occupancy housing).The interest on the funding is tax exempt (also known as private activity bonds),thereby reducing total development costs and increasing project feasibility. This program typically funds housing units that are affordable to households earning below 60% of AMI. In return for this incentive, the developer must set aside a certain percentage of units for low-income residents.' • Non-Profit Housing Bonds can assist 501(c)(3)nonprofits in financing numerous housing developments. These funds are more flexible than other types of financing programs. Nonprofit bonds cannot be combined with the LIHTC program incentives, but they can be used to finance a broader range of eligible activities and facilities (such as emergency shelters for the homeless).4 • The Land Acquisition Program assists qualified nonprofits and developers with purchasing land for affordable housing development (rental or homeownership). This loan helps developers buy land and then gives them the necessary time to build financing for building the housing. The Washington State Department of Commerce offers three additional funding programs for developing affordable housing. • The Washington State Housing Trust Fund(HTF) provides loans and grants to affordable housing projects through annual competitive applications. This program typically funds housing units that are affordable to households earning below 80%of AMI. Recently at the end of 2020, the DOC announced that$85.3M of funding will be granted/loaned from the state's HTF,with an additional$11.7M provided through HUD's HOME and National HTF programs (both federal but managed by the DOC). This funding amount sets a new annual record of investment by the state HTF. This funding will be allocated to 30 projects and will help provide an estimated 1,404 multifamily rental units/beds, 121 homes for first-time homebuyers, 86 units of modular housing, and 74 units in cottage-style communities. The DOC will post a call for 2 Although the 4%bond tax credit program tends to not be competitive,there could be competition for the bonds during certain years when demand exceeds availability.Sources:Washington State Housing and Finance Commission,https://www.wshfc.org/mhcf/4percent/index.htm and Local Housing Solutions: https://www.localhousingsolutions.org/fund/federal-funding-for-affordable-housing/. 3 Source:Washington State Housing and Finance Commission, https://www.wshfc.org/mhcf/BondsOn1y8020/index.htm. 4 Source:Washington State Housing and Finance Commission,https://www.wshfc.org/mhcf/nph/index.htm. ECONorthwest 2 applications for the 2021-23 biennial funds soon in 2021 at: https://www.commerce.wa.gov/building-infrastructure/housing/housing-trust- fund/applying-to-the-housing-trust-fund/. • The Housing Preservation Program provides funding for affordable housing rehabilitation, preservation, and capital improvement needs. It is only available for projects that have previously received Housing Trust Funds.5 • The HOME Program is a federal block grant program funded through the U.S. Department of Housing and Urban Development (HUD) used to preserve and build rental housing affordable to low-income households. The Washington State Department of Commerce runs the HOME Rental Development program for Washington State HOME Investment Partnerships Program (HOME). This program offers funding for the preservation and development of affordable rental housing to non-profit organizations, public housing authorities, and local and tribal governments. HOME Funds typically build units that are affordable to households earning below 50%of AMI.Action plans are developed every spring to describe how the state will allocate funds for the next year. Participating jurisdictions must set aside at least 15% of their HOME funds for housing that is developed, sponsored, or owned by Community Housing Development Organizations.' Local Funding Sources 1) A property tax levy(RCW 84.52.105)-allows jurisdictions to place an additional tax up to $0.50 per thousand dollars assessed for up to ten years. Funds must go toward financing affordable housing for households earning below 50%MFI. 2) A sales tax levy(RCW 82.14.530)-allows jurisdictions to place a sales tax up to 0.1 percent. At least 60 percent of funds must go toward constructing affordable housing, mental/behavioral health-related facilities, or funding the operations and maintenance costs of affordable housing and facilities where housing-related programs are provided.At least 40 percent of funds must go toward mental/behavioral health treatment programs and services or housing-related services. 3) A real estate excise tax (REET) (RCW 82.46.035)-allows a portion of city REET funds to be used for affordable housing projects and the planning, acquisition, rehabilitation,repair, 5 Source:Washington State Department of Commerce Housing Preservation Program, https://www.commerce.wa.gov/building-infrastructure/housing/housing-preservation-program/ Through the federal HOME program,the King County Housing and Community Development Department administers a Housing Finance Program(HFP)to provide capital funds for acquisition,rehabilitation,site improvements,new construction,and other costs related to housing development.Projects must apply for program benefits and the process is competitive.The HFP includes funds from King County's local Housing Opportunity Fund.Sources:Washington State Department of Commerce HOME Rental Development Program, https://www.commerce.wa.gov/building-infrastructure/housing/housing-trust-fund/home-program/and ARCH, https://www.archhousing.org/developers/other-funding-options.html. ECONorthwest 3 replacement, construction, or improvement of facilities for people experiencing homelessness. These projects must be listed in city's the capital facilities plan. Federal Government Funding Sources The U.S. Department of Housing and Urban Development (HUD) offers several different programs for developing affordable housing. Select programs are described below. • Since 1974, HUD has provided Community Development Block Grants (CDBG) for the improvement of the economic,social and physical environment and quality of life for low- and moderate-income residents. Generally, these grants can address a wide range of community development needs including infrastructure improvements, housing rehab loans and grants as well as other benefits targeted to low-and moderate-income persons. A competitive process is typically used to allocate grants for individual projects and the amount of federal funding for CDBG has diminished over the past few years. o The local CDBG Program is administered by Spokane County's Community Services, Housing, and Community Development Department since the City of Spokane Valley is part of the Spokane County CDBG Consortium(via an interlocal agreement).' The City of Spokane Valley is currently allocated approximately 20 percent of the consortium's total CDBG award which ranges between$270,000 to $358,000. Eligibility is based on consistency with adopted priorities in the consolidated plan and whether the proposal targets broader community-wide benefits and low- and moderate-incomes (as determined by census tract) and residential uses. • The HUD Section 108 Loan Guarantee Program is one mechanism available for CDBG (block grant) recipients to increase the capacity to assist with economic development, housing,public financing,and infrastructure projects by enabling a community to borrow up to five times its annual CDBG allocation. Communities can use these loans to either finance projects or to start loan funds to finance multiple projects over several years. The program has flexible repayment terms and is often layered with other sources of financing such as LIHTC.8 • HUD also provides two Section 8 funding programs that assist with rent payment. The Section 8 funding programs do not provide financial support to build affordable housing; rather, they provide support for households earning up to 80%of the AMI by paying the rent balance above 30%of the household income.HUD has a tenant-based Section 8 rental housing assistance offered primarily through the Housing Choice Voucher program. 7 Source:Spokane County https://www.spokanecounty.org/1240/CDBG 8 HUD Section 108 Loan Guarantee Program:https://www.hud.gov/program offices/comm planning/section108 ECONorthwest 4 o This voucher program is administered by the Spokane Housing Authority(SHA). Voucher holders gain a rental subsidy that can be used at any eligible rental housing. Consequently, this incentive moves with the eligible household rather than being tied to an affordable housing development. The other Section 8 program is a project-based voucher program providing a subsidy to specific housing units providing consistent affordability.SHA requires households to have 50%AMI or less and reserves 75%of units for incomes at or below 30%AMI.Since the assistance is connected to the housing unit, this program can help create or preserve affordable housing in high-cost, gentrifying areas. • HUD 202 Supportive Housing for the Elderly:This program provides interest-free capital advances to private,nonprofit sponsors to finance housing development for low-income seniors. The capital advance does not have to be repaid as long as the project serves low- income seniors. The nonprofit must provide a minimum capital investment equal to 0.5 percent of the HUD-approved capital advance, up to a maximum of$25,000. Occupancy in Section 202 housing is open to any very low-income household comprised of at least one person who is at least 62 years old at the time of initial occupancy.9 • HUD Section 811 Supportive Housing for Persons with Disabilities: This program provides funding to build and subsidize rental housing for eligible persons with disabilities, in household income levels ranging from very low (50%AMI) and extremely low(under 30%AMI).At least one adult member in the household must have a disability such as a physical or developmental disability or chronic mental illness.A general aim of this program is help persons with disabilities live independently as much as possible.The program provides interest-free capital advances and operation subsidies to nonprofit developers. In addition, assistance is provided to state housing agencies in a variety of ways such as Federal Low-Income Housing Tax Credits. 10 • Another HUD program supporting affordable housing rehabilitation is the Choice Neighborhoods grant program. This program is the successor to the HOPE VI program. This program funds the redevelopment, rehabilitation, and new construction associated with severely-distressed public housing and privately-owned HUD-assisted properties. A neighborhood revitalization plan (referred to as a Transformation Plan) describing the project goals and how it will address community problems and increase opportunities for the residents and the surrounding neighborhood is required.11 9 Source:HUD,https://www.hud.gov/program offices/housing/mfh/progdesc/e1d202 io Source:HUD,https://www.hud.gov/program offices/housing/mfh/progdesc/disab811. n Source:Local Housing Solutions,https://www.localhousingsolutions.org/fund/federal-funding-for-affordable- housing/. ECONorthwest 5 City of Spokane Valley Rent-Restricted Low-Income Housing Inventory Analysis Common Management Companies Number of Properties %of Total Number of Low Income Units %of Total California Commercial Investment Group,Inc. 3 13.0% 261 15.7% Catholic Housing Services of Eastern Washington 1 4.3% 51 3.1% Community Frameworks 2 8.7% 49 2.9% Goodale&Barbieri Company 1 4.3% 59 3.5% Hearthstone Housing Foundation 1 4.3% 287 17.3% Kiemle&Hagood Co 4 17.4% 98 5.9% National Church Residences 2 8.7% 74 4.4% Security Properties Incorporated 1 4.3% 139 8.4% Spokane Housing Authority 1 4.3% 207 12.4% Spokane Housing Ventures 3 13.0% 96 5.8% Spokane United Methodist Homes 1 4.3% 24 1.4% Vinland Housing Corporation 1 4.3% 80 4.8% WhitewaterCreek,Inc. 2 8.7% 238 14.3% Grand Total 23 100.0% 1,663 100.0% Bedroom Count(If property basal!or Affordability Level(for propertieswith some bedroom information %of Total income limit data 7LOfTaal SRO 0 0.0% LIH 30% 40 3.6% OBR 10 1.0% LIH 35% 36 3.2% 1BR 518 51.6% L1H40' 113 10.2% 2BR 354 35.3% LIH45% 0 0.0% 3BR 97 9.7% LIH 50% 143 12.8% 4BR 24 2.4% LIH 60% 781 70,2% SBR 0 ;21.0.-A Grand Total 1,113 100.0% Grand Total 1,003 100.0% Project Type(S trce) Sun?of Loy/Income Units Bond(WSHFC) 40 HUD 202 135 HUD 811 €1 HUD Section 8 221 TaxCredit(WSHFCi 870 Unknown(CommunityFrameworksi 28 Unknown(Spokane HousingAuthorityli 207 Grand Total 1,663 City of Spokane Valley Rent-Restricted Affordable Housing Inventory Data Sources:Washington State Housing and Finance Commission(WSHFC),2020, US Department of Housing and Urban Development(HUD),Spokane Housing Authority(SHA), and Community Frameworks(CF). Data Searches(mid 2020): HUD,USDA Rural Development Program (there were no properties in Spokane Valley),SHA, City of Spokane Valley,and PolicyMap. Notes: OBR:is a studio.SRO:Single Room Occupancy. BR:Bedroom. We de-duplicated properties that appeared in multiple databases by looking at property names,total units,and addresses. We did not gather information on affordable homeownership properties,nor information on any housing vouchers. This information does not include homeless shelters or transitional housing that is not income or rent restricted.Lastly, we assume the WSHFC properties are all currently rent restricted,even if their LIHTC Year-15 has passed. While we cannot guarantee that the data is fully complete,it likely captures a robust share of the total rent-restricted affordable housing across Spokane Valley. ECONorthwest 6 Federal Government Designated Geographic Areas for Affordable Housing Support Developing a regulated affordable housing property can be a complex and difficult process. Different funding sources may have different priorities, and the costs of land and development can be prohibitive. To help alleviate some of these difficulties, the federal government has designated certain geographic areas to receive higher priority or more funding for regulated affordable housing development. These include Qualified Census Tracts, Difficult to Develop Areas, and Opportunity Zones,each described below. Qualified Census Tracts HUD defines a Qualified Census Tract (QCT) as a Census Tract with "50 percent of households with incomes below 60 percent of the Area Median Gross Income (AMGI)" or one where the poverty rate exceeds 25 percent. 12 Affordable housing developments in QCTs that apply for LIHTC funding receive a boost in the amount of tax credits they can receive.The City of Spokane Valley has a few QCT(see image below). Map Options 1 13 Current Zoom Level Map Satellite 114.00 8 101.1 r 1 ❑Show Dilricult Development Areas(Zoom 7+) L J p Color OCT Quatifed Tracts[Zoom 7+) 113.00 114.00 EFJrkex'a p5how Tracts Outline(Zoom 11+) Hutton Show FMROuAines(Zorn 4+) Settlement ,I. ew,neai:tw�. a psnow LIHTC arose (zoo„tt.) .asadena Park F unr,.1-. 114.00 Click here for full screen map 113.00 Irwin Spokane Business - Select Year &Industrial Park V 114.00 1102021 116.00 k .'..,. •• 114.00 ...2020 .ra 111.0% t� • 11TV2 Lej..pi.01 Spokane Valley Mall Va ley 1,1 120.00 119.00 118.00 yl8 1 Superce 8 120.00 119.01 MO 129.0 1 a t ie r a e r DALE iTO i Vera f 1 Hills 1116 E, e.<aaaro 1 E _ Area raA 126.0i Ee,c 121.01 Google 130.00 Map datae2021 Google Tea.of Doe Report a map error. 12 HUD.2020."Qualified Census Tracts and Difficult Development Areas."www.huduser.gov/portal/datasets/qct.html ECONorthwest 7 Difficult Development Areas HUD defines a Difficult Development Areas (DDA) as "areas with high land, construction and utility costs relative to the area median income" and uses HUD Fair Market Rents,income limits, 2010 census, and 5-year American Community Survey (ACS) data as determinants. DDA properties using the Low-Income Housing Tax Credit(LIHTC)program can receive a 30 percent basis boost in qualified costs, increasing tax credits and resulting in greater investment equity in a project. The City of Spokane Valley does not include any DDAs. Opportunity Zones In addition,the 2017 federal Tax Cuts and Jobs Act created the Opportunity Zone program which is designed to incentivize investment in low-income communities by providing tax benefits. Opportunity Zones are Census Tracts where the poverty rate exceeds 20%.13 While there are no specific funding boosts for affordable housing projects developed in Opportunity Zones, the tax incentives make other types of multifamily development more feasible. The City of Spokane Valley does not have any Opportunity Zones. 13 Washington State Department of Commerce.2020."Opportunity Zones-An Incentive to Invest in Lower-Income Areas." https://www.commerce.wa.goy/growing-the-economy/opportunity-zones/ ECONorthwest 8 Affordable Housing Development Information This section describes the affordable housing development and finance process and how it differs from market rate development. Typical Affordable Housing Development Process The development of new, multifamily regulated affordable housing is a long and complex process. It is subject to many of the same development conditions as market-rate development, with added complexity due to lower rents requiring additional, lower-cost funding. The development process begins in predevelopment (design and feasibility, land entitlements, and funding applications) then enters construction, before beginning operations. The following are typical development phases for regulated affordable housing projects. Design and Feasibility Affordable housing developers start with an understanding of the need for less expensive housing in an area. How many units are needed at what rent level? What income levels have the biggest gaps in housing supply? What populations are struggling with housing costs the most? Just like market rate developers, affordable housing developers test the financial feasibility of what they hope to build against the local political and economic conditions. They must estimate what it will cost to build, what affordability levels the region needs, and the amount of funding available to build the project.If the project is not financially or politically feasible(i.e.,cannot find adequate funding sources or does not meet a neighborhood's goals),building the housing will be immensely challenging. Key challenges that are considered: cost of land, development allowed on the land (zoning), costs of construction, rents or prices, costs of operations (for multifamily), or local opposition to the project. How does affordable housing differ? Both affordable housing development and market-rate development need to go through design and feasibility. Affordable housing development differs from market-rate development in this stage due to limited funding. With the goal of providing below-market rents, the financing structure (often called the "capital stack") of an affordable housing development needs to fill a gap (often called a "funding gap") between what it costs to build the property and what the property's operations can support.A market rate development will typically have investor equity and one or two types of debt financing,but an affordable housing development may also need to secure public funding, grants, operating subsidies, and low-cost or forgivable debt on top of competitive investor equity sources (see exhibit below). Some affordable housing developers need to secure predevelopment loans or grants as they work out the logistics of project feasibility. ECONorthwest 9 Sometimes, affordable housing developments are given free or reduced cost land, which aids feasibility and reduces the amount of debt needed. Typical Capital Stacks in a Market Rate and a 9%LIHTC Affordable Housing Development Market Affordable Housing Funding Sources Funding Sources Equity Investors/ Developer Equity 62% 20% Gap Financing/ Mezzanine Debt 15% LIHTC 9% Credits Long Term Debt Gap Financing 21% competitive grants and other sources 65% (7 total) 17% Long Term Debt Source:ECONorthwest Land Use Entitlements This is the process of getting control of the site (buying land or assembling parcels) and getting the legal authority to develop (zoning and permitting, design review,neighborhood opposition, etc.). This can take months or years depending on the type of project, the required level of public review, the time it takes to obtain permits, the amount of neighborhood opposition, and many other factors. Developers typically take out pre-development loans to cover these costs, meaning that delays incur"carrying costs"(the interest that accrues on the loan each month of the process). This loan may be wrapped into or repaid by the construction loan. How does affordable housing differ? Both affordable housing developments and market-rate developments need to secure land use entitlements. One major way that affordable housing development differs from market-rate development in this stage, is due to neighborhood opposition. It is common for neighborhoods to object to a new affordable housing development, and some may use the slow land use entitlements process to delay or "kill" a project. Some market-rate developments may face opposition in this process, but they may also be in a better financial position to weather delays ECONorthwest 10 (e.g., if a market rate developer does not need a pre-development loan, delays do not incur carrying costs). Public Funding Applications This is a unique step required of affordable housing development that does not apply to market- rate development. Often, affordable housing developments receive public funding in exchange for renting to low-income households. With rents set below market, the property will have insufficient rent revenue to cover its operating costs and support the loans needed to pay for development. Thus, the property must apply for a range of low-cost funding, project equity, or grants to reach feasibility and begin construction. This step adds cost, time, complexity, and uncertainty to the development process. Because public funding is limited, these application cycles are very competitive and not all projects will receive the funding to move forward. The policy goals attached to each funding amount can influence the type of housing built (e.g., housing for families or seniors) as well as the income levels served.Most often, a project needs to have site control before it can receive funding. How does affordable housing differ? Market-rate developments do not typically need to secure public funding for development. Construction Once a property has site control, entitlements, and a confirmed design concept, it can begin construction.This stage depends on the availability of labor,materials, and equipment, as well as the complexity and size of the development.The project will take out a construction loan to cover these costs, which means that delays in construction incur additional "carrying costs." The construction loan is repaid by the permanent loan, which is sized based on the net operating income of the project(rent revenues minus operating expenses). How does affordable housing differ? Affordable housing projects do not meaningfully differ from market-rate projects in the construction process.However, they may have simpler designs and prioritize faster construction timelines. Operations Once the project is built and leased, it begins operations. Rents are determined at the project feasibility stage and are very important in the project's operating phase. Feasibility and funding applications can occur several years prior to the project operating. The revenues from property rents need to be high enough to cover the cost of operating the property (including maintenance and repairs, landscaping, taxes, and numerous other fees and costs). The project's net operating ECONorthwest 11 income must also service the monthly debt payments on the permanent loan. Banks generally require an income "cushion" to assure that the property has enough operating income to pay its debts.This means that net operating income must be 15 percent to 20 percent higher than the debt payment. Any change in rent revenues (market softening, competition, vacancies, etc.), costs of operations (higher taxes, maintenance costs, capital repairs, etc.) can meaningfully disrupt a property's operations. How does affordable housing differ? Affordable housing properties operate under affordability restrictions for a specified period of time (e.g., 15-99 years), and are typically managed by mission-driven developers or non-profit organizations. In contrast, many market rate properties will sell to an institutional investor after the property stabilizes (after 5 or 8 years of operations).Another difference in affordable housing operations is that typically, affordable housing properties are required to put a portion of operating funds into reserves (both capital reserves and or operating reserves) which serve as a cushion for unexpected vacancies, disruptions to operations, or major capital repairs. These reserves help prevent most affordable housing properties from defaulting on debt service requirements (LIHTC properties, in particular, have very low default rates). Market rate properties are not required to keep reserves. Lastly, another difference in affordable housing operations, is that often the properties may have insufficient cash flow (funds left over after paying for operating expenses and debt) to pay for any cash-flow dependent line items (e.g., the developer fee, cash-flow dependent loans, etc.) In contrast, market rate properties seek financial returns from the property, to provide steady cash flow to the owner or investor.While cash flow is not always available due to market rent fluctuations and or vacancies, the deals are structured to seek financial returns. Development Context There are a large number of interrelated variables to consider where affordable housing will be the most profitable for developers; among these variables are: • Base regulations-base density,height limits, lot coverage or floor-area ratios,etc. • Incentives-fee waivers, density and height bonuses, direct financial contributions,etc. • Inclusionary requirements-length of restrictions, set aside amounts, income levels,etc. • Market conditions-base rents, area annual income growth,land costs, etc. • Infrastructure-mobility(transit, roads, and trails), parks, stormwater,etc. • Internal metrics-developer internal rate of return, finance costs, etc. ECONorthwest 12 The difficulty in balancing these variables is that since each site,each project, and each developer have such widely varying characteristics, there is no single equation that results in the provision of affordable housing;each party can only make decisions that affect their span of control: • Developer: Choosing a region with anticipated profit,controlling for land costs,reducing the quality of the units, or charging increased prices for the finished units; since the first is sometimes fixed, and the last two are tied to market rates, controlling for land is often the overriding factor. • Jurisdiction: Reducing regulatory burden—parking requirements, impact fees, permitting timelines, cost of compliance,etc.—or increasing incentives. • Outside of control of either party: Financial markets,regional economic growth/decline. The challenge with affordable mandates is to price the associated incentives in a way to mitigate the costs. ECONorthwest 13 APPENDIX G ACCESSORY DWELLING UNIT AND TINY HOME POLICY ANALYSIS ECONorthwest ECONOMICS • FINANCE • PLANNING DATE: February 1, 2021 TO: Maul Foster &Alongi (MFA), Matt Hoffman FROM: ECONorthwest, Tyler Bump, Jennifer Cannon, and James Kim SUBJECT: DRAFT Evaluation of Key Housing Strategies for the Spokane Valley Housing Action Plan Introduction ECONorthwest in partnership with MFA is supporting the development of a Housing Action Plan (HAP) for the City of Spokane Valley to evaluate current and future housing needs and identify strategies to meet those needs. The HAP is largely made possible due to a Washington State Department of Commerce Housing Bill 1923 Grant. The overarching aims for the HAP are to include strategies to increase the supply of housing, and variety of housing types and actions to increase the supply of housing affordable to all income levels. The approach for developing a HAP began with an assessment of housing needs, public involvement, and analysis of the effectiveness of existing policies and potential updates to key regulations. All of this information collectively will inform the strategic actions to be including in the HAP. ECONorthwest provided Housing Action Plan content useful for describing Accessory Dwelling Unit(ADU) and Tiny Home policy updates to consider. Accessory Dwelling Unit Policies ADUs,also referred to as mother-in-law apartments, carriage house, granny flat,second unit, are a self-contained residential unit that is an accessory use to a single-family home and is located on the parcel with a single-family home.An ADU typically contains all the basic facilities needed for living independent from the primary residence such as a kitchen and bathroom.ADUs tend to be smaller in size and scale to the primary single-family home. ADUs can be considered a form of missing middle housing helping to bridge a gap between single-family housing and multifamily housing. Generally, this type of housing can be built at a lower cost per unit than single-family detached housing;however, this is not guaranteed. An ADU can be configured in different ways such as being attached to a single-family home, above a garage, or detached from the primary residence. See the examples shown below. ■ ■ ■ ■ I • I . I ' I I . DETACHED ATTACHED INTERIOR(UPPER LEVEL) • • • •. ■ , ■ - . ■ I■ INTERIOR(LOWER LEVEL) ABOVE GARAGE GARAGE CONVERSION A Accessory dwelling units(or ADUs)come in many shapes and styles. Source:AARP,2018 ABCs of ADUs Guide and images. ECONorthwest I Portland I Seattle I Los Angeles I Eugene I Boise I econw.com 1 Spokane Valley ADU Regulations:1 • Type: Both attached or detached are permitted. • Quantity: One ADU is allowed per lot. • Creation:ADU construction is allowed with new or existing primary unit. • Eligibility: ADUs are not allowed on lots with a duplex, multifamily dwelling, or accessory apartment. • Parking: One off-street parking space required for ADU in addition to existing parking requirements. • Design Standards: • Appearance: ADU must match primary dwelling unit's exterior finish materials, roof pitch,trim, and window proportions and orientation. No guidance on height limits. • Entrance: An attached ADU entrance must be on the side or in the rear to maintain single-family appearance. No guidance for detached ADU. • Size: ADU cannot be larger than 10% of lot or 1,000 sq/ft (whichever is greater) and larger than 300 sq/ft while not exceeding 50% of the habitable square footage of primary dwelling unit. And have no more than two bedrooms. • Setbacks: ADU must comply with existing side and rear setback requirements for a dwelling unit. For some properties this would be a 20-foot rear setback and for others the rear setback could be 10 feet. • Permit Fees: It is not clear from the Master Fee Schedule found in Resolution NO. 20-016 which fees apply to ADU permit fees. Clarifying which fees apply to ADU development will help reduce questions and streamline the process.Below are some fees that may: • ADU Planning: $300 • Building: $391.25-$993.75 • Site Plan Review: $80 • Certificate of Occupancy:$84.00 • Transportation Impact Fee: $1,260 • Other: Cargo shipping containers are not permitted as an ADU in residential zoning. • Industrial ADU: This is another type of ADU allowed in Spokane Valley. Code does not specify which zone it is permissible to build this type of ADU. Main difference from a regular ADU is that 10 industrial ADUs are allowed per site and are prohibited on the first floor of the building. Policy Considerations: 1 City of Spokane Valley Municipal Code Section 19.40.030 Development standards-Accessory dwelling units. ECONorthwest 2 • Adding off-street parking space in addition to the existing parking requirements can make an ADU more expensive to develop. Parking space requirements tend to increase the cost of development and can make the development physically impossible when taking into account the primary and accessory parking unit requirements. Lowering parking space requirements can be a helpful way to encourage ADU development. If on- street parking is available or garage or driveway space is available,the City should consider waiving onerous parking requirements such as prohibiting the use of the driveway, garage, or carport areas to count for parking. Especially if owner-occupancy is required, ADUs tend to be located on a lot with shared parking arrangements and the availability of parking can be coordinated with the primary residence (likely the landlord) living on-site.Parking spaces could easily cost$5,000 to$7,000 which, given the cost of development of an ADU, can add substantial cost such that it becomes a barrier for homeowner financing. • Generally, requiring owner-occupancy of one of the units can negatively impact ADU production.2 The City of Renton exempts owner occupancy requirements in exchange for 60%AMI affordability. • The City should explore whether there are feasible opportunities to relax the size limitations to allow for more flexibility and larger units and smaller units that could result from the conversion of garage spaces. • Relaxing the ADU setback requirements (particularly the side and rear) to five feet could make ADU projects more feasible, particularly on lots with irregular or elongated shapes. • A city might institute strategic fee waivers for affordable units to encourage more development, or lower-cost development. • Increasing the density to allow for two ADUs per lot could be helpful particularly if the City sees increasing demand for ADU housing options.Jurisdictions will not see large numbers of ADUs actually being constructed until the market rents reach a level that makes development feasible. • Monitor: Cities possibly will need to address short-term vacation rental use of ADUs and spillover effects in terms of parking, service, and neighborhood impacts. Benefits Associated with Promoting ADU Development: • Broadens housing diversity and choices in a broader range of neighborhoods since it can be offered at a more affordable cost due to their small size.Although ADUs can be cheaper housing options, this lower cost is not always the case. • Offers additional options for Seniors and younger populations, single person households,etc. • Can be a source of added income to help pay housing expenses. 2 https://www.planning.org/knowledgebase/accessorydwellings/ ECONorthwest 3 • AARP surveyed people 50+and found,they would consider creating an ADU to provide a home for a loved one in need of care (84%), provide housing for relatives or friends (83%),feel safer by having someone living nearby(64%,have a space for guests (69%), increase the value of their home (67%), create a place for a caregiver to stay (60%), and earn extra income from renting to a tenant(53%)Source:AARP Home and Community Preferences Survey, 2018. (AARP Home and Community Preferences Survey, 2018) • ADUs can blend into single-family neighborhoods and be a form of intergenerational housing. Tiny Home Policies Over the last decade,various factors have led to households downsizing and people choosing to live in smaller, more affordable, and environmentally sustainable dwellings. The concept of living smaller has been gaining momentum and new models of tiny housing have been popping up in cities throughout the country. Tiny houses are one way to provide a housing option for individuals and households who desire privacy and smaller home size but prefer single-family dwelling home amenities. Tiny homes, sometimes referred to as micro-homes, are small, single-family dwellings, typically 80 to 200 square feet but usually always less than 500 square feet.3 Tiny homes often have a kitchen and a bathroom and they can be on wheels (temporary or transitional) or on foundation (permanent). Tiny homes are an attractive option for home dwellers because they cost less than a traditional home and do not require a mortgage;units require less energy and utility services; and some tiny homes,especially those on wheels, provide dwellers the flexibility of movement. Tiny homes can be built entirely on the site (stick-built/site-constructed) or can be built elsewhere and transported to the site such as a factory-built modular home. Tiny house communities including property that can be rented or held by other others for the placement of tiny houses can also provide transitional housing for those experiencing homelessness (these villages have been built in Olympia and Seattle). Until recently, state law,building codes, and local regulations have presented numerous legal and logistical barriers to siting and building these very small, detached dwellings. In 2019, the state legislature passed ESSB 5383,which updated state law to enable the development of tiny houses or tiny house communities throughout the state.This law defined tiny houses, and mandated that the building code council write building codes for tiny homes.Washington state has adopted Appendix Q Tiny Houses which relates to tiny homes on a foundation. The City of Spokane Valley could consider the following policy updates/additions: 3 Brown,Emily(2016).Overcoming the Barriers to Micro-Housing:Tiny Houses,Big Potential.University of Oregon Department of Planning,Public Policy,and Management. ECONorthwest 4 • At a minimum, the City should define tiny houses to differentiate from trailers, manufactured homes, and recreational vehicles. Tiny homes on wheels might be challenging to address initially due to challenges with zoning compliance,waste-water treatment, and site design. Some communities have adopted building codes that allow for long-term occupancy of tiny homes,but in many towns and cities the legality of long-term occupancy hinges on whether the tiny home is on a permanent foundation and connected to public utilities. Consequently, focusing on clarifying regulations with tiny houses on foundations (not on wheels) could be addressed as a first step. The City could allow tiny homes, set on a foundation, to be utilized as an ADU. • Zoning code requirements can create additional barriers: Tiny homes may not be addressed in the zoning code as a permitted use, and if so, there may be a limit on which zoning areas allow them. Certain zoning areas have minimum lot size, setbacks, and parking requirements that are prohibitive. The City of Walsenburg, Colorado's city council eliminated a zoning code that prohibited residential dwellings of 600 square feet or less, allowing more housing in the mountain-town city.4 The permitted use table should be modified to identify where tiny houses or tiny house villages would be permitted outright or conditionally allowed. • The building code can be the most significant hurdle for legally constructing a tiny home. The City should consider whether to adopt the updated International Residential Code(IRC)with Appendix Q(2018) since this has been modified to encompass tiny house construction. This IRC defines a tiny house as a dwelling smaller than 400 square feet excluding lofts. The Washington state legislature (via ESB 5383) recognizes that the IRC has issued tiny house building code standards in Appendix Q which can provide a basis for the standards requested within this act.5 As a first step, the City should solicit input or convene a focus group or working group including tiny house owners and developers, city planners, and city building code experts to review how tiny homes would fit in the existing site plan approval process and identify regulatory barriers and possible areas of flexibility related to the use of the IRC. 4 For more information,visit:https://www.cityofwalsenburg.net/tiny-homes 5 The cities of Seattle,Tacoma,and Olympia have adopted Code to address tiny homes. ECONorthwest 5 Tiny Home Image Precedents - f• +.,', ';'-'46 1;°:" i ,..... L.---.._. - 4-1..e- .. -----;...„ "..L.....:*.... n —. [[ ' '''• ', 1 2111'cr't, '."apipr--- ile!` .„-.1 't r — , .0 , 1 .......- -...-_--- I ---- ... . ,_. -7. 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