Affordable Housing Update 2019 — Affordable Housing Advisory Board Report to the Legislature (February 1, 2020)
Summary
Affordable Housing Update 2019, the Affordable Housing Advisory Board report to the Legislature dated February 1, 2020, prepared with the Washington State Department of Commerce. The report describes the Affordable Housing Advisory Board as a 21-member board appointed by the Governor. Its Key Findings state that in 2019, despite increased permitting activity, housing affordability worsened throughout the state by 10%, and that twenty-two percent of Washington renters (234,362 households) are extremely low-income, with a deficit of 165,345 units that are both affordable and available to them. It also cites a 23.3% increase in total permitting activity noted by the Center for Real Estate Research at the University of Washington.
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“Affordable Housing Update 2019 — Affordable Housing Advisory Board Report to the Legislature (February 1, 2020).”
Original at app.leg.wa.gov. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/2020-2019-ahab-annual-report-a7453d12-5972-475b-97fa-5ee6819c24d5/
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Affordable Housing Update
2019 Affordable Housing Update Pursuant to RCW 43.185B.040
February 1, 2020
AFFORDABLE HOUSING
ADVISORY BOARD REPORT TO THE LEGISLATURE
Lisa Brown, Director
2.0
Acknowledgments
Washington State Department of Commerce
Diane Klontz, assistant director, Community
Services and Housing Division
Emily Grossman, lead policy advisor, Community
Services and Housing Division
Washington State Department of Commerce
Emily Grossman,
emily.grossman@commerce.wa.gov
AFFORDABLE HOUSING ADVISORY BOARD
1011 Plum St. SE
P.O. Box 42525
Olympia, WA 98504-2525
www.commerce.wa.gov
For people with disabilities, this report is available
on request in other formats. To submit a request,
please call 360.725.4000 (TTY 360.586.0772)
AFFORDABLE HOUSING UPDATE
Table of Contents
Executive Summary ..................................................................................................................................... 2
Current State of Affordability ....................................................................................................................... 3
2019 Progress ............................................................................................................................................. 6
Conclusion and Recommendations .............................................................................................................. 7
Appendix A: Members of the Affordable Housing Advisory Board ................................................................. 8
AFFORDABLE HOUSING UPDATE 1
Executive Summary
Overview
The Affordable Housing Advisory Board (AHAB) is a 21-member board appointed by the Governor. Its role is to
“address the state’s need for housing that is affordable to all economic segments and populations" and serve
as the Department of Commerce’s (Commerce) principal advisory body on housing and housing-related
issues. 1
Commerce is required to submit an annual progress report to the legislature, detailing the extent to which the
state's affordable housing needs were met during the preceding year and recommendations for meeting those
needs. This requirement is found in RCW 43.185B.040(2)(b):
"Each February 1st, beginning February 1, 1995, the department shall submit an annual progress report, to the
legislature, detailing the extent to which the state's affordable housing needs were met during the preceding year
and recommendations for meeting those needs."
This report constitutes the 2019 update.
Key Findings
While housing starts are at a 13-year high in fast-growing areas of Washington, affordability remains a problem
for most households. In 2019, despite increased permitting activity, housing affordability worsened throughout
the state by 10%. 2 For low and extremely low-income households, the situation is worse than ever. Twenty-two
percent of Washington renters (234,362 households) are extremely low-income, and there is a deficit of
165,345 units that are both affordable and available to them. 3
Summary of Recommendations
Communities can achieve housing affordability by ensuring that a variety of housing types are available,
including naturally affordable and subsidized units. The state's role is to offer effective tools and guidance to
help meet local needs. Thus, the Department of Commerce and the Affordable Housing Advisory Board (AHAB)
recommend the following policy actions:
1. Expand housing choices for low and moderate-income households.
2. Authorize effective tools to help local governments reach appropriate housing goals.
3. Substantially increase the number of units specifically affordable to low and extremely low-income households
through increased state funding for subsidized housing.
1 See Appendix A
2 Most of the increase in housing construction occurred in King and Pierce Counties. Center for Real Estate Research, Housing Market
Report Q2, 2019, http://realestate.washington.edu/wp-content/uploads/2019/09/2019Q2WAHMR.pdf. Accessed 11/23/2019
3 National Low Income Coalition, Out of Reach 2019: Washington State, https://reports.nlihc.org/oor/washington. Accessed 12/2/2019.
AFFORDABLE HOUSING UPDATE 2
Current State of Affordability
Overview
In 2019, rapid economic and population growth in Washington's metropolitan communities continued to
negatively affect housing affordability throughout the state. Meanwhile, permitting activity for both single-
family and multifamily homes increased: the Center for Real Estate Research at the University of Washington
noted a 23.3% increase in total permitting activity. 4 Despite the increase in permitting activity, housing
affordability worsened throughout the state by 10%. 5 These statistics refute a common misconception: more
housing inventory does not automatically translate to better affordability in the housing market.
The market has responded to consumer demand with more inventory, but newly constructed units tend to lack
diversity in housing type and target higher wage earners. Single-family and high-rise multifamily buildings earn
a higher return over high development costs, so suppliers favor them, but most Washingtonians cannot afford
them. Throughout the state, very little new housing is developed that is affordable for middle and lower-income
households unless it is subsidized through government funding.
Higher-Priced Housing for Fewer Consumers
High development costs are a key factor in the market dynamic described above. In 2017, the Housing
Affordability Response Team (HART), 6 a special committee of the AHAB, delivered to Governor Inslee
recommendations 7 on improving housing affordability and reported the following:
"During the development process for housing projects, significant risk exposures exist for the developer and
other parties. This is because the project must be complete before income and anticipated profit is generated.
To compensate for this risk, the market-rate developer, investor, and other capital providers establish a minimum
expected rate of return on their investment that must be achieved before they will go forward with the project.”
Thus, market-rate developers apply a market demand approach, which favors the higher-end and more
profitable, housing types (large-scale multi-family and single-family) 8 preferred by high-income earners who
tend to reside in urban areas. The consequence of this combination of factors is that more affordable markets
cannot compete with higher-priced markets, and less profitable but more affordable housing types are not
produced to the extent they are needed. 9 The housing inventory has grown, but overall affordability has not
improved.
One way to address the shortfall of housing that is affordable to households with median incomes is by
building smaller-scale multifamily units that are naturally more affordable. This type of housing, which includes
duplexes, triplexes, fourplexes, courtyard apartments and townhomes, is also known as the "missing middle."
4 Ibid.
5 Ibid.
6 Affordable Housing Advisory Board, "Affordable Housing Advisory Board (AHAB)- Housing Affordability Response Team Meetings and
Materials," https://www.ezview.wa.gov/site/alias__1961/overview/37021/overview.aspx
7 Affordable Housing Advisory Board, "2017 Housing Affordability Response Team (HART) Recommendations," (2017),
http://www.commerce.wa.gov/wp-content/uploads/2016/10/ahab-hart-affordablehousing-report-2017.pdf
8 Puget Sound Regional Council annual permitting data, https://www.psrc.org/sites/default/files/pmt2017.xlsx. Accessed 12/1/2019
9 Washington State Department of Commerce, Housing Memorandum: Issues Affecting Housing Availability and Affordability,
https://deptofcommerce.app.box.com/s/npwem3s3rvcsya15nylbroj18e794yk7. Accessed 11/26/2019
AFFORDABLE HOUSING UPDATE 3
Figure 1: Median Home Prices in Washington State, 10-Year Trend Data
Source: Center for Real Estate Research, Housing Market Report Q2, 2019
"Missing Middle" Housing Types
"Missing middle" housing is a range of multi-unit or clustered housing types that are compatible in scale with
detached single-family homes and provide solutions along a spectrum of affordability. These housing types
sell or rent at moderate costs compared to detached single-family units and higher density attached unit types,
yet most cities prohibit or strongly discourage them. Local governments that attempt to authorize infill
development with more missing middle housing types often meet community resistance based on fears that
higher-density housing will change the character of existing neighborhoods; bringing communities around to
support the required zoning changes can require an extensive, costly communications campaign to persuade
stakeholders and constituents.
Figure 2: Housing Type Spectrum - Relationship between Housing Types, Price and
Rent, Housing Unit Size and Housing Density
High-rise development
overwhelmingly uses some
combination of steel and concrete,
which are the highest-cost forms of
construction for residential use.
Large lot single-family construction is
expensive due to the cost of more
land, generally a larger house, no
shared walls with other units, and
greater per unit infrastructure costs
to extend and connect.
Low-rise and attached single-family
(including two, tri, and fourplexes,
cottages, townhouses, etc.) can be
entirely built with wood construction
and are the least expensive
typologies to build.
AFFORDABLE HOUSING UPDATE 4
Source: Department of Commerce Housing Memorandum page 81
Growing Need for Low-Income Housing
Affordable housing is commonly defined in terms of housing costs as a percentage of household income.
Housing is considered unaffordable when a household’s monthly housing costs exceed a certain threshold —
most commonly 30 percent of gross income — thereby reducing the budget available for other necessities and
amenities. For households with lower incomes, high housing costs often mean they must choose between
paying for housing or getting other life necessities like food or medications.
Although incomes in Washington state are growing faster than the national average, they are not keeping pace
with growing rents, and fixed incomes such as retirement or disability incomes have grown well below the rate
of rent inflation. 10 Consequently, there is a significant gap between renters' wages and the cost of housing.
According to the National Low-Income Housing Coalition's 2019 Out of Reach report, it costs twice the
minimum wage, or $57,782 per year, to affordably rent a two-bedroom unit in Washington state. This figure is
known as the "housing wage."
Figure 3: Median Wages for Largest Occupations Compared to Two-Bedroom
Housing Wage
70,000
$57,783
60,000
50,000
Annual Income
$41,809 $41,237
40,000 $36,231
$30,283 $35,594
30,000 $31,319
20,000
10,000
0
Two Bedroom Food Prep Cashiers Customer Retail Sales General Office Clerk
Housing Wage Workers Service Rep Laborer
Sources: National Low Income Housing Coalition- Within Reach 2019. Wage and hour statistics derived from the Employment Security Department
Occupational Employment and Wage Estimates, 2019 accessed January 3, 2020.
In Washington state, nearly half of renters are cost-burdened. Those with extremely low incomes, meaning
their household income is 30% or less of the Area Median Income, have the hardest time finding and keeping
housing. 11 Twenty-two percent of Washington renters (234,362 households) are extremely low-income, and
there is a deficit of 165,345 units that are both affordable and available to them. 12 When housing costs are
more affordable and housing opportunities are more readily available, there is a lower likelihood of these
households becoming homeless, and households who do become homeless can exit homelessness more
quickly and with a greater likelihood of sustaining that housing long-term.
10 U.S. Census Bureau American Community Survey one-year estimates for Washington State, B25058, B25057, B19081; inflation
adjusted using the Bureau of Labor Statistics CPI-U.
11 ACS Select Housing Characteristics, 2017 5-Year Estimates
12 National Low Income Coalition, Out of Reach 2019: Washington State, https://reports.nlihc.org/oor/washington. Accessed
12/2/2019.
AFFORDABLE HOUSING UPDATE 5
2019 Progress
The Department of Commerce provides tools to local governments, nonprofits, and community action
agencies so they can provide housing to low-income members in their communities. Commerce administers
the Housing Trust Fund (HTF), the state’s most important investment toward achieving the goal of ensuring
that everyone has the opportunity to live in a safe, decent, affordable home. Since 1986, the state has invested
more than $1 billion to provide 50,000 units of affordable housing to eligible families and individuals.
In 2019, the Housing Trust Fund awarded capital funding to organizations to build more than 2,300 multifamily
low-income housing units throughout the state, 876 of which will be dedicated to homeless housing. The
Washington State Housing Finance Commission, the state's allocating agency for the federal Low-Income Tax
Credit program, approved more than $331 million in financing that will build or renovate and preserve more
than 1,000 apartments affordable to people with lower incomes. While these investments are significant, they
are not enough to meet the growing need for affordable housing statewide.
HB 1406 (the Affordable and Supportive Housing Sales and Use Tax) and HB 1923 (Increasing urban
residential building capacity) were two significant legislative bills passed in 2019. Both bills provided new
investments in affordable housing.
Thus far, 29 jurisdictions have completed all the steps necessary to implement the Affordable and Supportive
Sales and Use tax locally, and many more plan to do so. More than $1 million in tax distributions from the
Department of Revenue have gone to jurisdictions for affordable and supportive housing development and
support, and rental assistance for low-income households in some cases. Commerce awarded grants to 52
fully planning communities with funding provided through HB 1923 (See Figure 4). An additional funding round
for partially planning jurisdictions is now underway. The grants will fund housing action plans and city code
changes to increase urban residential building capacity and streamline development regulations.
Figure 4: Commerce awards $4 million to 52 communities to address housing
affordability 13
Single City
Municipal Housing
Code Changes Action Plans Regional Housing Action Plans Sub Area Plans
Auburn, Burien, Federal Way, Kent,
Algona Arlington Airway Heights
Tukwila and Renton
Bothell Camas Bonney Lake and Sumner Kirkland
Bremerton Everett Lacey, Olympia, Tumwater Lakewood
Walla Walla with College Place,
Chelan Leavenworth Marysville
Waitsburg and Dayton
Covington Lynwood Port Orchard
East Wenatchee Monroe
Fife Mukilteo
Fircrest Oak Harbor
Lake Stevens Poulsbo
Mount Vernon Puyallup
Pasco Redmond
Port Angeles Seattle
13 https://deptofcommerce.app.box.com/s/tfhqjbqge5nz5e5c81v9u2pu4h901nmf, accessed March 3, 2020.
AFFORDABLE HOUSING UPDATE 6
Single City
Municipal Housing
Code Changes Action Plans Regional Housing Action Plans Sub Area Plans
Ruston Shoreline
Vancouver Spokane
Wenatchee Spokane Valley
Tacoma
Yakima
Conclusion and Recommendations
Overview
Affordable homes provide a foundation for positive health outcomes for families, correlate with better
cognitive development and academic achievement for children, and lower public expenditures on other
services like health care. Affordable homes in high opportunity neighborhoods with good schools can have
long-term impacts on earnings and economic mobility of future generations. A sustained commitment to
programs that improve housing affordability for low-income renters will provide profound benefits to families
and communities statewide.
Recommendations
To increase affordable housing options for all households, reduce the negative impacts of housing instability,
and end homelessness as quickly and efficiently as possible, the following AHAB 2020 Policy Priorities
support accessibility to affordable housing throughout the state.
Expand Housing Choices for Low- and Moderate-Income Households
Washington state needs a broader diversity of housing types to provide affordable options for renters and
homeowners alike. Smaller, "missing middle" housing types such as attached and detached accessory
dwelling units (ADUs and DADUs), duplexes, triplexes, fourplexes, townhomes and cottages can offer more
affordable options without changing the character of existing residential neighborhoods.
Help Local Governments Reach Appropriate Housing Goals
The Growth Management Act requires local governments to plan housing for all economic segments of the
population. The state can assist local governments by providing tools to assess housing needs and identify
strategies that will help housing developers make investments that meet these needs. Regular monitoring of
the housing market can help identify where and when changes to these strategies are needed to help hold
communities accountable.
Substantially Increase the Number of Units Specifically Affordable to Low-
and Extremely Low-Income Households
Meeting the need for low, very low, and extremely low-income housing will take a significantly larger public
investment. Local governments need effective funding tools to supplement state and federal investments that
can be implemented through a local vote, and through councilmanic action when necessary.
AFFORDABLE HOUSING UPDATE 7
Appendix A: Members of the Affordable Housing
Advisory Board
Table 1: Members of the Affordable Housing Advisory Board
Name Title
Derrick Belgarde Chief Seattle Club
Susan Boyd Bellwether Housing
Allison Butcher Master Builders of King and Snohomish Counties
The Honorable Claude DaCorsi Auburn City Council
Michael Dotson Banner Bank
Kim Herman ex-officio, Washington State Housing Finance Commission
Joel Ing Edge Developers
The Honorable Dean Kinzer Whitman County Commissioner
Diane Klontz ex-officio, Washington State Department of Commerce
Paula Wallace Lonergan Tacoma Rescue Mission
Peter Orser Runstad Center for Real Estate Development
Vijya Patel Madison Avenue Realty
Michone Preston Habitat for Humanity
Cindy Proctor Beacon Development Group
Paul Purcell AHAB Chair, retired from Beacon Development Group
Deborah Ruegsegger Hood Manor Apartments
David Stillman ex-officio, Washington State Department of Social and Health Services
Paul Trautman AHAB Vice-Chair, City of Spokane
Chuck Weinstock retired from JP Morgan Chase
Kurt Wiest Bremerton Housing Authority
AFFORDABLE HOUSING UPDATE 8
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