Spokane Mayor Lisa Brown proposes waiving fees, deferring others and more to encourage affordable housing

Hoping to spur the development of affordable housing, Spokane Mayor Lisa Brown unveiled a series of reform proposals Monday to make development cheaper, building codes simpler, and financing projects easier.

Spokane’s population is expected to grow by more than 23,000 people between 2020 and 2046, requiring over 13,000 homes to accommodate population growth – but it also needs to build another 9,000 homes in that time to address homelessness and overpriced housing created by historic underproduction, according to city and state projections.

Without major reforms, the city estimates it has the capacity to build 30,000 homes – but not enough of those will be affordable to households making less than $72,000 a year, which are considered low-income families in Spokane, according to federal criteria.

“We think that these ordinances today will be part of that (solution),” Brown said Monday.

Deferred fees

Brown proposed deferring up to $150,000 in building and construction permit fees for affordable housing projects. Instead of charging those fees during the initial permit application and before construction, they would not be due until immediately before the city issued a certificate of occupancy.

Michelle Girardot, chief executive officer for Habitat for Humanity Spokane, argued that deferral could help projects overcome cash flow issues: by requiring the fee only shortly before the building can be occupied, the developer could more quickly and easily recoup their costs.

To qualify, a development would have to be approved or recommended for funding from one of six other city affordable housing programs, including the soon-to-be-renamed HEART fund. What would qualify as “affordable” would depend on the program that a development used to qualify for deferral – it could be as expensive as a $2,300 two-bedroom rental under one program meant to spur the conversion of downtown offices into apartments or a $930 one-bedroom under the 1590/HEART fund, which would be paid for through a sales tax.

Liens would be put on properties and only lifted when developers paid the deferred fees.

General Facilities Charges

Brown also proposed waiving up to 75% of an affordable housing development’s General Facilities Charges in exchange for a 50-year covenant on the deed mandating price restrictions and household income limits.

When a new development comes into a neighborhood, whether it’s 20 homes or 1,000, it has an impact on local water and sewer systems. It may simply take up existing capacity, or, if that capacity is already full, it may require a new multimillion-dollar sewage treatment plant to handle the new toilets or a new pump station to keep everyone’s shower pressure from dropping.

Rather than make everyone in the city pay for the new facilities needed to support that new development, developers pay one-time “General Facilities Charges” to cover the shock they’re putting on the system. Those costs generally get passed on to the people moving into the new homes.

Those General Facilities Charges can also be expensive, particularly after the City Council voted in 2023 to raise them significantly over the next three years. The charges for the smallest and most common water and sewer connection for a new single-family home, for instance, nearly tripled from $3,600 prior to 2023 to $9,200 starting next year.

Those fees can add up up for affordable housing developers already trying to keep costs low. Girardot argued a waiver could make the difference for low-income families.

“Just in the last few years, the difference of even just a couple of thousand dollars can price a family out of attaining an affordable home ownership opportunity,” Girardot said.

Prior to 2023, Spokane regularly waived General Facilities Charges to spur development, including for affordable housing, but had to end the practice as it found itself without the funding to pay for infrastructure improvements. In 2023, the state Legislature began to require cities to backfill those waived fees from its own coffers or grants, rather than pass those infrastructure costs onto residents or the developers that didn’t get waivers.

“Furthermore, it is not in the public interest to continue to waive GFCs,” reads a council ordinance from March 2023, “because without adequate GFCs, the City’s current utility customers bear the burden of paying for new capacity to serve growth and a fund should be established to cover the cost of all or a portion of GFCs for certain development projects, including permanent affordable housing.”

That separate fund was never created, according to City Spokeswoman Erin Hut.

But Spokane got a carveout to restart waivers earlier this year by a law sponsored by state Sen. Marcus Riccelli, D-Spokane, that was signed this year..

Spokane, alone in the entire state, can now waive these fees without designating an alternative funding source. During Monday’s press conference, Brown suggested the costs would be absorbed by developers whose fees were not waived.

If the covenant is broken, the waived fees become due immediately.

HEART

Brown also proposed reforming the city’s funding pool for building affordable housing and behavioral health services, meant in large part to help house the homeless and prevent people from being priced out of the market. The fund is raised from a 0.1% sales tax imposed in Spokane since 2020.

If approved by the City Council, that fund, which has been commonly referred to as the “1590 Fund” in reference to the state House Bill that allowed the city to impose the tax, will be renamed the Housing Equity and Attainable Residences Trust Fund, or HEART Fund for short.

Currently, at least 75% of grants dispersed through this fund must be spent on construction and maintenance of affordable housing or behavioral health-related facilities. Another 2.5% of the tax funds can be spent on the city’s administrative fees. Whatever is leftover can be spent on behavioral health or housing-related services.

Under the HEART ordinance, only 60% of the funds would need to be spent for construction and maintenance, a decrease of 15%. Meanwhile, 10% of the tax could be spent on the city’s administrative fees, a quadrupling of the current rate.

City officials argue that lowering the minimum spent on construction would provide more flexibility, allowing more of a HEART Fund grant to be spent on services, if needed.

“This new split allows us to be more responsive to local needs if the need for services outweighs (new buildings),” Hut wrote in an email. “The percentage split is just the minimum – for example, there could be a funding round where 100 percent of costs could go to capital.”

As for the significantly higher administrative fees, Hut argued 10% was standard.

Again, Hut noted that 10% was a maximum, but not necessarily what the city would charge.

The Spokane Business Association, a prominent political advocacy group funded by businessman Larry Stone, recently proposed an amendment to the city’s charter, which if approved by voters would reshape the city’s homelessness laws and force Spokane to shift funding away from affordable housing, firefighting equipment and other priorities to fund emergency shelters, more visible police patrols and more.

The proposed amendment specifically calls for diverting the entirety of the 1590 Fund – or HEART Fund, if it’s soon renamed – away from affordable housing development.

Brown said she had not read the association’s proposed charter amendment but dismissed the group’s efforts as unhelpful.

Streamlining code

The mayor also committed to simplify and update city code related to housing development, a process in which she hopes interested community members will take part over the next year.

“This will be an opportunity for developers, neighborhoods, people who are urban geeks and want to bring some of the best practices of other cities to play, to be at the table with us as we update that code,” Brown said.

The city is preparing to request bids from national consultants with expertise in code development, Planning Director Spencer Gardner said Monday. It has not yet announced opportunities for public engagement, but intends to in the coming year.