New WA law allows housing in most commercial areas

Tired of seeing your neighborhood’s ghost town of a strip mall? A new Washington law could open it up for housing.

On Friday, Gov. Bob Ferguson signed a slew of housing legislation, including his personal hobbyhorse: Senate Bill 6026. The bill, now law, requires local Washington jurisdictions with over 30,000 residents to allow housing in most commercial and mixed-use zones.

“We need to make it easier to build more affordable housing units faster, and to do that, we must get creative,” Ferguson said.

The law aims to help Washington get back on track to building over a million units of housing in the next 20 years – a goal the state has fallen behind on in recent years as construction costs and interest rates soared.

It also helps the state address another problem: major retail and grocery chains, including Rite Aid, Kroger, fabrics retailer Joann and home-goods store Bed Bath & Beyond, have shuttered stores across Washington, leaving big spaces to fill.

The bill’s sponsor, Sen. Emily Alvarado, D-West Seattle, said the law will use Washington’s empty big-box stores and strip malls while unlocking more housing.

“It would be amazing to help solve our housing shortage by transforming those places into homes,” she said during Friday’s bill signing.

But cities and counties could already allow housing in commercial areas. So why was this law necessary? That’s what many legislators and local leaders asked Alvarado over the short legislative session – and what made the bill so controversial initially.

Some saw the bill as overregulation by the state government and thought cities should decide what’s best for them.

“Eliminating all ground-floor requirements removes local flexibility and does not guarantee more housing,” Bellevue Mayor Mo Malakoutian told legislators in February before the bill’s final changes. “It may instead encourage lower-density projects and weaken the walkable mixed-use neighborhoods we are working to build.”

But the governor’s office and Alvarado framed the bill as deregulation. The bill doesn’t require cities to build more housing in commercial areas – it just prevents local jurisdictions from blocking what the market naturally wants to do.

The problem is that some cities, including Kirkland, Mount Vernon and Richland, explicitly prohibit housing or heavily restrict housing in many of their commercial areas, Alvarado explained in multiple hearings over the bill. Plus, many jurisdictions require housing in commercial areas to have ground-floor retail – an expensive addition and occasional deterrent for housing developers in some areas struggling with high commercial vacancies.

Having a ground-floor mandate can stop housing from being built altogether,” Alvarado said in an interview Friday.

Getting the bill passed wasn’t easy, Ferguson noted at the signing ceremony.

Many Washington cities decried an initial version of the bill, which had few exceptions to the rules and proposed blocking ground-floor retail requirements everywhere. Leaders from Bellevue, Redmond, Kirkland and Bothell told legislators that the rules would disrupt their plans to create walkable neighborhoods and protect their commercial cores.

But after much debate, legislators settled on allowing cities and counties to require ground-floor retail or mixed-use in up to 40% of their commercial or mixed-use land. However, the jurisdictions can’t force publicly subsidized affordable housing to include shops, and they must create a process allowing developers to seek an exemption from the ground-floor requirement.

Additionally, the rules don’t apply in certain areas, such as around transit stations, high-rise areas, industrial areas, near refineries and outside urban growth areas.

The concessions largely appeased those who initially opposed the bill, including Bellevue’s mayor.

“It has certainly less impact than what was first introduced,” Alvarado said. “But I do think that it will require some cities, notably the suburban cities, to change existing practices and adjust their ground-floor retail mandates to make it easier to build housing.

Developers and builders who supported the bill were largely disappointed by the concessions made to get it passed, but they remained hopeful it will open up more opportunities for housing.

“Our members are working every day to deliver housing in an exceptionally challenging market and while we had hoped to see the bill go further, it sets the stage for continued work to address our housing crisis,” said Danielle Duvall, executive director of NAIOP Washington State, a commercial real estate development association, in a statement Friday.

Aaron Marvin, president of the Building Industry Association of Washington, said he worries some cities will continue to require ground-floor retail in many areas, but he still hopes to see a large impact on Washington’s housing supply.

“We’re going to have to see how it washes out and how cities implement it, and how builders are able to be productive in utilizing what the law now allows,” he said in an interview Friday.

Not all areas of Washington will see a noticeable change because of the new law.

According to a study commissioned by the Puget Sound Regional Council, the highest potential for new development is in midsize cities with available commercially zoned land, rather than the largest cities. Cities such as Seattle and Vancouver already allow housing in most commercial zones.

Cities with explicit bans on housing in some commercial zones will have a year and a half to change their regulations after the law takes effect June 10.

Mount Vernon Mayor Peter Donovan said his city, which has some of the most restrictive rules on housing in commercial areas, will have to expedite plans already in place to open up commercial zones to housing.

“Skagit Valley has a lot of folks who have lived here for a long time, and this can change the nature of the communities,” he said. “So I think there’s likely going to be a divided response to the impacts.”