Title
Update On Affordable Housing Programs Supported With Utility Revenues
Recommended Action
Information only. No action requested.
Report Issue:
Update on affordable housing programs supported with utility revenues
Staff Contact:
Jacinda Steltjes, Housing Division Manager, Community Planning & Economic Development, 360.753.8482
Presenter:
Jacinda Steltjes, Housing Division Manager, Community Planning & Economic Development, 360.753.8482
Background and Analysis:
Increasing Affordable Housing Supply
Over the past decade, the City has worked to increase the supply of affordable housing- defined as housing that costs a low-income household no more than 30% of their gross annual income- on several fronts. Efforts include, but are not limited to, the creation and implementation of the Housing Action Plan; adoption of affordable housing development incentives such as reducing impact fees by 80% and reducing general facility charges by 50%; and an ordinance declaring the insufficient supply of affordable housing an emergency.
These efforts align with efforts which are being taken in response to recent state legislation (HB 1220) passed in 2021. The legislation requires that local governments, when updating their Comprehensive Plans, outline how they will plan for and accommodate housing affordable to all economic segments, promote a variety of residential densities and housing types, and encourage preservation of existing housing stock in the coming 20 years.
Compliance with HB 1220 requires that jurisdictions identify the number of households in each income range they are planning for, document that need in their comprehensive plans, and demonstrate that their policies allow for that housing need to be met. Olympia and its urban growth area will require approximately 14,295 new housing units by 2045 to accommodate population growth. Of these, approximately 7,616 housing units will be needed for low-income households.
General Facility Charge (GFC) Discount Program
Discounting general facility charges by 50% is one effort that will help the city reach its housing supply goals. The Utility Advisory Committee received a briefing from staff in June 2023 asking the UAC to consider discounting general facility charges for affordable housing projects. In December 2023, Olympia City Council adopted ordinance number 7381, which made available a 50% discount to the city’s general facility charges associated with new water connections for affordable housing projects serving households whose income does not exceed 80% of Area Median Income. To be eligible for the discount, 100% of units must be available as affordable housing for not less than 30 years. If the property should fail to meet these conditions, the property owner is required to pay 50% of the water GFCs at the then-applicable water GFC rate. The program is similar to LOTT’s Affordable Housing Support Program, which provides a 50% reduction to its capacity development charges (CDC). Per the Utility Advisory Committee’s recommendation, the City Council approved discounting GFCs and increasing water utility rates on all new development by 2% to offset the anticipated loss of GFC revenues resulting from affordable housing projects benefitting from the discount.
Projects Supported by the GFC Discount Program
To date, Lansdale Pointe, developed by VBT Lansdale Pointe, LLC, and located at 911 Burr Rd., is the only project which has benefited from the program. The project received the GFC exemption in June 2024 and is currently under construction. The first units are becoming available this summer. The project consists of 162 family sized (2, 3 and 4-bedroom) multi-family rental units across 10 apartment buildings in addition to a community recreation room. The units are affordable to households with incomes ranging from 60-80% of Area Median Income. Rental rates for the units range from approximately $1,320 to $1,705. For perspective, the 2025 Area Median Income is $116,700. A family of four with a gross annual income of $93,350 earns 80% of area median income.
A table showing the fees assessed and those paid by VBT Lansdale Pointe LLC is provided as an attachment titled GFC Fees Assessed and Paid.
Three more projects have applied for the GFC discount but are still in the permitting process and a handful of others have expressed interest in the program. Because the fees are assessed and paid at the end of the permitting process and because the fee schedule changes annually, the associated fees have not yet been calculated or collected. A summary of projects which are in the permitting process and have applied for and were found eligible to receive a GFC discount are provided as the attachment titled GFC Discount Applicant Projects. Staff anticipate a handful of other projects will also apply by December 2025.
It’s anticipated that applicants for the GFC discount will also be eligible for other incentives, such as funding to assist them in constructing drinking water infrastructure and wastewater infrastructure necessary to support their affordable housing development.
Affordable Housing Emergency Declaration Infrastructure Assistance Grant
The Affordable Housing Emergency Declaration took effect January 2025 and incorporates six actions intended to increase supply of affordable housing. One of these is an infrastructure assistance grant program. The grant program has had interest but no applications yet.
The Infrastructure Assistance Grant Program makes funding available for off-site infrastructure improvements necessitated by affordable housing projects. Seed funding for the program originates from a 0.5% drinking water utility rate increase and a 1% wastewater utility rate increase effective January 1, 2025. The rate increases are estimated to generate approximately $75,000 in drinking water revenue about $85,000 in wastewater revenue in 2025. Funding originating from the drinking water utility will be applied toward drinking water infrastructure improvements. Funding originating from the wastewater utility will fund wastewater infrastructure improvements. Funding is available on a first-come basis.
Climate Analysis:
Increasing the supply of affordable housing is anticipated to lower greenhouse gas emissions by maximizing density in urban areas, reducing transportation emissions, and reducing energy use by incorporating energy efficient appliances and building designs.
Affordable housing projects do not frequently generate large amounts of net operating income from rents; this means developers are not typically able to attract large amounts of private financing and must rely heavily on public funding sources to finance their project. In Washington state, the Housing Trust Fund and Low Income Housing Tax Credit program are often needed to make an affordable housing project possible. These competitive financing sources require funded projects to maximize energy efficiencies and build in accordance with the Evergreen Sustainable Development Standards (ESDS). ESDS contains criteria that safeguard health and safety, increase durability, promote sustainable living, preserve the environment, and increase energy and water efficiency. These funding sources also prioritize projects in close proximity to transit and infrastructure.
Equity Analysis:
A lack of housing, specifically that affordable to low-income households, creates housing instability and is a factor in increasing homelessness. The GFC discount program and Infrastructure Assistance Grant Program will help increase affordable housing supply and therefore most prominently impact Olympians who are low-income. Low-income households and people of color are disproportionately negatively impacted by insufficient supply of affordable housing. Approximately 7,600 Olympia households are currently housing cost burdened, meaning they spend more than 30 percent of their income on housing expenses, according to a Housing Needs Assessment produced in January 2021 by Thurston Regional Planning Council. In general, the lower a household’s annual income, the more likely the household is housing cost burdened. According to the Housing Needs Assessment, about one in four Thurston County residents is a person of color - those who are Hispanic or Latino of any race and those who are any race other than white alone. Those who are Hispanic or Latino, Asian, Black, and multiracial are the largest minority populations in Thurston County. According to the Needs Assessment, people of color, due to systemic racism and other discriminatory practices, are less likely to own their own home, have a smaller household income, and are more likely to experience housing instability and homelessness than their white, non-Hispanic counterparts. Access to housing is essential to the security, health, wellbeing, and prosperity of our community and all its members.
Neighborhood/Community Interests (if known):
Housing affordability is a community-wide concern and topic of interest. During a May 21, 2025 Housing Affordability Forum hosted by the City of Olympia and the Council of Neighborhood Associations more than 50 people gathered in person and virtually to discuss housing affordability. Staff shared the development incentives it has adopted to encourage affordable housing and attendees asked questions of staff, shared their housing experiences in small group settings, and reported out on ideas for additional measures the City and community members can do to encourage affordable housing. Attendees communicated that incentivizing the development of affordable housing is an action that they support and the City should do.
Options:
Not applicable
Financial Impact:
This update presents no current financial impacts.
Attachments:
GFC Fees Assessed and Paid
Applicant GFC Discount Projects