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Committee of the Whole

BEL-CTW-2025-03-10 March 10, 2025 Committee of the Whole City of Bellingham 23 min
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The Committee of the Whole held a work session focused primarily on proposed updates to Bellingham's Multi-Family Tax Exemption (MFTE) program, designed to incentivize affordable housing development. Long Range Planning Manager Chris Behee presented comprehensive amendments aimed at expanding both the 8-year market rate program to all urban villages and improving the viability of the 12-year affordable housing program, which has produced zero units since its inception. The proposed changes would adjust income requirements from the current complex structure to a flat 80% Area Median Income (AMI) threshold, add a new 20-year homeownership program, and allow existing 8-year projects to extend for additional 12-year periods if they provide affordable units. The work session comes after Council direction from September 2024 following an ECOnorthwest market study showing current construction conditions are "super challenging" for multifamily housing development. Staff research indicates median market rents in Bellingham currently range from 70-100% AMI, suggesting the current 12-year program requirements may be too restrictive to attract developers while still providing community benefit. The meeting also featured a celebration of retiring Public Works Superintendent Marty Gray's 30-year career, with Gray delivering heartfelt remarks about the city as an employer and Council members expressing appreciation for public works' critical but often unrecognized contributions to city operations.

**Motion Carried (6-0, Hammill abstained):** Council Member Stone moved to designate Council Member Hammill as the Downtown Partnership liaison, replacing Stone who will continue with Sustainable Connections. **No formal action taken on AB 24467** - This was an information-only work session. Staff will return in April with a public hearing and consi…

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**Multi-Family Tax Exemption Program Overhaul:** Staff presented comprehensive amendments to address the complete failure of the 12-year affordable program (zero units produced) while expanding the successful 8-year program (1,700+ units since 1999). Key proposed changes include expanding 8-year eligibility to all urban villages including Fairhaven, Barkley and Waterfront areas currently excluded, and simplifying 12-year income requirements to flat 80% AMI across all unit sizes rather than the current 60%/80% split by bedroom count. **Displacement Risk Mitigation:** Council members, particularly Anderson, expressed concern about proposed changes to displacement provisions. Current rules require properties be vacant 12 months before MFTE eligibility, which staff argues creates inefficient development. Proposed rep…
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**Staff Position (Chris Behee, Blake Lyon):** Strongly supports expanding both programs, arguing current market conditions require maximum flexibility to incentivize any housing production. Emphasized that current 12-year program requirements are too restrictive given market rate rents already in the 70-100% AMI range. **Council Member Lilliquist:** Questioned whether the program is actually supporting affordable housing or subsidizing market-rate development that would happen anyway. Requested specific rent data from current MFT projects to determine actual community benefit. Raised concerns about household composition differences (single vs. dual earners) affecting true affordability. **Council Member Anderson:** Concer…
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**Chris Behee, on current market conditions:** "The big takeaway from the market study that Econorthwest did last year is that right now, none of them are making financial sense, even even just like you had said, absent the MFT tax incentive, just market rate construction right now is super challenging." **Council Member Hammill, on development economics:** "I reached out to some builders and to trade association private landowners who had were interested in using House Bill 1110 to build. And…
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**April 2025:** Staff will return with a public hearing and formal consideration of an ordinance incorporating the proposed MFTE program amendments. **January 1, 2032:** State law sunset date for new MFTE exemptions. City must evaluate program performance and determine future direction, potentially including sunset of 8-year program everywhere except Downtown and Old Town if sufficient housing production is achieved. **Ongoing monitoring:** Staff will track program performance metrics in…

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**Program eligibility expansion:** 8-year MFTE program would expand from four urban villages (Downtown, Old Town, Samish Way, Fountain) to include all seven (adding Fairhaven, Barkley, Waterfront), plus all areas allowing middle housing and multifamily development citywide for the 12-year program. **Simplified income requirements:** 12-year program requirements would change from complex 60% AMI (studios/1-bed) and 80% AMI (2+ bed) structure to flat 80% AMI for all unit sizes, based on staff research showing current market rents already in 70-100% AMI range. **New program options:** Add…
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# Bellingham Revamps Its Housing Incentive Program While Honoring A Public Works Legend The City of Bellingham's Committee of the Whole held a focused work session on March 10, 2025, tackling ambitious changes to the city's Multi-Family Tax Exemption (MFTE) program—a key tool in encouraging housing development—while also celebrating the retirement of a beloved public works veteran after three decades of service. ## Meeting Overview Council President Hollie Huthman presided over the afternoon session, with all seven council members present for what became a comprehensive discussion about housing policy and civic service. The meeting centered on proposed updates to the city's housing incentive programs, designed to address the ongoing housing crisis while ensuring development occurs in the right places. The session also featured a heartwarming farewell to Marty Gray, a 30-year Public Works employee whose remarks offered a rare glimpse into what makes municipal government work well. ## Overhauling the Multi-Family Tax Exemption Program The bulk of the meeting focused on proposed changes to Bellingham Municipal Code section 17.82, which governs the city's Multi-Family Tax Exemption program. Planning and Community Development Director Blake Lyon, Long Range Division Manager Chris Behee, and Planner Chris Cook presented comprehensive research and recommendations for updating a program that has generated over 1,700 housing units since 1999 but has struggled to deliver affordable housing. The MFTE program offers two main tracks: an eight-year exemption focused purely on housing production, and a twelve-year exemption designed to incentivize mixed-income development with affordable units. While the eight-year program has been successful, the twelve-year program has produced zero units—a stark indicator that the current structure isn't working. Chris Behee laid out the sobering market reality: "The big takeaway from the market study that Econorthwest did last year is that right now, none of them are making financial sense, even just like you had said, absent the MFT tax incentive, just market rate construction right now is super challenging." The proposed changes aim to address this by expanding both programs geographically and adjusting income thresholds to reflect current market conditions. Staff research showed that median market rents in Bellingham currently range from 70% to 100% of Area Median Income (AMI), suggesting that…
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### Meeting Overview The Committee of the Whole met on March 10, 2025, to review proposed updates to Bellingham's Multi-family Tax Exemption (MFT) program. Staff presented recommended changes to the 8-year, 12-year, and new 20-year tax exemption programs designed to encourage housing production and affordability. The meeting also included a celebration of retiring public works employee Marty Gray's 30 years of service. ### Key Terms and Concepts **Multi-family Tax Exemption (MFT):** A state program that exempts the building value (not land) of qualifying residential projects from property taxes for 8, 12, or 20 years to incentivize housing production and affordability. **Area Median Income (AMI):** The annual median family income published by HUD, currently $106,300 for a 4-person household in Bellingham, used to determine affordable housing rent limits. **Urban Villages:** Designated areas like Downtown, Samish Way, Fountain, Fairhaven, Barkley, and Waterfront where the city concentrates growth and infrastructure investments. **House Bill 1110:** State legislation requiring cities to allow up to 4 housing units by right on residential lots, with optional 5th and 6th units if affordable housing is provided. **Displacement Risk:** The potential for existing tenants to be forced to move when properties are redeveloped under tax exemption programs. **Sunset Date:** January 1, 2032 - when state law currently prohibits new MFT exemptions unless the legislature extends the program. ### Key People at This Meeting | Name | Role / Affiliation | |---|---| | Hollie Huthman | Council President, Committee Chair | | Chris Behee | Long Range Division Manager, Planning and Community Development | | Blake Lyon | Planning a…
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Housing Land Use & Planning Budget & Finance Government Operations HB 1110 Costar Downtown Partnership Econorthwest Planning Community Development Public Works Sustainable Connections Zillow Blake Lyon Chris Behee Chris Koch Daniel Hammill Hannah Stone Kim Lund Lisa Anderson Marty Gray Michael Lilliquist Mike Olinger Affordable Housing Area Median Income Comprehensive Plan Displacement Assistance Displacement Risk Downtown Development Employee Recognition Housing Policy Middle Housing Multifamily Tax Exemption Public Works Rental Housing Urban Village Expansion Urban Villages