[0:08] Good morning and good morning everyone welcome committee members staff presenters

[0:14] and all who are watching live from TVW to the September 17th Senate housing

[0:20] committee meeting we have a full agenda of presentters today for our work

[0:25] session on affordable housing production and financing we're going to start with

[0:30] a discussion on housing, production gaps and development trends followed by an

[0:35] For on the starter home demonstration program, then we will finish with presentations on housing

[0:40] affordability trends and financing issues. So I would like to begin and welcome our first presenter,

[0:46] Matthew Gardner, who will be joining us virtually from principal and chief economist,

[0:51] Gardner Economics, to give us an overview of Washington State housing production trends.

[0:55] Good morning, Matthew. Are you there?

[0:58] I am. Can you hear me?

[1:00] We can, well, we can see your presentation,

[1:03] which is, I think, what we would like to see.

[1:04] So welcome, and go ahead and get started.

[1:07] Far better than seeing me, sir.

[1:08] Come on, Chairman, members of the committee,

[1:11] thank you for the opportunity to speak today.

[1:13] Washington's housing affordability crisis,

[1:16] it's fundamentally a supply-side problem

[1:19] compounded by cost and delays

[1:21] in both nominal and real terms.

[1:24] Home price about pasting comes for more than two decades,

[1:27] nearly half.

[1:28] of Washington's renters are cost-burdened and homeownership has slipped out of the reach

[1:33] in almost every county and certainly in every major city in the state. Today I want to be

[1:37] expanding on a few the slides that I recently presented at the Association of

[1:42] Washington Cities annual conference. Next slide please. As you all know,

[1:47] Washington needs roughly 1 to 1.1 million new homes over the next 20 years, about

[1:57] We're not hitting that mark.

[1:59] Our FM data shows permits peaking in 2022,

[2:02] but falling since with a cumulative decline of 31%.

[2:08] Next slide, please.

[2:09] Now, shown here, completions kept climbing through 2024,

[2:14] which is serious high of over 53,000 that year,

[2:17] even as permits issued that same year

[2:19] had already fallen to just over 40, 000.

[2:22] Now that's not a contradiction.

[2:24] It's a 2021 and 2022 permit surge, finally landing the finished homes on a like primarily

[2:31] seen in the multi-family sector, meaning that today's relatively solid completion numbers

[2:37] are largely an echo of permitting from three years ago and not evidence that the pipeline

[2:43] today is healthy. Demilitations you see in yellow add a further but quieter drag.

[2:50] demolish units equal about 6.7% of completions, so the net housing stock consistently runs

[2:58] below gross completions. Now, it is important to note that net production of housing units

[3:04] has only cleared that 50,000 mark once since 1919. Next slide, please.

[3:10] However, the single-family share of total permits has fallen from about 48.7 percent

[3:16] in the 1990s to 41.5 percent today, and that's shrinking exactly the product most first-time

[3:23] buyers prefer, even as accessory-dwelling permits, a genuine reform success story grew

[3:36] On average, 5,500 permits do not become starts in any one year, while around 9% of permits

[3:43] are delayed or abandoned.

[3:45] Now, there's several reasons that can cause a project to be delayed, or indeed abandoned

[3:49] completely, and I've outlined some of them here.

[3:52] Firstly, permits can expire,

[3:54] and one can infer that some have the permitted but not completed gap is stalled constructions.

[4:00] It's permits that have lapped outright.

[4:02] Two, the math stops working. If costs and or revenue expectations increase or the permit

[4:09] sits in review, a project can go from profitable to underwater before a shovel has ever hit

[4:15] the ground.

[4:16] Third, litigation. It's a real issue. Even though an underlying permit was validly issued,

[4:26] for pre-development activity is insufficient.

[4:29] Now, if the market calls during the permitting process,

[4:32] a project may never break round.

[4:34] Now this is specifically true in the multi-family arena.

[4:38] Five site conditions, geotechnical problems,

[4:41] wetland, critical area findings, contamination,

[4:44] anything that arises during final engineering

[4:47] or preconstruction that can cause a delay

[4:50] or possible abandonment.

[4:52] And finally, the vested rights doctrine.

[4:54] Developers had a rational incentive to apply for permits before any anticipated code changes

[5:01] or rezoning is implemented that could harm their development, allowing them to secure more

[5:06] favorable terms in essence, even if they don't yet have firm plans or financing to build immediately.

[5:14] So as you can clearly see, the challenges that our states builders face are significant.

[5:21] although housing production is heavily concentrated in the central Puget Sound.

[5:26] The other 36 counties within our state face issues with housing supply, affordability and

[5:32] under-production.

[5:33] And there are numerous forces impacting housing and I've outlined some of them here that

[5:38] include staffing shortfalls, infrastructure constraints, a lack of workforce-priced

[5:43] housing, and a decline in manufactured housing production.

[5:47] These are all real issues that face our county's leaders.

[5:52] Now, my latest housing affordability index suggested a household making account is median

[5:58] income was able to afford to purchase a median priced house in just five counties in our

[6:04] state in the second quarter of this year.

[6:06] Next slide, please.

[6:07] And when we make modest adjustments to incomes, home prices and down payments, a first-time

[6:13] buyer was only able technically afford buy a home in one county, Garfield.

[6:19] Next, slide please

[6:21] Although I certainly appreciate the efforts to be made by both the House and Senate in

[6:26] passing significant legislation to try and address the crisis that we face, I believe

[6:31] that more can and should be done.

[6:33] Now, some of the recommendations you see here do overlap with those put forward by the

[6:38] state's several building associations, but I hope that they may still stimulate additional

[6:43] discussion.

[6:46] Now, a permit freeze. A freeze of this length carries real trade-offs in climate-goal alignment,

[6:51] insurance ratings, construction, defect exposure that make it important for the legislature

[6:56] to weigh explicitly rather than to treat them as simply costless.

[7:01] However...

[7:02] If a total freeze is not palatable, then the legislature should at least set a predictable

[7:08] cost-disclosed cadence for code updates. The Energy Code alone accounts for over a third

[7:13] of states' entire regulatory cost premium over other states. A decade-long freeze on the

[7:24] Washington has had a state surplus property program in place since 1993 and is brought

[7:29] in again in 2023, so the mechanism exists, but the record doesn't.

[7:35] Our thought should be made to pairing the existing statute with a dedicated matching grant fund.

[7:41] You can model this on California's comparable program and a statutory disposal timeline.

[7:47] Here's why I think we've got some fairly low hanging fruit.

[7:51] We also look at piloting a taxable revolving construction loan fund to link construction

[7:57] capital at below market rates.

[7:58] Now, unlike the state's tax exempt bond program, taxable debt is not bound by federal income

[8:04] restriction rules.

[8:05] Now that lets this tool reach out into the conventional multifamily world.

[8:10] That's where most of the State's unit gap exists, and not just income restricted deals.

[8:16] Now of note is the change in the test for eligibility means that right now there will

[8:20] be more projects chasing the same scarce bond volume cap.

[8:25] Now there's a way I think we could certainly push that forward.

[8:28] Next slide please. A dedicated targeted capital funding with conditions to water,

[8:34] sewer, road capacity as well in high growth rural counties.

[8:39] Let's say House Bill 2269 we know manages that part of the wastewater program this funding might

[8:46] otherwise need to address and that allows the capital program to focus on where it's actually

[8:51] needed. Warner systems which GMA treats far more permissively than the sewer and road capacity broadly

[9:04] State law already lets counties expand UGA's

[9:07] when buildable lands reviews show insufficient capacity.

[9:11] The process is slow and it's litigation prone.

[9:14] And the law's own default response to capacity shortfall,

[9:18] where it is more intensive use

[9:19] within the existing boundaries itself,

[9:22] not an expansion of them.

[9:24] And for counties that have already demonstrated a shortfall

[9:27] even after fall within boundary measures,

[9:30] I think the legislature should reduce growth management hearing board exposure and set

[9:35] a faster decision timeline, preparing any expansion with a TDR rights requirement, and

[9:41] that could offset the loss of resource land.

[9:43] In addition to this, we would be rewriting the burnable lands analysis, which in my opinion

[9:49] is fatally flawed.

[9:51] Next slide, please.

[9:58] But for example, if House Bill 1491's set-aside requirement ends up quietly suppressing production

[10:05] and not encouraging it, when it shows up in the data within a couple of years,

[10:09] rather than only becoming visible once or any once, and also could be in place for a decade.

[10:15] So the recommendation is to look closely and watch what's actually happening.

[10:20] Not that it's already a problem, but we really need to, I think, keep a better tab.

[10:25] on how these laws are being implemented if they are

[10:29] being implicated at all, relative to zoning changes.

[10:32] And that's the end of my slides. Senators, Washington's housing shortage,

[10:37] it's a production problem, not a demand problem.

[10:40] Production is being constrained on two fronts concurrently,

[10:43] cost and time. Both have worsened over the past five years,

[10:48] even as the state's own housing need assessments have grown.

[10:52] and both sit within the legislation's direct control in ways population growth and interest rates do

[10:57] not. The reforms I've shared with you would address the supply side of this crisis directly

[11:03] at every stage from land availability, through permitting, to construction and in most cases

[11:10] echo what the state's building industry has already asked the legislature to do.

[11:19] Thank you so much Matthew for that illuminating and alarming presentation that you've shared with us

[11:25] We have other house or Senate members of the housing committee that are here virtually

[11:29] And for those of you that would like to ask a question

[11:32] I'll just ask that. You raise your hand so that we can see you and we will call on you first

[11:36] I have on the screen senator Solomon followed by senator Gildon

[11:41] Thank You Matthew that was

[11:44] a lot in there and create it very fast. You mentioned one thing that was working.

[11:49] You'd mentioned the number 2000. Can you mention that again? I didn't catch it.

[11:54] I'm sorry. Well, you said there was one bright spot. Oh, yes. Right now, if you look at ADUs.

[12:01] So, accessory dwelling units. And those are something here.

[12:05] relatively recent, but we've really seen that take off very significantly, mainly in King

[12:11] and Snowish counties. But we have seen permit applications rise very, very dramatically

[12:16] in that one particular sector.

[12:18] And did you say about 2,000 applications?

[12:21] Just over 2.000 state, yes. Am I not sound like a lot, it's up from three in 2010.

[12:28] Amazing.

[12:33] Thank you, Madam Chair. Mr. Brother, thank you for the presentation. There was a lot,

[12:37] I wish we could have spent a whole hour on your presentation and go through the details.

[12:42] Of your recommendations, I'm curious, which of the recommendations do you believe would

[12:47] have the most effect on increasing supply in Washington State?

[12:53] Permit speed and predictability. I think for a

[12:57] lot of people, don't you understand what we're going to get?

[13:00] The understanding that for a builder, the interest rate clock starts well before a shovels

[13:06] put in the dirt, and so as time goes on the interests of crews and all the builder can

[13:13] really do is put that on to the end unit price.

[13:16] And so, if we can get speedier permit applications approved,

[13:20] if you can actually get some,

[13:22] if it could not change permitting halfway through the process,

[13:26] that is something which I know would certainly help

[13:29] a builder's because that does not put on this plan

[13:31] to do one thing, it's build housing.

[13:34] They're not, I don't think it requires them.

[13:36] Commons for the doctorate to tell you all that if they're not building, there's a reason why they

[13:40] are not built in. And most of it today is based around cost. They know how much it's going to

[13:45] cost them to build a house. However, if the market cannot accept that, we're talking about market

[13:49] rate products specifically, they won't build it. It doesn't mean they aren't going build

[13:53] it down to the goodness of their hearts. So the more we can make permitting predictable

[13:57] and speedy for them, that is the way I believe we could make an immediate impact.

[14:05] Thank you. Senator Alvarado.

[14:08] Thank You. And thank you for this presentation. I appreciate that you're focusing on what

[14:15] Washington can do. It would be helpful though if you can spend a minute or two and talk about

[14:24] some of the broader headwinds that are facing housing development.

[14:31] Because we have done a significant amount of regulatory reform in the legislature over the

[14:36] last few years, and we are not seeing the outcomes of that. So, to fire us to do more,

[14:43] if you could talk a little bit about...

[14:45] There are some factors, including high interest rates, you know,

[14:49] war overseas is driving the cost of construction,

[14:53] significantly impacting labor.

[14:56] We do know that Seattle in particular, but across the state,

[15:00] because of the housing boom in the 2000s,

[15:03] was having a vacancy rate and a softening in rent

[15:09] causes investors to not see a lot of rent growth.

[15:12] Therefore, they throttle on investment.

[15:15] So can you talk a little bit about those broader level trends

[15:19] and why in sight of the fact that we might not

[15:22] see the fruits of our labor, we should continue

[15:25] to make these regulatory changes?

[15:27] Thank you.

[15:28] Well, thank you, Senator. Great question. And you are right. The best I can describe it would be

[15:33] for a builder. There are four cost centres, they worry about. That's what goes into

[15:39] build a home. One, land. Two, labour. Three, regulations, and four materials. Let's run through

[15:47] them very quickly, Land. 3.7% of the state's total land is within the UGA, that we know.

[15:54] And so, where we live it land, what does that do?

[15:57] Well, by the very nature of it, it's going to push up land values.

[16:00] And you mentioned Seattle specifically.

[16:02] Well Seattle, quite frankly, is suffering from a decision.

[16:05] It made in 1924.

[16:07] It was the first comprehensive plan.

[16:09] So what you've done is you really built out the city.

[16:11] And, so there is very little land.

[16:12] In order to build or on an up zone,

[16:15] what can you do is, you have to tear down what's there.

[16:18] to replace it. Well, you're paying retail for the land value. That's, again, one example.

[16:23] So, land is expensive. Labour, as you absolutely have directly mentioned, a lot of our construction

[16:30] labour is, I mean, from the immigrant labour, and a lotta builders have been telling me that

[16:35] they've got crews not arriving, not showing up, because they're worried that ice might be there,

[16:39] even though those crews are totally permitted and allowed to work in the United States.

[16:48] Again, as mentioned, because I've lost a lot of other things, I'm looking at PVC pipe right now.

[16:54] The reason being is that pipe perfectly correlates to oil prices, and so we've seen a big jump in

[17:00] that copper steel aluminum tariffs lumber. The Canadian software lumber tariff is still in place.

[17:05] So all these type of effects come into play. And finally, is the regulatory burden.

[17:10] Now, Counties do vary fairly dramatically in that respect, but it is still a lot of money

[17:16] to get upon it. So, what a build would do. Those are four things. Look at those four costs.

[17:21] He knows interest rates are higher now than they were.

[17:24] It's very true. They've also got to have some skin in the game. You can borrow 62, 63% of total

[17:29] costs. So they're just being far more cautious today than they ever have been. And so those four

[17:35] corners are there. Yes, the legislature should be applauding because they have a lot of new laws

[17:41] on the books to try and help. But especially today, as you mentioned about interest rates and

[17:46] mortgage rates, when you've got the yield on 10-year treasure, it's now knocking on 5%. That

[17:53] That's going to be very hard to equate what a builder would need to sell or rent for

[17:59] relative to incomes. So yes, we've even seen incomes rising, but the offset's not there.

[18:04] And quite frankly, going forward, I expect the terminal rate, let's say on the 30-year

[18:09] mortgage, probably going around 6%. So we're not going

[18:13] to see the days of sub-3% financing again for a mortgage.

[18:17] So, yes you've done a lot.

[18:18] I think it's not what can be done and also implementing some of the laws, as I mentioned

[18:22] earlier, in my comments, that you have put in place. Because if we don't do that,

[18:27] we're going to have a big problem in terms of attracting businesses to move to our state.

[18:33] Thank you for that. Do I see a follow-up question, Senator Laddo?

[18:37] Thank, thank you so much, Chair Beitman. And thank

[18:41] quick answer to all of the opinions that I saw and I mean, which I talked to you quickly.

[18:47] No, it's great. Thank you. One last thing. Can you touch a little bit about the

[18:54] kind of cyclical nature of development in general as projects get built and there becomes

[19:05] supply expansion, it takes time to fill units. And during those time, investors are not seeing

[19:11] as much growth and predictability, so they might throttle. Can you talk a little bit about that?

[19:16] Because you know there was absorption post 2020 boom.

[19:20] Right. Anyway, if you imagine supply and demand on a line over time really being offsetting

[19:31] let's say today, it's going to take time for the supply to catch up with it, so you are always

[19:36] playing catch-up. We also fully understand that it works in cycles and it is the economic cycle,

[19:42] the next expectation at some point, if we're not starting soon, and we are going

[19:45] to have a turn down in the economy and that will come into place. So it really is a timing

[19:51] factor as much as anything else. The oversupply of apartments that you mentioned, again very accurately,

[20:01] You have to go back to the financial crisis, as we were coming out of it, the only money

[20:06] you could borrow, which would build apartments, it wasn't condominiums, certainly, and not

[20:10] really a single family.

[20:11] So the world became an apartment developer, but the lag is significant.

[20:15] So because of that, we had a boom in apartment development occurring, you're quite right,

[20:20] so supply, exceeded demand, rents were compressed, so we've already started to see...

[20:25] major slowdown in permitting of multifamily buildings, which

[20:29] allows that supply distance by the catch up. And then we'll see

[20:33] again. So really, it is that sign curve. Thank you. More than

[20:37] anything else, I'd say that's the reason behind it.

[20:39] Thank you so much, and I know you could talk to us

[20:43] for a lot longer, Matthew,

[20:44] and we appreciate your conciseness

[20:46] because of the work before the committee.

[20:47] We only have so many time,

[20:49] but I do encourage committee members to reach out to Matthew

[20:52] if they have additional questions.

[20:53] I think that my office will be doing that,

[20:55] so thank you for joining us,

[20:56] thank for the valuable information,

[20:58] and the presentation is available in our CAP system.

[21:01] Now I'd like to move, thank, you.

[21:03] We'll move on to a panel on development perspectives.

[21:06] I'm gonna invite the next panel,

[21:08] in person to come up, that way we can switch from person

[21:12] to person in a timely fashion.

[21:14] So we have Andrea Smiley, legislative director

[21:18] from the Building Industry Association of Washington.

[21:21] We also have Dylan Slaughter, Slooter,

[21:24] State Policy Manager, Master Builders Association

[21:27] of King and Snohomish County, and we

[21:30] have Ryan Donahue, Vice President of Advocacy

[21:32] for Habitat for Humanity, Seattle, King,

[21:35] and Kiditas Counties.

[21:37] Good morning, Andrea, would you like to start? Sure.

[21:42] Good morning, Andrea Smiley here on behalf of the Building Industry Association of Washington.

[21:47] As many of you may know, we represent the residential construction industry. We have about 8,300 members

[21:52] and about 150,000 workers across the state. I will say over the last seven years of my career

[21:59] and thousands of conversations I've had with experts both in the field, academic and

[22:04] economist, everything and also to kind of echo what Matthew Gardner just said,

[22:12] how if we want housing affordability we must start with with increasing access to

[22:17] buildable land and a lot of what Matthew had said is very correct the 3.7% of

[22:25] our land being in the UGA is really where we're seeing the

[22:32] the issues come to the forefront. Right now, our state is expecting that all of our growth is

[22:40] going to be put into those urban growth areas. However, housing often competes with other interests

[22:46] such as critical areas, office, commercial, industrial, all the things that make, you know,

[22:53] And so the result is less buildable land, fewer housing units, and more and higher housing prices.

[23:01] And, so, there is a common misconception that vacant land means that it's build-able.

[23:07] Kind of following in the same theme as Matthew Gardner, a lot of our members tell us that

[23:14] the remaining land is too expensive to develop.

[23:22] more plentiful than not that they are essentially lots that are unable to be

[23:28] developed and that takes away from the amount of billable and

[23:31] that is available. And so there's really two types of like land segments that I

[23:38] would kind of put development in. There's a permit ready lot or a not permit

[23:42] ready law and the major difference there is that you don't really have to deal

[23:48] that you know come with a not permitted or not permit ready lot and so when you

[23:55] can as much as possible get the land that's already has everything that

[23:59] you need and really at the end of the day all you needed a building permit that

[24:03] is the best scenario and I will say that it is also the lowest amount of time

[24:11] that takes to complete the project whereas it's the Project Permits that

[24:18] the delay and ad cost. Again, that's the approvals, the utilities, roads, everything that you need

[24:23] in order to build a house and have the person be able to live in it. And so I wanted to kind of

[24:31] show a report from our National Association of Home Builders that basically reiterates what

[24:36] we've been hearing across the state where, and I just kind highlighted those, I won't go through

[24:46] the real bottleneck in permitting is tied to land.

[24:50] And, sorry, here we go.

[24:56] The areas of opportunity.

[24:58] So for permit ready.

[25:00] Pauseing the residential energy code would do a lot.

[25:03] This last session we had recommended a 10-year pause.

[25:07] We've been stakeholdering that for the last, I would say,

[25:11] two to three months and have come up with a new idea of allowing

[25:15] the next energy to go into effect.

[25:17] And essentially after that happens, you pause it and let builders

[25:22] build for essentially two cycles or six years.

[25:25] And the idea is to have a period of stability where

[25:29] You can just kind of bang out production as fast as possible and then

[25:34] Secondarily to that establishing an annual cap on impact and development fees similar to rent control

[25:40] You got to really make the cost inputs predictable

[25:44] And then clarifying permitting authority for state and local governments. I think that there's an huge issue right now with state agencies

[25:52] and special-purpose districts feeling like they have

[25:57] I guess, more power over the decision-making process than they actually do.

[26:04] And turning to non-permit-ready lots, I will say, following a lot of the comments from

[26:10] previous speakers, that infrastructure unlocks more units.

[26:18] to offset some of the costs that our members have to deal with would be super super helpful in driving down costs as well as

[26:25] setting uniform design standards such as roadway standards that would help out a lot with annexations

[26:32] and costs across the state and then of course limiting discretionary studies, mitigations, et cetera.

[26:38] There are so many issues right now with shrubstep, white oak, a lotta critical areas, storm land or storm water,

[26:47] We don't really think about in the housing development

[26:52] unless you're actually in it.

[26:53] And so those are the most,

[26:57] from what we see most fruitful ideas for reform.

[27:02] And we are constantly updating our research center,

[27:06] the Washington Center for Housing Studies.

[27:07] So definitely recommend that you check out our website

[27:13] and yeah, thank you so much.

[27:16] Thank you, Andrea, and I'm going to ask my committee members to pause on their questions until the next two speakers are complete and we have Dylan to talk about for-profit development.

[27:27] Thank You, Chair Babin. Members of the committee, I am Dylan Sluter, State Government Affairs Manager at the Master Builders Association of King and Sonomish Counties, obviously some of

[27:35] the larger development areas in the Puget Sound that we represent.

[27:40] Today I wanted to focus on one simple question.

[27:42] How do we turn the housing Washington has and allows on paper to homes that actually

[27:47] have built?

[27:51] Washington needs more than 50,000 homes per year.

[27:53] We've seen that data.

[27:55] That's not our data, that's the state's data but that is not just a planning goal.

[27:59] That is actually a production challenge.

[28:03] Our outside of the state and local control where labor materials barring rates things like that

[28:08] But there are policies that we should focus on that are choices that the State and the local governments can make

[28:14] permitting development standards local fees

[28:16] infrastructure the process and time and uncertainty that it takes to get to the

[28:20] Process and so the practical question is are we focusing enough on the parts that?

[28:25] We can control and that caused those delay and cost?

[28:30] Here's part of the capacity that doesn't equate to production always

[28:33] And I think Matthew touched on a little bit looking at the buildable lens analysis things like that

[28:38] Just because on paper it looks like there's playing capacity

[28:41] Does not mean that we're going to have a feasible product that works there

[28:46] There's all these different systems in place Andrea touched upon it folks before me did as well

[28:50] but basically housing is sort of

[28:53] one product governed by many systems

[28:56] And here's some of the systems we talked about, land availability and planning, zoning development standards, all of these things are

[29:03] What a builder goes into when they're thinking about project feasibility?

[29:07] I think the problem when we think about the system is that not one individual rule itself prohibits housing

[29:13] But the cumulative system can make it infeasible, especially when it doesn't work together

[29:20] So let's talk about this. Here's a real-life example a member provided. This is

[29:26] South King County jurisdiction within a UGA some excess property and owner had they were looking to redevelop and provide some homes

[29:35] It was middle housing. This is our townhome units

[29:39] There was zoning capacity for up to 20 units in this area

[29:43] This the city itself states they wanted alley oriented form for this which is an interesting concept

[29:49] So the original design the roadway around it is actually an alleyway

[29:54] But it meets all of the the definitions of a street

[29:57] It has a 20 foot width and the problem with this when they took it to the jurisdiction is that

[30:04] alleys though are preferred

[30:05] can not be vehicle access for the fire code.

[30:08] So this does not work.

[30:10] They had to go back and do a redesign,

[30:13] and basically the city asked them to put a street in.

[30:16] And so they put it public street,

[30:17] and at least half a Street.

[30:19] And if you would dedicate the right of way,

[30:20] add all the infrastructure, the landscaping,

[30:22] the sidewalks, then required with that,

[30:24] there's still a challenge that the Fire Code

[30:26] couldn't be met.

[30:27] And even though you add this public Street

[30:30] and still can potentially achieve those 20 units,

[30:33] there's the units inside towards the top that actually don't meet the fire access

[30:37] when it comes to the hose length which is 150 feet. So again, codes that seem to

[30:41] not be working together.

[30:43] So, again back to drawing board, here's another redesign. Okay, so now we have

[30:49] the entire thing having a roadway around it, but then

[30:53] there is now another requirement that units have to be

[30:57] on either public open space or the street and on the right side you can see this got brought

[31:03] down to 16 units but at the top right those units up top couldn't front onto either the

[31:08] public opened space because the back lot and the geometry and configurations couldn t fit that.

[31:14] So we added more infrastructure, we lost some units and those costs couldn

[31:24] They looked at other things such as like unit lot drives,

[31:27] but those have a max capacity of nine lots per drive.

[31:30] That didn't work.

[31:31] A shared driveway may only reach max for residential lots.

[31:36] So then they ended up with this configuration

[31:38] that actually went away from middle housing,

[31:40] went to single family lots,

[31:42] and this also didn' t work with

[31:44] They added the road access they tried to provide the frontage they did all of this

[31:48] But now these lots are very small difficult to manage and if you see up top that open space

[31:52] That was originally designed to be their stormwater vault is now shrunk and they thought they would run into storm water issues with this

[31:59] Ultimately the owner decided this isn't feasible. This doesn't make sense even though they try to work with the city

[32:04] I even saw from this project. They tried do cottage styles a numerous different issues, but

[32:11] Ultimately, what happens is, while the codes themselves don't say we outright donít allow

[32:16] this type of housing, when they work together, they doníst work well, and you end up with

[32:20] a project that potentially 20 homes that could have been supplied, this site is still not

[32:25] developed.

[32:26] And so, these are some of the issues I wanted to highlight, that just because we have capacity

[32:30] doesníd mean it equates to production.

[32:39] What these fragmented systems can be and just because this

[32:43] Example had to do with fire and roads and different access issues

[32:48] It could be a different project with the same system of question do the rules work together to produce the housing they collectively supposedly allow

[32:56] And that issue is again a system issue. It's not an isolated rule

[33:02] So here's a question that I think is worth asking that

[33:05] I wanted to ask the committee and folks today.

[33:07] If we were designing a housing production system today

[33:11] to meet Washington's goals,

[33:12] would we design the system we have now?

[33:16] I don't believe so.

[33:18] We need to build the systems that builds the homes.

[33:21] And this is not necessarily a fault of

[33:24] who designed the system. It wasn't one person. This was years and decades that evolved

[33:29] of one legitimate objective or another that created this huge process that's difficult to manage.

[33:35] I'm not suggesting we completely start from scratch and start over. I am suggesting

[33:38] we start thinking about how we design backwards from our goals and the outcome we want which are

[33:43] homes being built. So what's some near term solutions we can talk about? We've got a simplified land

[33:50] I think one of our priorities is raising the short

[33:53] plat threshold of 30 units within UGA's.

[33:56] That aligns with the CPA laws.

[33:57] That allows folks to use an administrative pathway,

[34:01] which we think can save up to 50% of time.

[34:04] Stabilize the building code as folks have discussed.

[34:07] This brings an opportunity for predictability,

[34:09] reduces regulatory churn, and allows

[34:11] folks catch up on the shortage that we have now.

[34:14] Create permitting certainty.

[34:16] Talk about clear and objective standards

[34:20] and strengthening the opportunity for licensed professionals to use their stamp as approval.

[34:25] Looking at peer reviews and limiting them when they are redundant in ad cost.

[34:30] And then obviously opposing new cost to housing.

[34:32] I think adding more costs when we're already so constrained,

[34:37] when you go through different regulations, as we talked about, this is a system.

[34:40] Multiple things can interact in different ways.

[34:42] Let's start thinking about this holistically as you

[34:44] go though builds the session and as

[34:46] you consider things, look at it through the lens of what does this mean for housing?

[34:50] And then for the long term, I think this is sort of a broad concept I wanted to introduce.

[34:56] Let's play them for production.

[34:57] Let us look at how we can look a capacity that land is serviceable, developable and likely

[35:02] to deliver homes, standardize what we came with the basics.

[35:06] Look at the things that are repeatable that we consistently do across multiple steps so

[35:11] that have these standardized checklists and things to go through the process more efficiently.

[35:15] coordinate the path. We've got one project to go through multiple systems. Let's coordinate

[35:20] and get a consolidated answer from the government. Make land housing ready.

[35:24] infrastructure is one of the hardest problems we're dealing with, as Andrea and folks before us.

[35:28] Let's start planning infrastructure and tying it to sites that are likely to be developed.

[35:33] And then let's measure what gets built. Let us look at the full production pathway.

[35:37] Ultimately, we see things, maybe 50 to 90s in place, things like that, but that's part of

[35:41] the data. I think we need to start looking collectively at all the

[35:44] data so that we can clearly address those barriers and those issues throughout the pipeline.

[35:51] and then that's sort of my closing but I just wanted to say that it impacts we believe everyone deserves a place to call home and

[35:59] I think the question I have is how do we create a clear more coordinated more predictable path from land to home?

[36:07] Because aplace to Call Home ultimately depends on a system capable of delivering one. Thank you

[36:14] Well, I feel like I should give you an applause, Dylan.

[36:16] Thank you very much for that.

[36:19] There was a very frustrating example that you showed, and I know that it's replicated in City across City.

[36:24] We'll talk more about that during the Q&A.

[36:26] Senator Solomon,

[36:27] I've asked folks if they could wait until the last presenter.

[36:29] Would that be okay?

[36:30] We have one more,

[36:31] and then I'll open it up for questions.

[36:32] Okay.

[36:33] All right.

[36:34] Ryan Donahue to talk about non-profit housing development.

[36:37] Good morning.

[36:38] Good Morning.

[36:43] President of Advocacy at Habitat Friminity, Seattle King,

[36:46] and Kittitas Counties.

[36:49] Hey, look at that.

[36:50] All right.

[36:52] So really excited to be able to have the opportunity

[36:54] to talk a little bit about who we are and the work that we do here.

[36:58] I'm sure many of you are familiar with Habitat for Humanity,

[37:01] if only because you've heard my voice talk about it

[37:04] quite a few times.

[37:06] But more importantly, what we did was

[37:07] we build permanently affordable homeownership opportunities

[37:10] for families all across Washington who are low income and below.

[37:15] In order to qualify for one of our homes, you have to be earning 80% or below area meeting income.

[37:20] So we're talking about your local barista.

[37:22] We're talk about a home health aid.

[37:24] We are talking a city staff member or the folks that work in our non-profits that help our communities run.

[37:30] Essentially, we are talkin about the essential workers that make our community continue to survive.

[37:38] Home ownership in the model we use is something called permanent affordability

[37:42] So we used a one-time investment that stays with the home in order to ensure permanent

[37:48] Affordability we's a long-term renewable ground lease that makes sure that that one time investment

[37:53] That we get whether it's from the state from The City

[37:56] Or, more often than not, as we'll hear a little bit more, both end up actually helping keep that home affordable into the long term.

[38:04] As I said, we are 100% home ownership, and the other thing I'll note is we actually,

[38:08] at our affiliate, have over 309 homes in our pipeline in King and

[38:13] Kittitas County over the next five years alone.

[38:15] This last year we built 54 homes, built and sold 54 home.

[38:20] This next year, our fiscal year.

[38:25] five, which is a lot needless to say, but I want to talk a little bit about some of

[38:32] how we're going to get to that 85 and the way that we are able to actually do that.

[38:39] I want to start off really by saying thank you to all of you, especially for those of

[38:43] you who were here in 2023 that voted to support the capital budget, which I believe everybody did

[38:49] that year, because this project was included as one of the appropriations in there at six

[38:57] million dollars. So of that 30 million dollar total development cost, six million of

[39:05] But I do want to take a quick second to kind of recognize what this project also represents.

[39:11] There has never been an affordable home ownership project that Habitat has done anywhere in the United States, this size are larger.

[39:19] This is actually a historically large project

[39:22] that really hadn't ever been done with a single family home, 58 units.

[39:28] As I said, in this neighborhood where it's built.

[39:30] the Columbia City, the average condos are roughly around $600,000 in order to purchase that.

[39:37] If you're going to purchased one of our homes at this project, you are starting off at either

[39:42] around 165 to $285, 000, depending on what size of home you building. This project took about four

[39:52] And it's important to note, right, that this was kind of a one-time thing.

[39:57] We'd never been able, we hadn't ever done this before.

[39:59] We look forward to continuing to do these type of projects.

[40:01] You also have the pro forma for this project in the book.

[40:05] I believe we submitted that.

[40:07] I'm assuming that that's, you guys have that somewhere, at least I hope so.

[40:10] I wanted to compare it though to another project that we have going on this one is floral Avenue is what we're currently calling it

[40:17] I'm sure I can't imagine any of you guys can guess where it is in Cleallam, but

[40:23] More specifically this is a project. That's gonna be 16 units in cleallum

[40:27] We're comparing the two because

[40:30] one thing I really kind of want to lean in here is that local housing subsidy and the state housing trust fund component of it

[40:38] When we are trying to do projects in, for example, the City of Seattle,

[40:42] we're lucky that there are a number of different local funding sources that are able to help maximize those projects and maximize

[40:49] those dollars available to us, whether it's through things like mandatory housing affordability,

[40:54] or the Seattle housing levy, or even the jumpstart tax.

[41:00] Any of those things all help make housing more, or make affordable housing possible.

[41:06] I should say help fund affordable, housing in the city of Seattle.

[41:09] That means the state doesn't necessarily have to lean in as much on those projects.

[41:14] As I noted before, you all allocated $6 million to the Liberty Commons project out of a $30 million allocation.

[41:22] What we ask for when we asked for funding in a project like Cleolm is significantly more in proportion to what the project is.

[41:30] ultimately what we need because they don't have the local funding sources available to them.

[41:35] Ultimately, when there's no local housing funder, the state ends up becoming that local

[41:40] housing funder.

[41:42] Coming back to Liberty Commons for a second, I want to know a little bit here.

[41:46] First off, as you can see, we were able to obtain the land in 2022.

[41:51] We purchased it off the open market outright, and we're able build a couple years later.

[41:59] was because of design review this is something that you all have actually

[42:02] helped address already so thank you but one thing in particular I do want to

[42:06] note was we actually had to work with the city of

[42:08] Seattle and our partners some of which

[42:10] right here at the table to help get a ordinance passed at

[42:14] the City level to be able to emphasize that and make sure

[42:17] that we were able be to get through some

[42:19] of the design-review problems another thing that's really important to

[42:24] is funding at scale.

[42:26] When we start talking about affordable housing funding,

[42:28] especially when we're looking at

[42:29] when this project moved forward,

[42:30] which was 2022, 2023,

[42:33] it's important to remember what the funding was available

[42:36] for affordable home ownership at that point in time.

[42:38] It was significantly less.

[42:40] I've been here seven years,

[42:42] and I remember seven, seven year ago,

[42:44] we were lucky in the home-ownership space

[42:46] to get about two to three million dollars a year.

[42:50] That's obviously gone up now and I want to thank all of you for doing this and helping

[42:54] to be able to make that more possible.

[42:57] But the reality is, is that even in 2023, the funding wasn't at scale enough to actually

[43:03] award a project like Liberty Commons, a regular award.

[43:07] So we had to go for a direct appropriation.

[43:09] We appreciate the fact that you all gave us that direct appropriations, but we'd rather

[43:13] compete with everybody else to get that.

[43:19] to do that. A couple of other things really to highlight before we move on to

[43:23] the next slide here is first off that sales tax per home notation there that's

[43:29] the added cost per her home that had to be allocated in order to

[43:35] be or that basically the homeowner ended up still having to pay for in

[43:39] order be able to mitigate that

[43:40] So, for example, on this project itself, it was roughly $2.1 million.

[43:45] And again, you all allocated $6 million, so a third of that ended up coming right back to the state in sales tax.

[43:55] So we'll just note that the other thing I'll note is because we had to get a construction loan on this

[44:00] It actually cost us almost a million dollars eight hundred and fifty thousand dollars in interest loan interest rates alone

[44:07] Just to be able to give this project done so we can be about to close on the mortgages and be

[44:12] able clothes on that loan

[44:14] Both of those things cost additional funding

[44:17] So the question is what is that we could do to change the math here?

[44:22] First off substantial and predictable capital we simply need more money particularly for affordable homeownership

[44:29] And it needs to be sized at scale in order to

[44:31] Be able to continue to produce that we need

[44:33] More local funding flexibility don't make it so the state is the only option to

[44:38] Be be able get funding options. We need to

[44:40] Be available to use access local governments as well

[44:43] a revolving construction loan fund to be able to reduce the cost of interest rates that we're having to pay in order to

[44:49] be to get these construction loans and then also take a look at sales and use tax and

[44:55] acknowledge that or and realize that there's a lot of entities that don't have to necessarily

[45:00] pay sales in use taxes when it's for public goods. That's not the case when

[45:04] it comes to affordable housing that's the way we can bring more affordable

[45:07] housing online at a quicker rate. So thank you very much.

[45:13] I know my info is up there but I'm sure we'll take questions for any of us.

[45:16] Yes, we will. Okay, committee members,

[45:19] we have some time for questions. Senator Solomon, did you want to start with your question for Dylan?

[45:30] Yeah, sorry, I got mute. Dylan, thank you for your presentation. I was just wondering,

[45:43] about the plant that was not ultimately built.

[45:46] Does the fire code vary by city?

[45:48] I just don't understand why there's this back and forth.

[45:52] Is there a lack of clarity in the code

[45:54] and is there build that could help that?

[46:01] Thanks for the question. I think in this example, it was just a multitude of different code issues

[46:06] that were difficult on a constrained site. You know, if the alleyway was allowed to be the fire

[46:12] access, which I thing was a local discretion option, that the ally could have fit the required

[46:17] standards within the Fire Code to beat that access. And my understanding from the builder I worked

[46:24] that was the case but the city didn't allow that even though they preferred alleys so that

[46:29] was one of the issues they tried to work around but without changes for these codes to actually

[46:33] work together like if you're going to have that preference I think you should allow those

[46:37] access opportunities especially if your building to the standard. So that

[46:40] was I the major issue and then the frontage issues as well was difficult to deal with on this sort

[46:51] policy not working with the fire code was the conflict that ultimately killed it.

[46:58] Follow-up, Senator Solomon?

[46:59] It's just interesting that you mentioned that the city had the ability to authorize the idea,

[47:06] but didn't. I just think maybe that's something we should drill down on in the future.

[47:10] I sent you an email already, Dylan.

[47:11] Okay, thank you.

[47:13] Thank you, senator Gaynor.

[47:20] I've been, I guess in 24 years that I have been in county and state government.

[47:26] I had continually heard issues relating to regulations and as Matthew mentioned,

[47:33] the housing problem started back in the 90s. So could you highlight either some of the regulations

[47:40] that have recently been passed that may have actually been helpful or things that you would

[47:54] Yeah, well, there are a lot of things. I probably could write an entire dissertation, but I

[48:02] Think probably first and foremost is focus is refocusing on modernizing the Growth Management Act

[48:08] I think that there's a lotta things in that that are

[48:11] opportunities for being able not just to speed up process or speed-up construction projects,

[48:17] but also be able to alleviate some of the

[48:22] I guess discretion and the lack of understanding of who has authority and who's lane is really

[48:31] who is lane, right? So like in my presentation I mentioned that some state agencies and some

[48:41] special purpose districts feel like they have more power over the end permit decision than they

[48:49] A lot of times our local governments are not, I guess, given the I don't know what the right

[48:57] word is, but basically they're kind of caught between the middle of the project, the Project

[49:03] Advocate and another third party, right? And so how do we ensure that there's a mechanism

[49:08] in place to control some of that? We have a member issue in Clark County right now where

[49:15] pretty interesting in their interpretation on a fire access gate for a pool and really it's the

[49:26] local government that's allowed to decide how to deal with that issue. They just don't feel like

[49:31] they are empowered to do that right now. So thank you. Does anyone else have anything they want to add?

[49:39] I guess answering the other side of the question, this is Ryan Donahue with Habitat again, the

[49:47] Some of the good regulations, if you count them as good, or if

[49:50] you counted them is regulations I'm not entirely sure.

[49:53] But I would actually point specifically to some of

[49:55] the parking reforms that have been done.

[49:57] Minimizing the requirements for parking, I

[49:59] would point to sum of requirements

[50:01] for ground floor mixed use changes, some

[50:05] of work that's been there.

[50:07] As being another example of things that

[50:09] have actually helped out,

[50:10] I'd point in middle housing as well, HB 1110,

[50:14] as wells actually ULS reform as

[50:16] And being able to really kind of be in some of those things that have been done especially over the last few years that

[50:22] Have been quite helpful

[50:25] Go ahead Dylan. I

[50:27] Encourage Ryan on those issues especially things like unit lots of division

[50:30] We've seen be used to provide that ownership project.

[50:32] I just wanted to highlight

[50:34] the lack of standardization, one issue that a lot of our folks are facing.

[50:38] So in King County, when you're dealing with stormwater mitigation,

[50:41] they sort of have their own rule set and do their

[50:43] own things. So like proprietary systems to deal with the mitigation

[50:46] that ecology has tested, invented, and say work well.

[50:50] Some of those King County wouldn't allow on their own and I think if we're going to have ecology testing and vetting these

[50:55] I

[50:55] think that should be sort of a top-down approach to say if these work they should

[50:59] Be able to work everywhere and allows that flexibility it allows

[51:02] That innovation to happen and ask a clarifying question. Yeah, are you saying that ecology has vetted a certain stormwater management?

[51:09] Yes things and Seattle saying we've got our own thing. We're not going use that one. King county. Okay.

[51:17] That's a good example, thank you.

[51:20] Senator Elvarado, do you have a question?

[51:22] No, okay, well that's good because we're running out of time.

[51:25] But I do want to just say the example that you gave was really helpful to see that plot of land and

[51:33] the multiple iterations that that landowner was going through in order to get homes to the market.

[51:40] there is discretion from the city and they're making an active policy choice and that policy

[51:46] choice is resulting in less homes being built in a city. And we have cities that tell us we need

[51:53] we needs more homes and we needed to build more home and yet we had policies like this where it

[51:57] literally is a choice. We could have a pro housing approach as a local government.

[52:04] and have all of those different, the fire department

[52:07] and the city planners coming together to say,

[52:08] how do we get to a yes?

[52:10] And how can we partner with you to get these homes

[52:12] on the market because what ultimately will happen

[52:15] is that lot is going to sit there, make it,

[52:18] or they're going build a multi-million dollar mansion,

[52:20] McMansion on it.

[52:22] And in that case,

[52:23] the City is giving up 20 homes.

[52:25] It could be more affordable for a single family home,

[52:28] which I think is antithetical to most of our goals here

[52:33] And I appreciate the comments that you made, Ryan, about bills and legislation.

[52:38] I would point to we have had legislation proposing workforce revolving loan funds.

[52:43] We actually passed that bill.

[52:44] That was a Mari Levitt bill multiple years ago.

[52:46] It has never been funded.

[52:48] We've also had a bill that gave a sales tax exemption for affordable housing construction.

[52:53] I'd love to see that applied more broadly.

[52:56] That bill did not pass.

[52:58] Yeah, it did pass, so the specific barriers that

[53:03] the legislature has worked on but not funded and considered and not passed.

[53:09] The point being we can take action and appreciate you all coming forward with potential solutions.

[53:14] We will take note of that.

[53:15] We look forward to partnering with you on this issue of making sure we all have more housing.

[53:19] And with that, we're going to move to the next panel because we are getting low on time.

[53:24] But welcome. We have two presenters, Chris Hermans and Marty Koestra, and they're going

[53:29] to provide us with an update on starter home demonstration program of the Washington starter

[53:34] home plan. Good morning. Welcome. Please begin.

[53:38] Thank you Madam Chair and community members. We're excited to be able to provide you an update

[53:45] around the starter home plan since we last met with you and into coma in July and so

[53:55] getting an overview of where we are with the demonstration program along with some other work

[54:01] that's underway and then I will spend a few minutes just talking about update on the financing

[54:08] that we're looking to try to inspire related to offset construction.

[54:18] So we're going to quickly go through is is giving you an update on what's happened when since we last saw you in July as Chris said we are definitely wanting to update you on the demonstration program and the financing programs and also what we've been doing as it relates to the response and long term recovery of the fires that have occurred again in Washington state. Next slide, please.

[54:48] Based on where we are at, related to understanding the long-term recovery, we're staying in close contact with communities called Viltride, Spokane leadership, organizations there, developers, builders, the AIA and others.

[55:04] trying to make sure that everything that we have learned over the years from no

[55:08] honor fires out to Dina, certainly the experience post Katrina and how

[55:13] offsite methodologies and the starter home plan fits into that recovery

[55:18] strategy, including the use of pre approved.

[55:21] permit ready plans, the townhouse competition

[55:25] that Chris has led, and other strategies,

[55:28] including the use of what we call micro factories,

[55:32] rather than needing to establish one or two large factories.

[55:36] How can we use a satellite and hub strategy

[55:38] or a smaller, basically, micro factory strategy

[55:44] in community, keeping economic development,

[55:46] economic benefit in the community and leveraging offsite?

[55:51] We also talked specifically with you in July about how the use of offsite front loads some cost issues and what that does in terms of creating a financing strategy challenge and we will share with

[56:20] program. So let's go to the next slide.

[56:25] So the demonstration program will start with us releasing the RFP out to

[56:31] communities and developers.

[56:34] You can imagine that there have been a number of folks reaching out to us from across the state

[56:39] with potential projects. We're starting to even see more of the habitat affiliates in various

[56:45] pockets throughout the State acquiring larger parcels of land, community land trusts as well,

[56:53] and then developers of course who are private developers who

[57:03] now secured and properly catalogued and categorized at commerce. Snap the Spokane

[57:10] neighborhood action partners will be the fiscal intermediary and of course the

[57:15] ship will help administer that. We're looking for two sites, two distinct

[57:21] jurisdictions, 30 to 44 sale homes. Again, we're targeting low and moderate

[57:29] Each site will test a different off-site methodology.

[57:33] It could be full-on 3D volumetric boxes,

[57:36] or a panelized construction,

[57:39] or some hybrid thereof alongside stick fame,

[57:43] because we actually do want to be able to test

[57:46] all of the assumptions that have been made.

[57:49] And so we will be using the Housing Future Center at the University of Washington to actually

[57:55] monitor and evaluate and do all of the R&D related work that goes along with this.

[58:02] Next slide, please.

[58:06] So what will we measure? Well, first of all, we want to get to a better understanding of

[58:16] A lot of times what we see as developers and others looking at first-cost only, we know that

[58:24] Until we get to standardized plans, until we

[58:26] get the repeatability volume purchasing, that there may be a 10% up to 10 percent premium

[58:35] for using off-site methodologies in the first cost.

[58:39] However, when we factor in time and time to market, time delivery, I think you just heard

[58:46] from one of your parties that, there was 850k in interest on a project that was done.

[58:53] We seek to better understand what the fully loaded costs are, and of course, we're looking at scale and quality and waste.

[59:03] There are a lot of things that we are learning about how use of offsite methodologies can improve our sustainability practices and our reduction in waste, etc.

[59:12] So, we hope to have the first comparative data available to review Q4-2027,

[59:20] and we certainly are looking forward to moving forward with this demonstration program,

[59:27] a task force is being seated that will do all the evaluations and final decisions

[59:34] in the 1st quarter of next year.

[59:36] We're also about ready to release. We hope by the time housing Washington comes around the first phase of our work with community attributes on the economic impact study that will elucidate very clearly where we see the starter home plan contributing to the revenue base and revenue opportunities for the state and local communities.

[1:00:05] As electives are very keenly aware of a lot of these things, as you struggle with the revenue issues, we just want to make them very plain and clear so that you can actually process them and see how investments might make a difference.

[1:00:20] Next slide, please.

[1:00:24] And I think this is where Chris picks up.

[1:00:27] It is and as we talked about just a kind of a reminder when we met in July with you at craft contracting one of the key things that we're working on simultaneously to the demonstration program is for the first time to work in putting together financing program and products that work for offset construction.

[1:00:57] of a home's building cost for offsite construction

[1:01:03] is in the factory and currently low lenders.

[1:01:06] And we had a design session with six banks in May

[1:01:11] and none of them have an existing program or product

[1:01:17] that funds off site.

[1:01:18] So we have been at the same time working

[1:01:20] with the finance commission,

[1:01:22] modeled after our conversations and programs

[1:01:26] in Colorado, in Oregon, and California, Tulsa and other places in the country that's looking

[1:01:33] to incentivize both developers to build using offset construction, as well as lenders to

[1:01:41] get engaged in factory capacity. So next slide. We're excited to just note that at the August

[1:01:53] Finance Commission meeting, the board has approved two allocations and the first allocation is $10 million for what we're just generally describing as a catalyst fund that specifically would be administered by an area CDFI.

[1:02:22] specifically to

[1:02:25] provide seed capital and that down payment assistance to the factory to utilize penalizer

[1:02:32] modular construction methods. Again, with public financing, the target will be 50 to 80 percent

[1:02:41] AMI and allows for shared equity and 50 year affordability. The second tranche is $10 million,

[1:02:55] We're looking to use finance commission's capital to bring in conventional construction lenders as because we do not currently have an existing program or product.

[1:03:10] There's a lot of concern or caution on the part of private lenders to get into this financing. So the goal is ultimately to create revolving loan product that would incentivize.

[1:03:24] both nonprofits and, but specifically, small, lot mission line developers building missing

[1:03:32] middle housing to utilize offset construction with this particular program and product.

[1:03:39] And it would be a recyclable, recycled capital, and but it's done in combination with

[1:03:49] Trying to standardize designs master permitting and ultimately to aggregate off site construction demand. So that in fact, we're trying to build factory capacity and a predictable pipeline for them to be able to go from one shift to two and three shifts.

[1:04:18] The private market will in fact have an opportunity to see that this is actually a de-risking proposition and that they will get involved with their own products.

[1:04:32] So right now we are continuing to work with the finance commission and putting the structures in place. We have a draft.

[1:04:43] I'm going to ask you to try to wrap it up.

[1:04:47] And we're, yeah, we were next slide.

[1:04:52] This is our last slide. Ultimately, we think that where we need the legislature and what makes all of

[1:05:01] this repeatable is that if we are able to pass permit ready plans with SB 6015, my introduction,

[1:05:11] if were able through resource, LNI, and local jurisdictions to be able

[1:05:19] For both permit ready plans and factory built housing that will be in a place to aggregate that demand in order to be able to accelerate attainable starter homes for working families across Washington State and we'll just end with

[1:05:37] We understand the current revenue constraints for the state of Washington, and there is an opportunity to do a capital budget appropriation that matches the finance commission's program related investments, as we've seen in other states, that would be a huge lift, but it is not something that we are requiring or that will be required for these programs to move forward.

[1:06:07] Thank you so much, Chris and Marty. Thank, you. So much. It was very exciting to hear the work that you've done and those specific asks and how they relate to creating more start homes. Do we have any questions from the committee?

[1:06:22] All right, looks like we don't. We'll keep trying along.

[1:06:25] Thank. You so, Marty and Chris will look forward to talking with you more.

[1:06:29] Okay, with that, we will move to our last subject for the agenda today, which is housing

[1:06:34] affordability trends and financing. We are very lucky today to have an overview of affordability

[1:06:41] trends by Chris Collier, the director of government relations housing authority of Snohomish County.

[1:06:47] Good morning, Chris. I haven't seen you in a while. It's good to

[1:06:50] have you back before the committee. Good to see you, Madam Chair, members of the

[1:06:53] committee, thank you so much. Am I coming through? Okay.

[1:06:56] You are great.

[1:06:57] Okay.

[1:06:58] Okay, I'm joining you from Eastern Washington, Washington DC, where I am here representing

[1:07:03] both the Association of Washington Housing Authorities, on which I co-chair the Legislative

[1:07:07] Committee and the American Planning Association, in Washington chapter where i co share their

[1:07:12] legislative committee as well.

[1:07:13] So I' m here to really put an exclamation point as we round out the session on all of

[1:07:18] the presenters ahead.

[1:07:19] I think that you will find in the next 10 minutes that I have, and I'll try to keep to

[1:07:25] Again, or an exclamation point on the information that was shared in the presentations proceeding. So let me share my screen very quickly and is that visible to everybody, especially online.

[1:07:37] It is true. Okay. Very good.

[1:07:39] So here's my presentation. I'll get right into it.

[1:07:46] data from OFM. Here is the number of homes versus the

[1:07:49] number households that were built in Snohomish County in

[1:07:52] green year by year per OFF. We built 1,106 more housing units in

[1:07:56] Snuhomich County than new households either moved or

[1:07:59] reformed to, you know, in Sinohamish county in that year.

[1:08:04] This adds up, the housing unit does not get pushed over, that is

[1:08:07] unsold or un-rented in 2004. This ends up into a surplus. If we

[1:08:12] zero in the year 2000. We add up to a healthy surplus of housing that continues to be added

[1:08:18] to year by year and this indicates that people have choice. There are options whether to rent

[1:08:22] to own or something else in Snomish County if you're forming a household here. This changes

[1:08:31] significant increase in immigration to Snohomish County in this period to functionally zero by 2019 the rebound

[1:08:39] from Mr. Gardner's presentation was primarily apartment construction as he covered

[1:08:44] So we remain in a period of acute scarcity in ownership housing. What did this do to price in?

[1:08:51] Brown is the median sale price for a single family detached home in all Snuhomich County adjusted for inflation from

[1:08:58] 2000 to 2025

[1:09:01] We have a high water market of $831,000 in 2024.

[1:09:05] Again, this is adjusted for inflation.

[1:09:08] Now, most of us are not buying homes with all cash.

[1:09:11] We need to get a bank loan, so let's put 10 percent down on this home,

[1:09:15] which is the majority sale product in

[1:09:17] Sonoma County, by the way,

[1:09:18] about 80 percent of our homes sold,

[1:09:20] our housing stock is single-family detached.

[1:09:23] Let's go to 10% down payment on

[1:09:25] a 30-year fixed rate mortgage with the annualized annual interest rate.

[1:09:29] property taxes and insurance included, and you get this yellow line. This is the required income

[1:09:34] for a household to obtain this median house, right? The final piece of the puzzle is a debt

[1:09:39] to income ratio of 33%, above which the bank says you're an unsafe lending prospect,

[1:09:45] right. The reason that that jump happens in 2021 is interest rates going from two to six,

[1:09:54] What this line I like to say is that you must be this tall to ride line for housing ownership in Snohomish County.

[1:10:00] This is from the financial perspective. How tall are we?

[1:10:04] In purple, but inflation adjusted median household income in snohamish county. The problem starts here. It rolls downhill from here to town homes to condominiums to apartments.

[1:10:13] Just for context, the average rent for an apartment in Sonohama County again adjusted for inflation in green.

[1:10:20] This is how asking rents look like in Snohomish County.

[1:10:24] Back to Mr. Gardner's presentation,

[1:10:26] the dearth of or rather the, the oversupply,

[1:10:28] not overupply the production of apartment units.

[1:10:32] In Snuhomich County has had an impact

[1:10:34] on the actually asking price for apartments.

[1:10:36] Ownership housing is not the same story.

[1:10:38] In the appendix packet that I sent

[1:10:41] that should be in your materials,

[1:10:43] you'll see that production

[1:10:44] of ownership housing has been quite low and remain so.

[1:10:47] So I can corroborate his data with my own.

[1:10:50] Um, let's look at declining affordable home ownership. Now, I'm looking at all ownership options in Snohomish County from 2000 to 2025 year and how many homes of any type from single family down to a mobile home park home sold for less than $100,000 again adjusted for inflation.

[1:11:10] You go to $200,000 to 300, 000, 300 to 400, 00, dollars of sales, you start to see a

[1:11:17] story emerge when your 10,00 units sold in the year 2000 were well below that number

[1:11:22] in 2025. We continue with 10 groups of sale price up to 900,0000 to one million dollar homes,

[1:11:32] a story emerges that we are selling the same number of homes

[1:11:37] Today, as we were in the depths of the recession and the wake of a great financial crisis,

[1:11:42] and there were reasons to this for time that I won't go into in detail, but certainly it

[1:11:47] is a struggle to find a place to buy a period.

[1:11:50] And also the makeup through the lens of sale price of these homes has changed dramatically.

[1:11:56] The final piece of puzzle is homes that sell for over $1 million in red at the top of

[1:12:00] the bar chart.

[1:12:01] that today 20% of everything that you can own

[1:12:05] in Snohomish County sells for over $1 million, everything.

[1:12:09] This is data from the county assessor.

[1:12:11] It is a true census of every single sale

[1:12:13] of any property in all of Snuhomich County.

[1:12:17] So this is an ancillary to the proceeding slide.

[1:12:22] Let's look at who can afford it.

[1:12:24] In the Seattle Metro, Snhomuch, King, Pierce County,

[1:12:26] how many workers make over 240,000 dollars?

[1:12:29] 216 to $240,000 in their current occupation, the median wage for their

[1:12:34] current occupations is in this band of income. And we go down the scale to the

[1:12:40] final piece, about $57,00 a year. This is not what everybody makes.

[1:12:45] This if you stick in your current profession, this is what you will make

[1:12:48] in the middle of your profession. It's from the Bureau of Labor Statistics,

[1:12:55] This data is from 2025. Let's look at the, uh, you must be this tall to ride line for 2025 force in how much county single family homes require one eighty eight hundred and eighty thousand dollars of household income.

[1:13:06] You see the rest down to apartments. If you don't want to pay more than 30% of your income for the average apartment is in the homeless county. You need to make this much.

[1:13:14] Only less than 2%

[1:13:23] if you open it up to town homes and condominiums of which they are very few.

[1:13:27] Only 40 percent of the region's workforce could afford to rent

[1:13:29] affordably something somewhere in Snohomish County. You may be renting in Stanwood and driving

[1:13:34] all the way to Seattle where your job is, but you can rent it affordly. In any case,

[1:13:39] about 60 percent or 1.2 million people in the Seattle metro could

[1:13:42] afford it to do neither of those things on their own. But dual income, yes indeed,

[1:13:52] Even combining incomes of two incomes

[1:13:55] of $57,000 in the middle of your career

[1:13:57] in your 30s and 40s, you will be able

[1:13:59] to rent affordably,

[1:14:00] you'll not be to own anything.

[1:14:02] This is the rent trap.

[1:14:03] This the proof of the put proof

[1:14:05] in that statement of rental trap,

[1:14:07] rounding out my presentation.

[1:14:09] What has this done to the workforce?

[1:14:10] Where does the work force live?

[1:14:12] In Snohomish County,

[1:14:14] going from a cardinal directions on the x-axis

[1:14:17] and the number of people on

[1:14:19] Why access the less than 10 mile trips. This is how many people?

[1:14:24] New people we added just in how much counties workforce the people that are working there today

[1:14:29] Who are coming from less and 10 miles from where their home is to where there workplaces?

[1:14:34] You see the directions then 10 to 24 miles this is your 10-24 mile trip from home to work each way

[1:14:40] 25 to 50 miles

[1:14:42] 50 Miles or greater

[1:14:44] Two stories that I want to call out here in my remediating time is that we gained 6200 new workers that are coming to Snohomish County today from over 50 miles from the south.

[1:14:54] If you look at five south of Seattle and it's a parking lot, this is why because of the reverse commute has.

[1:15:01] not been such a reverse community anymore.

[1:15:03] The second thing that I'll call out is from the east.

[1:15:06] I'm looking at Senator Gaynor Wenatchee,

[1:15:08] Representative Burnett, who I spoke with

[1:15:10] and said, Chelan County is now a bedroom community.

[1:15:12] Everybody lives here and now trucks over the mountains.

[1:15:14] This is the proof of that data

[1:15:16] that 4,176 estimated new people are coming to work

[1:15:21] in Snohomish County from over

[1:15:23] the Cascade Mountains from Chelin County and other places.

[1:15:26] Again, there is more detailed information in the packet

[1:15:31] time. This is the impact of the presentation that you have seen today, much of which I

[1:15:35] agree with. I am available for questions, I welcome any opportunities to continue this

[1:15:40] discussion in more dynamic fashion. And thank you very much.

[1:15:44] Thank you, Chris, for that lightning round of pieces of information for us.

[1:15:49] I know that senators probably are processing. First up,

[1:15:52] I have Senator Alvarado. Please go.

[1:15:55] Thank you, Madam Chair and thanks Chris for that presentation. I think it really illustrates the housing gap at the lowest income level.

[1:16:04] And can we talk a little bit about we know that it takes something.

[1:16:11] to deliver housing for that majority population

[1:16:15] that is left out of the market.

[1:16:17] Can you talk a little bit about what you're seeing

[1:16:19] at the federal level and as a housing authority

[1:16:22] for the backbone of operating subsidy

[1:16:25] that it takes to make that housing available to folks?

[1:16:29] Yes, right now it's not how much county

[1:16:30] the main source of Operating Subsidies

[1:16:32] taking a Housing Choice voucher or a Section 8 voucher

[1:16:36] and assigning it to a specific unit, that unit.

[1:16:39] now has 70% of its rent paid by that voucher.

[1:16:42] There is a statutory limit on, for most housing authorities where they cannot

[1:16:47] project base, as it's called, over 20%

[1:16:50] of their voucher portfolio in physical units,

[1:16:53] where then the voucher is assigned again to a unit, not a household who can take it

[1:16:56] wherever they wish. There has been great discussion

[1:17:04] Allowing that that is right now. That is the source for operating subsidy. Other sources are few and far between and I would basically call them unicorns. I wish that I had better news, but that

[1:17:16] is a very difficult limit that we have as we look at our assignments, our goals of zero to 50% am I housing, even higher than that, perhaps.

[1:17:35] Thank you. Any other questions for Chris?

[1:17:40] I don't see any.

[1:17:41] Chris, I know that you gave us some appendices

[1:17:43] in your presentation, so that's available for folks.

[1:17:46] I knew that was a lot of information.

[1:17:47] One of the challenges we have is we wanna get

[1:17:50] a comprehensive overview of these topics,

[1:17:51] and I now that it can be hard,

[1:17:52] because you're getting a lotta information very quickly,

[1:17:55] but I do encourage folks to take a look at that,

[1:17:57] and then also reach out to Chris

[1:17:58] if you have follow-up questions.

[1:18:00] Chris thank you so much for your work,

[1:18:01] and your vast knowledge, and all of your advocacy.

[1:18:04] We really appreciate you being here.

[1:18:06] Thank you, sir.

[1:18:07] Thank-you.

[1:18:08] Okay, and now we will move on to an overview of lending framework and financing barriers.

[1:18:14] We've got a couple presenters who will be visiting us virtually.

[1:18:18] Staff, do we have them ready on Zoom?

[1:18:23] While you're getting them in the Zoom room, we've Don Costa, EVP, Chief Home Lending Officer

[1:18:29] for First Security Bank and member of the Washington Mortgage Bankers Association.

[1:18:36] Bradenburg, EVP, Chief Lending Officer of Cashmere Valley Bank and member of the Washington

[1:18:41] Bakers Association.

[1:18:43] All right, good morning.

[1:18:46] Who would like to start?

[1:18:48] My stuff's on the screen. So I guess I'll start. All right. You're in the mistake of responding to some questions from just a foot.

[1:18:55] Jessica Worskew. And so here I am today. I'm not a professional at this, but I will do my best.

[1:19:01] I just like to thank all the senators for the efforts here.

[1:19:05] I want to say everybody for House Bill 1110, the ADU Bill 1337. It was really some great work.

[1:19:13] And I want to thank the presenters ahead of me.

[1:19:16] I know Matthew Gardner, so I wanted to give a shout out to him

[1:19:20] and really appreciate the information he's given there.

[1:19:23] Maybe I'd only add to Matthew's pieces if you think that it's been kind of dire

[1:19:28] on the new construction building. I'll look right now.

[1:19:31] I think you can, you know,

[1:19:32] you haven't seen anything.

[1:19:34] to about what you're gonna see really starting today

[1:19:36] and maybe for the next six months.

[1:19:39] I can tell you, we do two kinds of lending here.

[1:19:41] We do spec lending, which is lending to builders,

[1:19:44] which mostly what we spoke about so far.

[1:19:47] And we also do custom construction lending

[1:19:49] which if you wanted to have a home built by a builder,

[1:19:52] we would lend you the money to do that.

[1:19:55] Our business has taken a pretty dramatic downturn

[1:19:58] over the last few months of the builders just saying,

[1:20:01] we can't afford to build.

[1:20:03] We're exiting this for now until some later date.

[1:20:08] And I think there's going to be some pretty devastating consequences there.

[1:20:12] Trying not to repeat stuff that everybody else and so many of the other people have said is I

[1:20:17] think just time is money, time as risk. And what I would say is that I

[1:20:23] think a fault in the building process is a sequential view of how it's done.

[1:20:33] I develop. I ask for a bill need permit.

[1:20:37] I build.

[1:20:38] And I just think things can be done at the same time,

[1:20:42] as opposed to one after the other.

[1:20:44] And it could probably shorten the timeframe of build

[1:20:47] to build maybe in half or more.

[1:20:49] If there's anyone here representing Grace Harbor area,

[1:20:52] I'd like to give them a shout out.

[1:20:54] There's a really success story down that way called Seabrook.

[1:20:58] They will actually allow a builder to get

[1:21:01] their lots segregated during the development process.

[1:21:05] They can actually start building homes

[1:21:07] process and they're able to get homes built in a much more timely manner and I

[1:21:13] only point that I point them out is that some county that maybe the committee

[1:21:17] could look at to see the good things that that they are doing. I think another

[1:21:22] challenge is as I've said is the cost of permitting is extremely expensive and

[1:21:29] one of the things we just work on a five unit town home here for a builder.

[1:21:33] And they decided to pass. This is in Seattle. It's a $1.2 million home as it sits today. The developer was putting five town homes on that project, each selling for about $800,000. So it's taking, you know, one home, making it five.

[1:22:03] affordable housing and however there is a MHAF mandatory housing affordability fee that

[1:22:12] builder would have to pay of $125,000 on top of everything else that they're paying and

[1:22:18] it just made the project not feasible and the builder passed.

[1:22:27] should probably be eliminated if you're in low land value areas which there are MHA fees

[1:22:34] in the low-land value area and or maybe you've capped the sales price and say if

[1:22:40] you were to keep your sales prices below a certain amount you will not have to pay these fees because

[1:22:47] it doesn't make a lot of sense to paying you know low income housing fees on low

[1:22:57] Next slide, modular housing.

[1:23:00] I think one of the folks to talk spoke about that and we do modular

[1:23:05] housing, so the rest of slides will be mostly custom construction.

[1:23:08] This will not be developer or builder loans.

[1:23:11] This'll be loans to consumers.

[1:23:12] We provide modular

[1:23:15] housing loans

[1:23:16] to consumer. This is where consumer would want a modular home built for themselves.

[1:23:21] We have some really nice financial,

[1:23:23] modular housings treated just like a stick built home.

[1:23:25] It's a great way to build a house.

[1:23:27] I'm sorry. I've seen hands up. Do I need to? No, I mean, ask my committee members to wait.

[1:23:32] We're just going to let you finish your slides and then we'll open up our questions.

[1:23:35] But I got you guys.

[1:23:36] We have some great financing for a consumer that wants to build a modular home.

[1:23:42] They could come in with as little as three and a half percent down up front.

[1:23:46] We will pay for the building costs through the loan and it actually works really well.

[1:23:52] It is limited.

[1:23:53] I'll say that.

[1:23:54] We're one of the specialists in the state.

[1:23:57] It's very much a bank or maybe credit union product because the interest rate risk for

[1:24:06] We can handle that within our balance sheets,

[1:24:08] but most blenders, just standard letters cannot do that.

[1:24:11] So we love the product,

[1:24:14] but we're fearful of the project, and here's why.

[1:24:18] The hole was built in a factory.

[1:24:20] And what happens is that some of the, the large manufacturer home dealers,

[1:24:26] the mobile home dealer that say that have modular financing, not such a big deal.

[1:24:31] But there are others who want significant deposits upfront from the consumer.

[1:24:37] And they're building these home in a factory.

[1:24:39] You can't tell what, you know, two by sixes are our borrowers, what?

[1:24:44] Walls are borrowers versus other borrowers.

[1:24:49] when you're advancing these funds, but there's nothing at the home site, you've had a lot of risk.

[1:24:55] In some of these modular dealers will want up to half over time, half of the loan or the customer

[1:25:03] funds to be paid to them before there is even one piece of wood at that house.

[1:25:08] And so we have experienced some pretty devastating losses. We have in person our bank,

[1:25:16] where they're having modular homes built, but unfortunately, the modular builder,

[1:25:23] their finances weren't in line, and they ended up filing bankruptcy. And the bankruptcy court says,

[1:25:30] we don't know what two by sixes are yours, borrower. We don t know that walls are yours.

[1:25:35] I'm sorry, you're just out. In real extreme cases, we actually had one borrower who advanced

[1:25:44] manifest this builder, modular builder and lost it all. And we've had a number of them happen that

[1:25:51] way and so we're very, we will do these loans to some of the manufacturer home dealers,

[1:25:57] but we'll worry about doing it to others because we have no idea what financial shape these dealers

[1:26:04] And so I put a couple of recommendations down.

[1:26:08] Maybe there's bill to performance bonds,

[1:26:10] maybe requirements, maybe they're required

[1:26:14] to maybe have escrow, the money in escrows,

[1:26:17] and we can then, once the walls and stuff

[1:26:21] are delivered to the site, we could fund off of there.

[1:26:23] So that way we're going to identify what's their stuff.

[1:26:28] And, you know, let's just.

[1:26:30] in the factory itself, but it is a good product.

[1:26:34] It does save money.

[1:26:35] It's just a lot of risk with the way

[1:26:37] that deposits are being handled.

[1:26:39] Manufacturing housing, we're actually

[1:26:41] the state's largest lender.

[1:26:43] And you can see that the financing options,

[1:26:45] we have VA financing, 3.5% down financing.

[1:26:49] 5% Down to Financing.

[1:26:51] We have a great draw process in place that allows consumers to to come out of pocket with very little money

[1:26:58] It is a really great product of keeping values low

[1:27:02] I would say we mostly see it is as far as custom construction and go-ons go in the rural areas

[1:27:09] I think I'd like to see maybe that this is only an opening up for maybe

[1:27:15] Cities and instead of just allowing stick belt

[1:27:18] Maybe they allow manufactured housing if you haven't been in a matter

[1:27:21] factory house, late house home lately, you'd be shocked how nice some of them are and maybe a

[1:27:28] lot of a more. So my recommendation would be to think about pushing on zoning where maybe

[1:27:34] a double wide manufactured home, which looks very similar to a single family home would

[1:27:39] be allowed in those different areas. And then regarding the ADU pieces, I would think the number

[1:27:49] First of all, it is working and they are being built.

[1:27:51] I think that's due to the house bill that was passed.

[1:27:55] I do think you do have some municipalities that are fighting you if it was this committee.

[1:28:00] They seem to come up with new coverage rules, tree ordinances, different things that basically

[1:28:07] seems to be from a builder's perspective trying to reduce the amount of ADUs that were being

[1:28:15] built in their cities.

[1:28:18] And I think the number one thing I recommend is, is what's happening is is when you're

[1:28:24] building these ADUs, you, to be,

[1:28:27] you condominiumize the lot and to

[1:28:31] be able to sell them individually.

[1:28:33] The challenge was that condiment is a lot expensive and sometimes it limits

[1:28:40] the financing that a borrower can get.

[1:28:43] It also sometimes limits the numbers of ADU's that can be built on the home.

[1:28:47] on the property. So, for instance, when you're doing a condaminomized type of ADU project,

[1:28:53] you really don't want to go over three. Now, the ADu house bill allows up to six,

[1:29:00] or the middle housing bill, allows us up six ADUs, but you won't wanna do that when

[1:29:04] you are condaminomizing the lots, because you'll lose your financing that the consumers can have.

[1:29:13] Change those into unit lot subdivisions where you're actually having just a standard lot and that just keeps the takeout financing wide open. There are no condo fees.

[1:29:25] There's no, you know, all the costs that go into putting the homeowners associations together. All of the reviews that have to be done and you really getting to the same place.

[1:29:43] I can, if I unit lot subdivision it, I

[1:29:46] can sell the same house on the

[1:29:47] same basically lot. And it's just

[1:29:49] this legal definition that is a

[1:29:51] differentiator that really makes it

[1:29:54] difficult. What I like about the

[1:29:56] unit lots subdivision, it covers both

[1:29:58] the house bill 1110 and the 8u 1337.

[1:30:02] You kind of kill two birds with one stone.

[1:30:05] That's why thank you done. Thank you so much. All right. I'm gonna go to senator Gainerd followed by senator Alvarado senator gainer

[1:30:14] Thank You madam chair, so

[1:30:18] Don I did look up what the manufacturer and

[1:30:22] For housing affordability.

[1:30:24] I mean in other words, you're trying to make it more expensive by providing money for affordable housing

[1:30:32] not so much on the manufacturer this was on that on

[1:30:37] the mandatory housing. Oh yeah, mandatory

[1:30:39] housing you're making it more expensive even

[1:30:41] affordable homes to support affordable

[1:30:44] homes. Okay, I just when I looked up what it

[1:30:47] was. That was my application. Yes. All right.

[1:30:49] Thank you. Senator Alvarado. Thank

[1:30:53] you

[1:30:55] It's interesting that you brought up mandatory housing affordability. It is the City of Seattle's

[1:31:00] second most effective program at building housing for low-income people and had built

[1:31:08] 3,600 homes with 5,000 in the pipeline.

[1:31:14] It also interesting you that brought it up from a banker's perspective because of all of the costs

[1:31:22] known and predictable cost that hasn't changed over many years. I'm wondering if you can talk a

[1:31:28] little bit more about other costs, whether the cost of capital or investor appetite,

[1:31:36] other things that are actually fluctuating and changing project viability. Because again,

[1:31:43] that one affordability program has been baked into the code for many

[1:31:51] I agree. This is a affordable housing in our state. Yeah, I'd agree it's just that I think that

[1:31:56] I would recommend that maybe there's a cap on a price cap that it instead of doing it on

[1:32:03] a $500,000 home, for example, which is affordable, housing is maybe it starts that that comes in when

[1:32:10] that's $1 million home or a nine hundred thousand dollar home. It just seems kind of, you know,

[1:32:21] And it could have gone up and we provide, you know, the five more unit for more units. So that was it. I don't think get rid of it, but

[1:32:30] I would just say the biggest cost is time,

[1:32:34] and then time is risk, you know,

[1:32:36] because all of a sudden you think

[1:32:37] you're going into one market versus the other.

[1:32:39] I think there are a lot of permitting fees,

[1:32:43] sewer connection fees.

[1:32:44] Sometimes the city will say,

[1:32:46] you can't connect where you are at today

[1:32:49] and it's 25 feet off the property.

[1:32:51] We're gonna want a line improvement of 110 feet.

[1:32:54] on the other side for you to be able to connect to water.

[1:32:59] There's a lot of times there's delays of months

[1:33:01] on a completed home where the utilities folks aren't able

[1:33:05] to get out and get that utilities connected.

[1:33:08] And just it's just really on that timing delays.

[1:33:11] Yeah, the permitting fees are somewhat kind of well known

[1:33:15] to, you know, and you kind

[1:33:17] of know what you're going into there.

[1:33:18] I would say the thing would be is, for instance,

[1:33:22] sidewalk improvements. There was no sidewalk there to begin with, and now they want a sidewalk,

[1:33:27] and that 100% of that cost is applied to that builder slash that owner, whereas that sidewalk

[1:33:36] I would argue will be used by many. And I think clearly improvements you see, I

[1:33:41] would think some of those costs could be maybe shared by the community as opposed to being taxed

[1:33:51] Thank you. I actually do have a bill on the sidewalk permitted thing. My question is

[1:33:56] You mentioned Seabrick is able they were able to build during the application process somehow. It could you expand on it?

[1:34:03] Yeah, basically what they seem to allow allowing him to do is kind of work

[1:34:09] You know the building and the development all happen in kind more at the same time

[1:34:14] So what happens is is they are letting them get they've got their development permit

[1:34:20] and then instead of making them finish the last sidewalk and the whole development process,

[1:34:27] for example, they're saying it's close enough now that we're going to allow you to segregate

[1:34:33] it into lots. And then at the same time, we'll allow to get a building permit and actually start

[1:34:39] building, even though the development project isn't completely signed off. So they are shorting

[1:34:50] Thank you.

[1:34:51] Thank You.

[1:34:52] Well, thank you so much, Don, for kind of lifting up the lid on the financing side of

[1:34:57] this.

[1:34:58] It's not something that we typically delve deeply into in the housing committee, but

[1:35:02] it is something obviously linked and important for us to understand.

[1:35:06] I know it was just an overview.

[1:35:08] We could learn a lot more, and I do appreciate your insight and being taking time out of

[1:35:12] your data talk to us, so you can tell Jessica Fortesky that you did a good job.

[1:35:16] Yeah, you can do whatever you would like. We have another speaker who's going to talk about financing. So you are welcome to sit in and listen to that conversation. Okay. Thank you, Don. And with that, we will hear from Steve from cashmere Valley Bank.

[1:35:33] Thank You Steve for joining us as well. Please proceed.

[1:35:42] go over to top of what Don had to add on financing and the difficulties between

[1:35:48] around the 80 moose and with lots of our homes. I can hit some top top line

[1:35:54] numbers about like mortgage production estate, but I'm not sure that's exactly

[1:35:57] what we need to be looking for in this moment. So I kind of leave that up to

[1:36:01] you, Madam Chair, if you want to hear those numbers or if

[1:36:04] you just want a press on.

[1:36:05] Um, sure, some of those top line numbers and then I thought it was interesting, the financing challenges around factory built. If you have anything to add on that, that would be useful.

[1:36:16] The,

[1:36:18] The having to fund on the factory bill, so having some fun on 30, 40%, but we told them out and have no improvements on a lot. It's, it's just not something of traditional construction financing ever really anticipated.

[1:36:35] And you can develop a program around it, but the regulators, you know, pretty high scrutiny on that.

[1:36:44] And rightly so, because, like, on said, we can't have a builder in the Midwest have

[1:36:50] a factory that goes bankrupt or say by a tornado and you've got really no.

[1:36:56] So it's, it is a risk for the bank.

[1:37:00] Is it possible to have like an insurance that the factory belt can cover a certain cost or a

[1:37:07] lean on the property? Is there any? I don't have a lean

[1:37:10] on a property, but you've only got the value of a bird and you could have if you got, you know,

[1:37:16] we've got a billion dollars, $100,000, like you run, funded $150, or $200, 000 to get the

[1:37:28] actual flower after the event and you have that's what I understand.

[1:37:35] And then could you get any, could require them to have some version of builder risk, maybe, but they probably will just go to the next test.

[1:37:45] It was, it was bank doesn't require.

[1:37:47] Sure.

[1:37:49] Okay, and then any top line trends that you had that. You're seeing in your community.

[1:37:54] And then I'll have to Senator Gaynor if he has any specific questions because I know you're in his neck of the woods.

[1:38:00] But yeah, we hear a hometown, I see him all the time in the school dance.

[1:38:03] How are you serving?

[1:38:08] If we just want to talk 2025, this top high level mortgage origination data.

[1:38:15] There were 175,441 mortgages originally in Washington.

[1:38:21] of them, 78,515 were for a principal residence purchase.

[1:38:28] So, and the other ones are broken out, cash out home improvements.

[1:38:33] You know, we finance the system long, not a lot of activity like that.

[1:38:38] People have went wrong with 3% noise.

[1:38:40] So.

[1:38:41] The banking sector is meeting the needs of the people who can't qualify and talk a lot about the affordable benefits.

[1:38:49] And we have the same challenge.

[1:38:52] We're showing them does this, which is where we went for principle that that everybody else had.

[1:38:57] You have to earn 20 30 40% over the way into accounting to do a little for the moving sale price home.

[1:39:05] And both prices are up 5%.

[1:39:09] for 2025 or 2026 and that 5% is enough to permanently price the median wage

[1:39:17] or a completely out of everyone. So we're very cognizant of that. Are you

[1:39:24] seeing any trends? Oh I have Senator Gaynor. Senator

[1:39:27] Gayner go ahead and then I'll ask my question.

[1:39:30] Thank you, Madam Chair, and see if I was just going to, I think you're kind of touching on what we've had the discussion before about how people are getting priced out of the market. I mean, just the slight increases.

[1:39:41] How many people or once again, you know, left out, of, the, uh, purchasing opportunity. So do you want to talk to some of trends that you are seeing, like, in and around the.

[1:40:00] So, again, Flint County, we have some very expensive land because there's very little other private lands. So there is land values for building law almost double here, which can be in Franklin and Benton County.

[1:40:21] So what it when is available is expensive and then we're in primarily agriculture based economy show the median household income for trying to count according to the Census Bureau is just over 99,000.

[1:40:33] We have to make a hundred and fifty two thousand dollars to be able to afford the medium sales price from.

[1:40:40] So there is a vast.

[1:40:44] Yeah, I mean.

[1:40:45] It's, and it's there as from the banking sector you're okay.

[1:40:50] 50 year mortgage book at today's rates that literally only drops the payment by about $400, but the individual that's not enough to help.

[1:41:02] So it's, you know, when we talk last year Keith and I watch it through that presentation.

[1:41:16] There's nothing we're going to do about in the ground available land shrine town.

[1:41:20] It's, I mean, the Forest Service isn't going about that forest,

[1:41:22] and we should make. So it's in all of everything that grows, you know.

[1:41:28] More flexible term for the bank and sector sure, but they just end up

[1:41:33] locking those people in between two or three times in interest over 50 years of what they

[1:41:41] It needs to be in all of everyone who has tried to address some of these.

[1:41:46] Some of them are so structural, they may not be an offensive.

[1:41:51] Any other questions from committee members?

[1:41:54] All right. Now I'll ask mine.

[1:41:57] Are you seeing and maybe you can't elaborate on this,

[1:42:00] but one of the presenters before you talked about more people on the east side of

[1:42:04] the mountains buying and then commuting.

[1:42:08] Longer distances for works. Are you seeing folks that are kind of coming from outside of your area to buy and actually having to commute?

[1:42:16] People landing here usually are working fully remote. That's more, but could it task counting?

[1:42:23] You know, Rosalinda Bay? Okay.

[1:42:26] It's, I mean, it's two hours and ten minutes down from Seattle.

[1:42:29] Thank you, that's all for the good day. Yeah. But it, you know it was closer to 75 minutes to happy minutes.

[1:42:37] Okay.

[1:42:39] Okay, we have a presence over there, and we are seeing it.

[1:42:43] I have approved loans for people that work in downtown Seattle.

[1:42:48] Yeah.

[1:42:49] I'm in residence.

[1:42:50] We play all around for someone.

[1:42:52] And then those are people

[1:42:53] that potentially could have incomes reflected of the county King County

[1:42:57] and be able to be meet the loan requirements for a home in your area,

[1:43:02] which will then put pressure on your community members who are being priced out.

[1:43:06] as well so okay well thank you for sharing that overview and that information was nice to have

[1:43:13] the committee be able to just ask some questions of you so we appreciate that and thank

[1:43:17] you both panelists on this topic oh senator gainer did you have one last question

[1:43:23] actually if i could just add a comment you know what we've seen in our area that some of the

[1:43:34] complicates that the housing availability issue. That's one of the bigger issues that even like

[1:43:40] I know Leavenworth is a big place where a number of people have come that they're consuming homes

[1:43:46] without you know taking basically taking them off the market for for locals. So that's probably

[1:43:52] more of an impact that we're seeing because people do have the money but not from the affordable

[1:44:03] Okay, well, thank you again, and we will move to our next speaker who is Lauren McGowan.

[1:44:10] She's the Executive Director of the Local Initiative Support Corporation.

[1:44:15] Is she available? Oh, you're here in person.

[1:44:18] Hello, Lauren. Thank you so much for being here.

[1:44:21] Awesome. Thanks, Madam Chair, members of The Committee.

[1:44:26] Again, my name is Laura McGown, Executive director of LISC.

[1:44:30] Elisk is a national community development organization and CDFI, and we work here in Washington to

[1:44:36] accelerate housing and economic justice. As you've heard from all of our panelists today,

[1:44:42] we all know there's a huge need for more affordable housing, more funding is needed,

[1:44:47] and face extraordinary challenges, particularly coming from the federal level right now.

[1:44:53] And so today I want to talk a little bit about some of the ways that we are working directly

[1:44:59] to increase the capacity of developers on the ground to really leverage many of

[1:45:06] the policies you all have passed in recent years.

[1:45:14] absolutely need more funding to do this work.

[1:45:17] And we think that there are some bridges and tools

[1:45:22] that we can use to better link and connect the dots

[1:45:25] between all of the work that is being done across the state.

[1:45:30] One of ways that, we have seen this

[1:45:31] work happen is through, what we call,

[1:45:33] the list housing accelerator.

[1:45:35] It's a partnership with the Amazon Housing Fund

[1:45:38] to support emerging for-profit and nonprofit developers.

[1:45:43] It's an 18-month-long fellowship program that provides deep technical assistance combined

[1:45:50] with access to low-cost capital.

[1:45:53] And from this project, we have seen more than 50 organizations and fellows come through

[1:46:00] accessing over $18 million, thousands of hours of training, and most importantly, more

[1:46:13] Perhaps most importantly from this though is what we have seen is it is not just our emerging

[1:46:17] developers. It is our housing ecosystem that really requires us to think better and in a more

[1:46:26] coordinated way about what folks need.

[1:46:31] Oftentimes what we're seeing with these developers is really well-intentioned policies and funding

[1:46:38] Get into the hands of folks early on but often a project gets stuck

[1:46:42] So that could look like a college or a church that has land but doesn't know how to turn it into housing a

[1:46:49] Project that is a public award, but may not be able to

[1:46:53] access that award and that cash for many months.

[1:46:57] A balance sheet of a developer that is unable to really

[1:47:02] show a lender that they are able to build and be trustworthy

[1:47:09] of additional financing.

[1:47:12] So there's just a ton of barriers,

[1:47:13] both in the project side, as well as

[1:47:16] in organizational side that oftentimes getting in

[1:47:20] the way.

[1:47:21] This is where technical assistance, capacity building and really creative financing tools

[1:47:27] can come into play to help accelerate housing production across our state.

[1:47:33] So, you know, again, bottom line, we need more funding and we all recognize the environment that we're in.

[1:47:40] So a few things that believe we can do together.

[1:47:44] One is to turn more land into housing.

[1:47:48] We all know that there's been a lot of work around faith-based organizations to do that.

[1:47:53] The state legislature commissioned a report for community colleges a

[1:47:59] few years back to look at how to use their land.

[1:48:03] And the reality is there are opportunities, but we need to make the connections between

[1:48:09] those land opportunities.

[1:48:11] The developers who have the ability to develop that land and the financing.

[1:48:17] And that's where CDFIs and intermediaries like a list or an enterprise can really help

[1:48:22] to bridge some of those barriers.

[1:48:25] But we've got to fund it.

[1:48:26] We've gotta be able to, make that work happen so that we're not just leaving promising

[1:48:32] on the table. We need to make sure that we are keeping funded projects moving. You heard

[1:48:40] earlier from Ryan Habitat about projects maybe getting an initial appropriation but taking

[1:48:49] In the meantime, there's so much work that needs to be done.

[1:48:54] There's costs that are incurred.

[1:48:56] So we've got to do more, not only to coordinate,

[1:48:59] but to ensure that if one piece of the funding puzzle

[1:49:02] is there, that we're able to leverage other pieces.

[1:49:08] As a CDFI at LISC, we have access to national capital

[1:49:11] that can bring into Washington, and we

[1:49:13] want to bring in to Washington.

[1:49:18] to leverage that with the local funding that exists.

[1:49:24] Simply for things like we don't have contracts in place

[1:49:28] through some of our state agencies.

[1:49:30] So there are ways even without significant additional funds

[1:49:34] that we can keep projects moving faster.

[1:49:38] We need to invest in developers and in the owners.

[1:49:41] Yes, we need more land.

[1:49:43] Yes we needed access to additional resources.

[1:49:47] our ecosystem really requires that we continue to invest in both the nonprofit and for-profit

[1:49:55] mission-aligned developers. One of the things that that

[1:49:58] we are seeing is that, we've got a lot of folks who have been developing for a long time who are

[1:50:03] really struggling with their portfolios and so looking at how we do asset management

[1:50:17] a healthy ecosystem and more housing on the ground is really essential.

[1:50:24] As I mentioned, there are private dollars out there.

[1:50:27] We've got to do more to link the public and private sectors

[1:50:30] together to leverage the funding that exists.

[1:50:35] And then, as you've heard from some of my colleagues,

[1:50:37] really thinking about some

[1:50:39] of the ways in which we provide additional

[1:50:41] down-to-payment assistance and long-term subsidies

[1:50:45] for the lowest-income earners is super essential.

[1:50:50] A lot of this is about connecting the dots, right?

[1:50:53] How do we take training that is happening

[1:50:56] in one part of the state and ensure

[1:50:58] it's happening in other parts?

[1:51:00] How we look at the land and opportunities that exist

[1:51:05] where maybe we've written a report as a state,

[1:51:07] we have outlined what the capacity issues are.

[1:51:11] We've got to act on some of those things.

[1:51:15] Many of you have heard about the Black Home Initiative,

[1:51:17] a model in the Puget Sound region,

[1:51:20] that is really brought together a lot of the ecosystem partners.

[1:51:24] We've had a lotta learnings through that,

[1:51:26] and one of them is that building

[1:51:30] a deeply affordable home ownership projects is challenging,

[1:51:35] but it's not impossible.

[1:51:36] It's about bringing those partners together,

[1:51:39] connecting the dots, and then leveraging the capital that exists.

[1:51:44] That can be done in a number of ways.

[1:51:47] Thinking about where we can better use

[1:51:51] revolving loan funds, guarantees,

[1:51:54] and flexible financing is something that

[1:51:57] we're thinking about every day in order to

[1:51:59] unlock some of the capital that exists

[1:52:01] and we'd be really happy to talk to members of this committee

[1:52:06] and others to think about how we do that in

[1:52:09] a more scaled way so that we

[1:52:11] can begin to meet some

[1:52:14] goals. You all have done a lot. We've got a

[1:52:19] lot more work to do. The challenge is coming from the federal level cannot be

[1:52:24] understated and yet this is one of the regions that has the smartest and most

[1:52:30] talented people in the country and so I feel

[1:52:36] you know, deeply passionate about how we connect these dots,

[1:52:40] bring people together, really unlock the opportunities that currently exist.

[1:52:45] Thank you. Thank You Lauren. Do we have any questions from committee members

[1:52:51] of the few that we left? No? Okay.

[1:52:57] Well, thank you so much for your time.

[1:52:59] Thank you for being here today.

[1:53:01] I want to thank all the staff that are here,

[1:53:02] making this meeting happen for all of you there, virtual.

[1:53:05] We want just thank them that we have a full house here

[1:53:08] in person in the room.

[1:53:09] And thank for my committee members that were able to attend.

[1:53:12] I hope that this was informative and educational.

[1:53:15] And I know some of it was very fast to do appreciate that.

[1:53:18] But I look forward to seeing you in-person

[1:53:21] and for the rest of that, we are adjourned.

[1:53:24] Thank-you.

Senate Housing

Transcript