Is requiring new apartments to include affordable units the right move for Vancouver? It’s working in Redmond

Without the thorough economic analysis cities undertake before adopting the policy, it’s unclear whether mandatory inclusionary zoning would help here.

It is clear, however, that not enough affordable housing is being built in Vancouver. The city has only 22 affordable homes for every 100 low-income renters and a growing homeless population.

Redmond’s solution

Redmond wasn’t always a high-tech hub with towering apartment complexes and corporate headquarters. It used to be a town with lumber mills, chicken farms and dirt roads.

But when technology companies began to set up shop in the 1960s, housing costs rose. By the late 1980s, locals began to worry.

“As the Microsoft campus really started blossoming, we recognized the need to preserve some equity in terms of the growth,” Lefcourte said.

In 1993, Redmond adopted its mandatory inclusionary zoning policy that applies to most areas of the city. The policy has since created about 1,100 affordable units as the city has grown to a population of 77,490. (By comparison, Vancouver has more than twice the number of residents but a lower median income.)

In Redmond, developers can choose to build 10 percent of new units with rents attainable for people making up to 80 percent of the area’s median income, or $82,040 a year. They can include fewer affordable units if they are targeted toward renters who make 50 percent of the median, or $51,275. Or developers can choose to pay a fee instead, which goes toward other affordable housing projects. Of the last 100 projects or so in Redmond, only 3 percent of developers have chosen to pay the fee, but it’s brought in $8.75 million since the program’s start.

Building housing at lower rents doesn’t always pencil out, so Redmond offers density bonuses to let developers include more units in their buildings, bringing in more revenue to offset the cost.

The city also has a voluntary program that offers a property tax break for a certain number of years in exchange for lower rents.

Lefcourte said the mandatory inclusionary zoning policy has proven to be “an effective tool.”

“It may not be the appropriate tool for every community — the economic conditions matter — but it has been a rousing success in Redmond, so much so that we receive acclaim regionally and statewide for what this program has done,” Lefcourte said.

Figures show market-rate development has stayed strong in the city throughout the policy’s existence — a success the city attributes in part to a steady demand for housing.

According to a Redmond city spokesperson, Redmond’s housing stock has grown by 42 percent since 2010, compared to nearly 16 percent growth in the state and almost 20 percent in King County.

Lefcourte encourages other communities to undertake the economic analysis necessary to see if the policy would work for them.

“Even if you set it to something like literally just one affordable unit, that’s one more than you would have gotten otherwise,” he said.

Portland’s mandatory inclusionary housing policy has found some success by combining the requirement with a mishmash of financial incentives. One study commissioned included a hypothetical example where developers of a seven-story building required to include affordable units could save $800,000 in costs.

But that’s a best-case scenario, experts say.

Risks vs. benefits

When it works, mandatory inclusionary zoning not only creates more affordable housing; it also diversifies neighborhoods and reduces commutes. But if a community doesn’t have the right economic environment, the policy can have the opposite effect, producing less overall housing and higher costs, experts say.

A community must already have a high demand for market-rate housing to ensure that developers continue to build in the region even with the requirement for affordable units, explained Michael Wilkerson, a senior economist with ECONorthwest who has studied inclusionary zoning.

Mandatory inclusionary zoning is a fixed policy, while the dynamics of market-rate real estate development are ever changing, according to a 2016 study co-authored by Wilkerson. Costs go up and down. Housing needs change. Development levels fluctuate.

“So even if the policy is generally well understood, calibrated, at that point in time, if you’re not updating it frequently, that risks unintended consequences,” Wilkerson said.

Vancouver’s crisis

It’s those unintended consequences that worry Andy Silver, CEO of the Vancouver Housing Authority, a quasi-governmental agency that builds and operates affordable housing in Clark County.

Clark County needs more than 50,000 units of low-income housing by 2044 to keep up with the state’s projected housing needs, according to a state report.

“The reason we’re losing ground is because of this overarching housing market problem where we have more people wanting to live in our community because it’s so great than we have housing supply,” Silver said.

Vancouver so far has relied on voluntary programs, primarily a tax break for apartment builders known as the multifamily tax exemption. But only nine of the 49 projects that have received the tax exemption have been for people earning 80 percent of the area median income ($63,150 for one person or $90,200 for a household of four in Clark County). The rest of the projects targeted renters making the median income or higher.

Vancouver City Councilor Bart Hansen acknowledges that the tax exemption has not produced enough affordable housing.

“We wouldn’t have gone to the affordable housing levy if it was,” he said.

In 2016, Vancouver voters passed the levy to fund affordable housing options, which raised $42 million over seven years. This year, voters renewed the levy, which is projected to raise $100 million over 10 years.

Mandatory inclusionary zoning hasn’t come up in the Vancouver City Council’s discussions about affordable housing, both Hansen and former City Councilor Alishia Topper said.

Topper served on the Vancouver City Council from January 2014 until December 2018, when she became Clark County treasurer. During that time, she led the city’s affordable housing task force.

Although the task force didn’t consider mandatory inclusionary zoning back then, she thinks it’s worth considering now.

“We hadn’t seen the multifamily development boom that’s currently occurring within the city limits,” she said. “I think when you have a really strong housing market and there’s a lot of new construction — especially in the multifamily sector — that it’s a better opportunity to use a tool like inclusionary zoning.”

From 2016 to Dec. 1, 2023, the number of yearly building permit applications the city of Vancouver has received to build apartments has more than doubled — growing from 40 to 90, according to the city’s development project dashboard.

Topper emphasizes that mandatory inclusionary zoning policies have to be tailored to communities. She also would like to see units for those who make less than 80 percent of the area median income.

Hansen said he favors incentives over mandates but won’t rule anything out before discussing it. In addition to serving on the Vancouver City Council, Hansen is executive director of the Building Industry Association of Clark County, a trade group.

“What I don’t want to do is dismiss discussions, because if you don’t discuss it, you’re not moving the needle forward,” Hansen said. “You need to get everything on the table, discuss it and then go from there.”

On that, Hansen and Topper agree: It’s important to continue conversations about ways to increase affordable housing. Topper thinks Vancouver and even other cities in Clark County should explore mandatory inclusionary zoning.

“I know nonprofit developers are doing as much as they can,” she said, “but without the private sector helping to add inventory, we’re not going to make enough progress.”