OLYMPIA — The question of how to produce more affordable housing is a tricky one as the cost to build and purchase a home remains high in Western Washington.
In Thurston County, the median price for a single-family home is around $500,000. If you want to make a 20% down payment on that $500,000 home — typically a recommended amount to avoid paying private mortgage insurance — you need to come up with $100,000.
But under a new plan announced by the state Department of Natural Resources — a plan that also might be taken elsewhere across the state — the agency is putting its land to work. The agency wants to offer its first residential ground lease to nonprofit home builder South Puget Sound Habitat for Humanity to “create permanent affordable home ownership,” said Krosbie Carter, a housing policy adviser with DNR.
“This is the first time we have explicitly sought this out on a large scale,” added DNR communications manager Kenny Ocker.
Carter, Ocker and South Puget County Habitat for Humanity interim Chief Executive Greg Laura met with The Olympian in late January near Meridian Road Southeast at Indian Summer Drive, northeast of Lake St. Clair and part of Lacey’s urban growth area. It’s there that DNR owns an undeveloped 28-acre plot of land.
The plan is to work out a ground lease with the nonprofit to aid Habitat for Humanity in its home building efforts, keeping costs low for them and the residents who eventually live there.
Buying 28 acres would cost the nonprofit millions of dollars, Laura said, but with a ground lease it’s a much different financial proposition.
“This is a fantastic opportunity that we want to explore here,” he said.
The goal is to build between 120 and 150 homes that would serve 400 to 500 people. He thinks they might break ground in two years, then spend another five to six years completing the development.
By leasing the land from DNR, Habitat can then lease it to the homeowner, who then only buys the house, but not the underlying land, he said. They also only pay tax on the house and not the land, Laura said.
In lieu of property tax, the homeowner would pay a leaseholder excise tax. However, DNR supports current legislation (Senate Bill 5967 and House Bill 2003) that would create a leasehold tax exemption.
Habitat currently serves low- and middle-income families who earn between 30% and 80% of area median income. For a family of four in Thurston County, 80% is $80,700, said Laura, citing recent U.S. Department of Housing and Urban Development figures.
One goal of a Habitat mortgage is to make sure the owner pays no more than 30 percent of their monthly income toward it, Laura said, but with average rents also high, some of their prospective clients find themselves moving from apartment to apartment, paying more than 30% or in some cases more than 50% of their monthly income on rent.
And their clients typically have good jobs — entry-level nurses, firefighters, police officers and teachers.
“They are making decent money, but not enough to afford a market-rate house,” he said.
In addition to supporting the leasehold tax exemption legislation, DNR is also trying to secure a $2.25 million capital budget request to help Habitat bring sewer to the site, which is 4,000 feet from the proposed development.
The site needs sewer because under current zoning it allows for one house per five acres. With sewer, it climbs to six houses per acre, DNR’s Carter said.
A portion of that capital budget request — $250,000 — would be used to study 37 other DNR sites, totaling 3,000 acres, to see if they would be feasible for housing, she said.
Other Habitat projects
Before they get to the project on Meridian Road, Habitat for Humanity is about to get to work on a 28-home development in Tumwater at 73rd and Henderson Boulevard, a 22-home project in Yelm, and later a 112-home development in Olympia on Boulevard Road.
The nonprofit is also about to select its next chief executive, Laura said. They have been searching since September and are down to three finalists, he said. Once the new CEO has been hired, Laura will return to being chief operating officer, he said.
