06-06-2023 Council Packet - SpecialCITY OF
Federal Way
Centered on Opportunity
CITY COUNCIL
SPECIAL MEETING AGENDA
City Hall — Council Chambers*
June 6, 2023 — 5:00 p.m.
1. CALL MEETING TO ORDER
2. PLEDGE OF ALLEGIANCE
3. STUDY SESSION
a. Housing Action Plan Implementation Code Amendments*
• Staff report: Sarah Bridgeford, Community Services Manager, and
Chaney Skadsen, Senior Planner
*this item is on the regular meeting agenda for Council action.
4. ADJOURNMENT
Special Meetings may be recorded and televised live on Government Access Channel 21 or FW YouTube. To view agenda
materials, public comment options and to watch meetings online please visit www.cityoffederalwaV.com.
*Remote attendance available via Zoom meeting code: 938 0263 0822 and passcode: 370773
COUNCIL MEETING DATE: June 6, 2023
ITEM #:
CITY OF FEDERAL WAY
CITY COUNCIL
AGENDA BILL
SUBJECT: HOUSING ACTION PLAN IMPLEMENTATION CODE AMENDMENTS: INCOME RESTRICTED
AFFORDABLE HOUSING REQUIREMENTS
POLICY QUESTION: Should the City Council make added changes to FWRC 19.110.010 (Affordable Housing)
to improve housing production in the City Center and Community Business zones.
COMMITTEE: N/A MEETING DATE: N/A
CATEGORY:
❑ Consent
❑ City Council Business
STAFF REPORT BY: ,Keith Niven, Director
Attachments: 1. Staff Memorandum
❑ Ordinance ❑ Public Hearing
❑ Resolution ❑ Other
1 I DEPT: CD
Options Considered:
1. Approve the proposed Ordinance as drafted
2. Reduce the percentage of affordable units from 5%
3. Specify the tenure of the affordable units is 50 years rather than "life of the project"
4.... Allow fee in lieu of as an option
MAYOR'S RECOMMENDATION: Option 1.
MAYOR APPROVAL: DIRECTOR APPROVAL:
•C' mit Cc •fl 3 afe
itial a Inisii, . Da,
COMMITTEE RECOMMENDATION: N/A
Hoang Tran, Committee Chair Jack Dovey, Committee Member Erica Norton, Committee Member
PROPOSED COUNCIL MOTION: N/A
(BELOW TO BE COMPLETED BY CITY CLERK'S OFFICE)
COUNCIL ACTION:
❑ APPROVED
COUNCIL BILL #
❑ DENIED
First reading
❑ TABLED/DEFERRED/NO ACTION
Enactment reading
❑ MOVED TO SECOND READING (ordinances only)
ORDINANCE #
REVISED — 1/2022
RESOLUTION #
44k
CITY OF
Federal Way
CITY OF FEDERAL WAY
MEMORANDUM
DATE: May 23, 2023
TO: City Council
VIA: Jim Ferrell, Mayor
VIA
FROM: Keith Niven, AICP, CEcD "_
Community Development Director
Sarah Bridgeford, Community Services Manager
Chaney Skadsen, Senior Planner
SUBJECT: HAPI Code Amendments and Income Restricted Affordable Housing
Requirements
On May 16, 2023, the City Council held a public hearing and first reading of the Ordinance (Council
Bill 850) containing proposed changes to Title 19 of the Federal Way Revised Code (FWRC) in
response to the recommendations made by Heartland, LLC. The proposed revisions are part of the
City's Housing Action Plan. This effort is funded through the Housing Action Plan Implementation
grant by the Department of Commerce and is aimed at implementing Strategy #5: Ensure that
financial and regulatory _ incentives for mixed -income housing are effective, and Strategy #6: Review
school impact fees on multifamily housing with the objective to improve the production of housing
in the City Center Core, City Center Frame, and Community Business zones.
As part of the discussion of the proposed Ordinance, the City Council asked for some additional
information and alternatives to the proposed changes to FWRC 19.110.010 (Affordable Housing).
Background:
The Federal Way Revised Code contains affordable housing regulations pursuant to the provisions
FWRC 19.110.010. The affordable housing regulations create income restricted units by requiring
developers to set aside a percentage of housing units to be sold or rented at below -market prices.
The current provisions read as follows (highlighting added):
(2) Affordable housing defined. "Owner -occupied affordable housing" means dwelling units
that are offered for sale at a rate that is affordable to those individuals and families having
incomes that are 80 percent or below the area median income (AMI). "Rental affordable
housing" means dwelling units that are offered for rent at a rate that is affordable to those
individuals and families having incomes that are 50 percent or below the area median income
(AMI).
(3) Multiple -family developments; senior citizen housing; assisted living facilities; townhouse
development; zero -lot line townhouse development; mixed -use projects; and cottage housing
in multifamily zones. New projects involving 25 dwelling units or more are required to
provide affordable dwelling units as part of the project. At least two dwelling units or five
percent of the total number of proposed units, whichever is greater, shall be affordable.
Projects including affordable dwelling units may exceed the maximum allowed number of
dwelling units as follows:
(a) One bonus market rate unit for each affordable unit included in the project; up to
10 percent above the maximum number of dwelling units allowed in the underlying
zoning district.
(5) Duration. An agreement in a form approved by the city must be recorded with King County
department of elections and records requiring affordable dwelling units which are provided
under the provisions of this section to remain as affordable housing for the life of the project.
This agreement shall be a covenant running with the land, binding on the assigns, heirs and
successors of the applicant.
Since these code provisions were added in 1997, 85 income -restricted units have been created to serve
low income (50%>80% AMI) and very low income (30%>50% AMI) residents. See a list of the
project specific information attached as Table 1.
The report prepared by Heartland included a recommendation to remove the affordable housing
regulations for the City Center -Core, City Center -Frame and Community Business zones as a measure
to reduce the cost for developers and achieve more multifamily development in the City of Federal
Way.
Affordable Housing Regulations & Inclusionary Zoning in the Region
Not all cities have a requirement for income -restricted affordable housing, sometime referred to as
inclusionary zoning or inclusionary housing requirements. Staff put the following Table together to
provide information on inclusionary programs.
Requirement/Incentive
Seattle
2.1% - 7% (SMC 23.58C.050 Table A)
Bellevue
Voluntary — extra density (Chart 20.25D.090)
Auburn
Kirkland
10% @ 50 AMI (KMC 112.15)
Kent
Sammamish
10% @ 80 AMI in Town Center
Renton
Federal Way
5%
Redmond
10% @ 80 AMI or 5% @ 50 AMI
Shoreline
10% @ 60-70 AMI (MUR-35 zone)
Burien
Issaquah
5% MC 18.21.0.0)
Des Moines
Bothell
10% @ 50 AMI MC 12.64.105 4
SeaTac
Newcastle
5% @ 50 AMI MC 18.38,020
Tacoma
2
Housing Need by Income Band
As part of the Periodic Update to the Comprehensive Plan, the city is mandated to "plan for and
accommodate housing affordable to all economic segments of the population of this state, promote a
variety of residential densities and housing types, and encourage preservation of existing housing
stock." RCW 36.70A.020(4).
The City has a housing target of 11,260 units by 2044. The breakdown of those housing units by
income band is determined by the Countywide Planning Policies and is outlined in the Table below.
Total
Non PSH 0-30%
PSH 0-30%
>30-50%
>50-80%
>80-100%
>100-120%
>120
11,260
1,799
946
842
208
981
1,112
5,372
% of
total
16%
8%
7%
2%
9%
10%
48%
The income bands are categorized by AMI, see Table 2 in the attachments for the 2023 Seattle -
Bellevue, WA HUD Metro income limits by household size for low income, very low, and extremely
low-income households. The maximum rent limits for income -restricted housing by income band
from studios, one bedroom, and two bedrooms are attached as Table 3.
Approximately 9% of the future housing needed by 2044 are low-income and very low-income. The
affordable housing requirements per FWRC 19.110.010 is the only tool available to help the City
reach its affordable housing targets in the low-income and very low-income income bands over the
next 20 years.
Example Scenario Anal
Development Example: Apartment complex with a total of 233 rental units in the Community
Business zone. The apartment is made up of 18 studios units, 150 one -bedroom units, and 65 two -
bedroom units and requires 378 parking spaces.
Scenario 1, Current Code: In this scenario the developer would be required to provide 5% affordable
housing units at 50% AMI and would be eligible for construction cost savings for the removed parking
requirements for the affordable housing units.
Assuming the following proposed market rate rents and an even proportion of income restricted
affordable units by size results in a monthly cost of $12,283 to the developer to provide 12 income -
restricted affordable units at 50% AMI. On an annual basis the cost to restrict this units are $147,396.
Neither of these calculations address changes in inflation. For this scenario, the cost of the developer
is ongoing for the life of the project, for context, if the life of the project were to be 50-years
operational cost would be approximately $7.4M.
3
Monthly
Monthly
Revenue
Market
Revenue without
with 5%
Monthly
Total
Rate
Affordable
Affordable
50% AMI
Affordable
Cost to
Unit
Rent
Housing
units
Rent
Housing
Developer
studio
18
$ 1,786
$ 32,148
1
$ 1,132
$ 31,559
$ 589
1-BR
150
$ 2,230
$ 334,500
8
$ 1,213
$ 326,873
$ 7,628
2-BR
65
$ 2,707
$ 175,955
3
$ 1,456
$ 171,889
$ 4,066
Total
233
$ 6,723
$ 542,603
12
$ 3,801
$ 530,321
$ 12,283
The developer would benefit from the proposed provision to remove the parking requirements for the
income -restricted affordable housing units created. Assuming an average parking stall costs $65,000,
the developer would have an upfront cost saving of $1,226,875.
Total Unit
Affordable
Units
Parking Ratio by Unit
Size
Parking Cost
without
Affordable
Housing
Parking Cost
Savings with
Affordable Housing
studio
18
1
1.25
$ 1,462,500
$ 73,125
1-bedroom
150
8
1.5
$ 14,625,000
$ 731,250
2-bedroom
65
3
2
$ 8,450,000
$ 422,500
Total
$ 24,537,500
$1,226,875
The community would benefit from the 12 income -restricted affordable housing units created to serve
households with extremely low -incomes per year that otherwise may not find affordable housing.
Scenario 2, Reduced Percentage of Affordable Units: In this scenario the developer would be
required to provide less than the current 5% affordable housing units at 50% AMI, such as 4% and
would still be eligible for construction cost savings for the removed parking requirements for the
affordable housing units.
Assuming the following proposed market rate rents and an even proportion of income restricted
affordable units by size results in a monthly cost of $9,826 to the developer to provide 10 income -
restricted affordable units at 50% AMI.On an annual basis the cost to restrict this units are $117,912.
Neither of these calculations address changes in inflation. For this scenario, the cost of the developer
is ongoing for the life of the project, for context, if the life of the project were to be 50-year the
operational cost would be approximately $5.9M.
Monthly
Monthly
Revenue
Market
Revenue without
with 5%
Monthly
Total
Rate
Affordable
Affordable
50% AMI
Affordable
Cost to
Unit
Rent
Housing
units
Rent
Housing
Developer
studio
18
$ 1,786
$ 32,148
1
$ 1,132
$ 31,677
$ 471
1-BR
150
$ 2,230
$ 334,500
6
$ 1,213
$ 328,398
$ 6,102
2-BR
65
$ 2,707
$ 175,955
3
$ 1,456
$ 172,702
$ 3,253
0
Total 1 233 $ 6,723 $ 542,603 10 $ 3,801 $ 532,777 1$ 9,826
The developer would benefit from the proposed provision to remove the parking requirements for the
income -restricted affordable housing units created. Assuming an average parking stall costs $65,000,
the developer would have an upfront cost saving of $981,500.
Total Unit
Affordable
Units
Parking Ratio by Unit
Size
Parking Cost
without
Affordable
Housing
Parking Cost
Savings with
Affordable Housing
studio
18
1
1.25
$ 1,462,500
$ 58,500
1-bedroom
150
6
1.5
$ 14,625,000
$ 585,000
2-bedroom
65
3
2
$ 8,450,000
$ 338,000
Total
$ 24,537,500
$ 981,500
The community would benefit from the 10 income -restricted affordable housing units created to serve
households with extremely low -incomes per year that otherwise may not find affordable housing.
Alternatives:
Staff have discussed this item and present the following four alternatives for the City Council's
consideration:
1. No change. The draft Ordinance currently reduces the fiscal burden of providing these
affordable units by removing the requirement for parking stalls. This benefit addresses the
construction viability as it removes costs from construction. It does not, however, address the impact
to the operating budget of the project.
2. Reduce the percentage of affordable units. The code currently requires 5% of the units to be
affordable. Although this is a relatively small number, the Council could reduce it to a lower number.
3. Specify the tenure is 50 years. FWRC 19.110.010(5) identifies that the affordable units need
to remain affordable for the life of the project. RCW 36.70A.540(e) identifies the units need to be
affordable for 50 years. City code could be revised to the 50-year duration specified in the RCW,
which would likely result in the project being required to be affordable for a shorter period of time
compared to the "life of the project."
4. Allow for a fee in lieu provision as an alternative to some or all of the continued affordabilitv
duration (cannot be enacted at this time). Under RCW 36.70A.540, cities may reduce the
affordability duration below 50 years, but only if they adopt a fee in lieu program with equal to or
better benefit to affordable housing than the 50-year duration. There are some cities in King County
that have a fee in lieu program for affordable housing. After reviewing a number of City codes, the
methodologies for determining the fee varies significantly. Should the City Council wish to select
this option, staff would recommend approving this ordinance as is and requesting a follow-up
ordinance with a fee in lieu provision. Adopting a fee in lieu provision cannot practically or legally
be accomplished at second reading of the Ordinance.
Recommendation:
Staff s recommendation is to approve the draft Ordinance as currently written. Retaining the income -
restricted affordable housing requirement at 5% is vital for the City's compliance with the provisions
of 2SHB1220 and will be necessary to meet the 2044 planning target for housing units by income
band. The Heartland study evaluated the potential for development with the inclusionary requirement
retained. As shown in their presentation slide below (example of City Center Core), with the currently
proposed code amendments (which did not anticipate the reduction of parking for affordable units),
the resultant of adopting this Ordinance will make the properties located in these zones more
developable.
RLV Modeling: C&C Example Scenario
CC-C Zone Test Scenarios
3.1 Base Scenario
■ No changes, models existing conditions
3.2 Code Adjustments
■ Removed Inclusionary Zoning
■ Parking ratio reduction
■ Retail reduced to 1:1000
• Residential reduced by 25%
■ Retail space required reduced 70%
• Off -site stormwater treatment
■ Assumes application of the 12-MFTE program
Result.' Podium -style development beats the
hurdle value (existing land use values)!!
1/18/2023
Next Steps:
S50
„
- ---------- -
sre
a
LAND VALUE HURDLES
(S/Sq Ft) j
r BASE
SCENARIOS
X
REDEVELOPMENT "PE NCILS?"
SCENARIO VARIABLES - ,
3.1 Base Scenario
32 Code Adj J
MFTE YIN
Yes
Yes
Inclusionary Housing YIN -
Yes
No
Parking Ratio Residential (Stalllunil)
1.33
1.0
Parking Ratio Retail (Stall/1 k SF)
3.33
1.0
Parking Typology
Structured/Surface
Structured
Impact Fees
Current
Current
BCICCF — 30' height limit in proximity to SF
No
No
Ground Floor Retail Requirements
0.85 offloor plate
0.25 of floor date
Onsite Slormwater Management
Yes
No
Market Rent Assumption
$2.84
$2.84
H F A R T L A N D
This item has been scheduled for the Special Council Meeting on June 6, 2023. If any of the City
Councilmembers would like to discuss the contents of this memorandum in advance of the Special
Council meeting, please do not hesitate to reach out to any of us.
Cel
Attachments
Table 1: Federal Way Projects with Income Restricted Units Created by FWRC 19.110.010 Provisions
Project Name
Address
Year in
0-30%
31-50%
51-80%
81-120%
Total
Unrestricted
Total Units
Service
AMI
AMI
AMI Units
AMI
Inco
Units
Income -
Certificate
Units
Units
Units
me-
Restricted d�
Of
Restri
Unrestricted
Occupancy
cted
Units
35703 16th Ave
Park16
S
2014
0
15
0
0
15
278
293
1201 South
Kitts Corner
336th St
2015
0
11
0
0
11
205
216
Uptown
1066 South
Square
320th St
2015
0
15
0
0
15
285
300
Celebration
Senior
1524 S 328th St
2013
0
10
0
0
10
188
198
27830 Pacific
Barkley Ride
Hwy S
2007
0
0
6
0
6
106
112
31701 Pete von
Traditions at
Reichbauer Way
Federal Way
S
2019
0
10
0
0
10
190
200
Mirror Lake
Village
31000 9th PI SW
2019
0
5
0
0
5
93
98
31635 23rd Ave
Senior City
S
2008
0
0
3
0
3
59
62
Brookdale
Foundation
House
32290 1 st Ave S
2000
0
0
7
0
7
204
211
0
66
16
0
82
1608
1690
Table 2: Seattle -Bellevue, WA HUD Metro Area FY 2023 Income Limits Summary
Median
Income Limit
Persons in Family
Family
Category
Income
1
2
3
4
5
6
7
8
Very Low (50%)
Income Limits
$47,950
$54,800
$61,650
$68,500
$74,000
$79,500
$84,950
$90,450
Extremely Low
i
$146,500
(30%) Income
$28,800
$32,900
$37,000
$41,100
$44,400
$47,700
$51,000
$54,300
Limits ($)
Low (80%)
Income Limits
$70,650
$80,750
$90,850
$100,900
$109,000
$117,050
$125,150
$133,200
Table 3: 2022 Rent Affordable by AMI and Household Size from Washington State Housing Finance
Commission
Studio
1-bedroom
2-bedroom
3-bedroom
30%
$ 679
$ 728
$ 873
$ 1,009
50%
$ 1,132
$ 1,213
$ 1,456
$ 1,682
80%
$ 1,812
$ 1,942
$ 2,330
$ 2,692
*Will be updated based on recent AMI data release