06-07-2022 Council Packet - SpecialCITY OF
I Federal Way
Centered on Opportunity
CITY COUNCIL
SPECIAL MEETING AGENDA
City Hall - Council Chambers*
*remote attendance available via zoom
June 7, 2022 - 5:00 p.m.
Mayor and Council encourage you use one of the following ways to participate in the meeting remotely if you are
unable to attend in person:
• Watch the meeting live via Zoom, Federal Way YouTube Channel, or FWTV Channel 21 (via Comcast)
• Call in and listen to the live meeting: (888) 788-0099 or 253-215-8782
• Public Comment may be submitted in -person or online here; written comments are accepted here.
• Zoom meeting code: 938 0263 0822 and passcode: 370773
1. CALL MEETING TO ORDER
2. PLEDGE OF ALLEGIANCE
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a. Introduction: Keith Niven, Planning Manager
b. Staff Presentation: Chaney Skadsen, Senior Planner & Evan Lewis, Associate Planner
c. Council Questions/Discussion
4. EXECUTIVE SESSION
• Collective Bargaining pursuant to RCW 42.30.140(4)(b)
5. ADJOURNMENT
Regular Meetings are recorded and televised live on Government Access Channel 21.
To view Council Meetings online please visit www.cityoffederalway.com.
COUNCIL MEETING DATE: June 7, 2022 ITEM #:
CITY OF FEDERAL WAY
CITY COUNCIL
AGENDA SILL
SUBJECT: Report on Forecast Housing Needs
POLICY QUESTION: N/A
COMMITTEE: N/A MEETING DATE: N/A
CATEGORY:
❑ Consent ❑ Ordinance ❑ Public Hearing
® City Council Business ❑ Resolution ❑ Other
STAFF REPORT BY: Chaney Skadsen, Senior Planner DEPT: Community Development
Evan Lewis, Associate Planner
Attachments: 1. Staff Report
2. Agenda Bill
MAYOR'S RECOMMENDATION: N/A
MAYOR APPROVAL: DIRECTOR APPROVAL:
• Co, itt • Enunci] Initial/Date
Initialloa lnisiallDa c
COMMITTEE RECOMMENDATION: N/A
PROPOSED COUNCIL MOTION: N/A
(BELOW TO BE COWLETED BY CITY CLERKS OFFICE)
_
COUNCIL ACTION:
❑ APPROVED
COUNCIL BILL #
❑ DENIED
First reading
❑ TABLED/DEFERRED/NO ACTION
Enactment reading
❑ MOVED TO SECOND READING (ordinances only)
ORDINANCE #
REVISED - 4/2019
RESOLUTION #
CITY OF FEDERAL WAY
MEMORANDUM
DATE: June 2, 2022
TO: City Council
VIA: Jim Ferrell, Mayor
FROM: Brian Davis, Community Development Director 6;1 =
Keith Niven, AICP, CEcD, Planning Manager
Chaney Skadsen, Senior Planner y
Evan Lewis, Associate Planner-'
SUBJECT: Report on Forecast Housing Needs
Financial Impacts:
No financial impacts.
Background Information:
The conversation about housing is broad and can take many paths. As an initial 2022 discussion with the
Council on this topic, Planning staff will provide background data regarding Federal Way's housing
supply and future trends; and, information about the cost of housing and housing affordability broadly
within Federal Way.
Part 1: Housing Background
There are currently approximately 38,000 housing units in Federal Way. Under existing zoning rules and
current development patterns (1 house per lot), Federal Way will run out of developable single-family
land in the near future and the remaining land capacity for single-family housing is not adequate to meet
the housing need for the community. Therefore, much of the City's future housing will take the form of
multi -family housing.
As illustrated in the table below, Federal Way's annual, single-family housing production has steadily
declined over the past several decades as the finite supply of single -family -zoned land has been developed.
This trend will continue.
.uata: 1 roauction. (:abacity and Manned Growth
Single-family/Single-Unit 166 single -unit housing units/year since 1990*
housing production, 1990-2021 0 1990s avg: 262 single-family units/year
• 2000s avg: 180 single-family units/year
• 2010s avg: 68 single-family units/year
*WA Office of Financial Management (OFM)
Single -Family Housing Production by Year*
Rev. 7/18
6,000
4,000
2,000
0
■
1960s 1970s
1980s 1990s 2000s 2010s
*Chart Source: Federal Way HAP
(original source from King County Assessor's
Office)
Remaining Housing Capacity
in Single -Family Zones (as of
2019)
1793 residential units
Planned Future Housing
through 2044
11,260 residential units
The majority of the housing in the City has been, and is currently, single-family housing. However, given
the existing regional and local demand for new housing and the City's growth expectations, the majority
of housing in the City will transition to multi -family housing during this 20-year planning cycle (2024-
2044).
2021 Federal Way Housing by Type
(Family,
-Single- Single-
46 % Family, 54%
84 units) �20'567 units)
Projected 2044 Federal Way Housing by Type
Nan -Single- I Single -
Family, 55% � Family, 45%
(26,763 units) (21,582 units)
Part 2: The Cost of Housing
Housing costs are rapidly increasing in Federal Way and in the region for both rental and
homeownership options. As the City engages in a conversation about housing in general, it is
important to understand the cost of that housing, and who can afford to occupy it.
In order to determine if the housing in Federal Way is meeting housing need, the threshold for how
much a household should be expected to spend on housing must be determined. The U.S.
Department of Housing and Urban Development (HUD) considers housing affordable when the total
housing costs do not exceed more than 30% of the household income.
Rev. 7/18
Households that pay more than 30% of their gross income on housing costs are considered cost
burdened and those that pay more than 50% of their incomes on housing costs are considered
severely cost burdened. Although a growing number of low-income household and households of
color are disproportionately cost burdened, households along all income levels can be cost burdened
or severely cost burdened'.
Determining housing affordability is a function of household income, and the standard for calculating
income is based on the Area Median Income (AMI) The 2022 Seattle -Bellevue AMI for a family of 4
is $134,6002. The following terms are used to categorize household level of income as a function of
the area median3:
"Extremely low-income" housing with incomes at or below 30% AMI
"Very low-income" households with incomes at or below 50% AMI
"Low-income household" household with incomes at or below 80% AMI
"Moderate -income household" household with incomes between 80% and 115% AMI
"Workforce housing" households earning between 60% and 120% of the AMI
"Market rate housing units" are those whose price is determined by market factors like supply and
demand, as opposed to price limits and income restrictions imposed by state or local affordable
housing programs
Discussing affordability in terms of AMI limits this evaluation as it is based on higher incomes in
Seattle and the Eastside. To better understand the income level appropriate for this City, Median
Household Income (MHI) should be used. As can be seen in the Table below, Federal Way has a
much lower income than in other parts of the County.
King County City Median Household Income Comparison¢
City
MHI
Total Monthly Housing
w/o Cost Burdening
Federal Way
$68,672
$1,716.80
Seattle
$97,186
$2,429.65
Bellevue
$129,497
$3,237.43
Sammamish
$181,464
$4,536.60
Market Conditions
According to a recent Zillow search for the City, only one single-family house is for sale for under
$500,000, and four listings for below $600,0001. Given the current demand for housing in the region
resulting in home sales greatly exceeding listing price; single-family home ownership options for less
than half a million dollars are virtually nonexistent in Federal Way.
To further exacerbate this issue, starter homes with typically lower prices such as bungalows,
townhomes, condominiums, and other attached dwelling unit typologies are not being built currently
in the City.
1 Federal Way Housing Action Plan, Housing Needs Assessment
2 FY 2022 Multifamily Tax Subsidy Project Income Limits Summary, US Department of Housing and Urban
Development. Data accessed May 25, 2022. Income limits by household size from 20% AMI to 80% AMI
provided by the https://www.huduser.gov/portal/datasets/il/il2022/2022sum mtsp.odn
3 Terms defined per RCW 36.22.178, RCW 84.14.010, and the Urban Land Institute
4 US Census QuickFacts, 2020 data
5 Zillow Search conducted May 31, 2022 for housing units within Federal Way city limits
Rev. 7/18
Below is a comparison of affordable home sale prices for a family of four
Income
Home Sale Price in Reach w/o
Cost Burdening
Extremely low-income
$38,820
$150,742
Very low-income
$64,700
$251,237
Federal Way Median Household Income: $68,672
Low-income household
$103,520
$401,979
Moderate -income household
$103,520 - $154,790
$401,979 - $601,066
Below is a comparison of market rate rents charged by newly built apartment complexes in the South
King County region.
Examples: South King County Apartment Rents by Bedroom Si.Ze
Name of Building
City
Studio
1-Bedroom
2-Bedroom
3-Bedroom
The Platform
Apartments
Kent
$1,500 - $1,700
$1,695 - $3,243
$2,441 - $3,854
N/A
Altitude Apartments
Renton
$2,015
$1,655 - $1,980
$2,050 - $2,250
N/A
The Maverick
Burien
$1,770 - $2,480
$1,816 - $3,156
$2,400 - $3,463
N/A
Airmark Apartments
Tukwila
$1313 - $2000
$1775 - $2587
$2,510 - $3,623
$6615 - $7500
None of the rents above are affordable to extremely low-income and very low-income households
based on household size.
Conclusions:
The City is growing and the type of housing constructed in the City will be denser than that built over the
last 20 years and a majority of that new construction will be concentrated in our higher -zoned areas. New
housing in the City, both rental and ownership, is expensive and unaffordable to many.
Rev. 7/18
Appendix A: Calculating Affordability Methods
Limitations
This memo is not intended to be an extensive investigation of all affordable housing scenarios by
income level and household size. Instead, this exercise is intended to explore the expenses to consider
in calculating housing costs and identify the level of affordability served.
This analysis is further limited by the assumption that a household has the savings to afford a 10%
down payment and there is an institution willing to loan the mortgage for that remainder of the
house.
Calculating housing affordability
Below is an effort to simplify an analysis of the maximum housing costs to be affordable for renters
and homeowners for different household sizes and income levels. This analysis is based on a number
of assumptions.
Determining housing affordability is a function of household income, and the standard for calculating
income is based on the Area Median Income (AMI). The AMI measures the median, or middle,
household income in a specific geography and is annually updated by HUD. The City of Federal Way
is located within the Seattle -Bellevue, WA HUD Metro Area. The 2022 Seattle -Bellevue AMI for a
family of 4 is $134,600.
King County MTSP — Income Limits by AMI
AMI
1-person
2-person
3-person
20%
18120
20720
23300
30%
27180
31080
34950
Extremely
Low Income
35%
31710
36260
40775
40%
36240
41440
46600
45%
40770
46620
52425
50%
45300
51800
58250
Very Low
Income
60%
54360
62160
69900
70%
63420
72520
81550
80%
72480
82880
93200
Low Income
4-person
5-person
6-person
7-person
8-person
25880
27960
30040
32100
34180
38820
41940
45060
48150
51270
45290
48930
52570
56175
59815
51760
55920
60080
64200
68360
58230
62910
67590
72225
76905
64700
69900
75100
80250
85450
77640
83880
90120
96300
102540
90580
97860
105140
112350
119630
103520
111840
120160
128400
136720
For example, housing costs include expenses for basic utilities such as water, sewer, garbage,
electricity and gas at a minimum. These expenses go into calculating the total housing costs and
contribute to determining the maximum a household can afford. The Washington State Housing
Rev. 7/18
Finance Commission recommends using published public housing authority utility allowances
correlated by unit size to base monthly utility estimates.
King County Housing
Authority Published Tenant Monthly Utility Cost by Housing Type
0/1-bed
2-bed
3-bed
Single Family
$170
$211
$260
Multifamily
$127
$154
$191
Rental Model
Housing costs are correlated with household size. However, the maximum rent charged per unit by a
developer required to serve a certain income level is irrespective of the actual household size. Rather,
it is based on the number of bedrooms and assumes 1.5 occupants per bedroom, except for studio
apartments which assumes a household size of 1. For units that result in an uneven household
number such as, 1 bedroom = 1.5 people, 3 bedrooms = 4.5 people the average AMI between
household size is used.
To calculate the maximum rent by unit, the annual income by household size and income level is
utilized as a function of the AMI. That number is multiplied by the maximum housing cost to be
considered affordable and then divided by 12 months. This will be the maximum gross housing
costs.
For example:
a) Studio (very low income) $1,006 maximum rent
($45,300 for 1-person household * 30% max housing costs) /12 months = $1,133 Total housing costs
$1,133 - $127 utilities = $1,006 affordable maximum rent
b) 1-bedroom (extremely low income) $601 maximum rent
($29,130 AMI for 1.5-person household, taking average between 1- and 2-member household * 30%
max housing costs) /12 months = $728 Total housing costs
$728 - $127 utilities = $601 affordable maximum rent
c) 2- bedroom (low income) $2,176 maximum rent
($93,200 AMI for 3-person household * 30% max housing costs) /12 months = $2,330 Total housing
costs
$2,330 - $154 utilities = $2,176 affordable maximum rent
Homeownership Model
Calculating the housing costs for purchasing a home whether it's a townhouse, condo, or single-family
house require additional considerations such as, the percentage of down payment, interest rates, loan
term, property taxes and HOA fees. There is substantial amount of variability among these inputs to
calculating housing costs.
For example, HOA fees vary considerably by the dollar amount and the proportion of housing cost
and are particularly high in the Seattle -Bellevue -Tacoma region ranking 5th in the US for highest HOA
fees in 20197.
6 King County Housing Authority provides monthly energy assistance supplement based on an average
utility rate for the King County area https://www.kcha.org/landlords/rent-utilities
Rev. 7/18
The home sale price and monthly housing costs affordable by income level calculated below assume
the following; an interest rate of 5.1%8, down payment of 10%, and combined HOA fees, property
taxes, utilities accounting for approximately a quarter of the housing cost.
Single Family Typology example
a) A loss -income household of 4 with an income of $103,520 can afford a $401,979 house.
Resulting in a maximum affordable housing cost of $2,558.
$2,558 - $260 utilities = $2,298 Assuming a $1,984 house payment leaves $314 to cover
remaining housing costs
b) A family of 4 with an income at the area median of $134,600 can afford a $522,667 house.
Resulting in a maximum affordable housing cost of $3,365.
$3,365 - $260 utilities = $3,105 Assuming a $2,580 house payment leaves $525 to cover
remaining housing costs
Condo Typology example
a) A very lose -income family of 4 with an income of $64,700 can afford a $251,237 house.
Resulting in a maximum affordable housing cost of $1,618.
$1,618 —$191 utilities = $1,427 Assuming a $1,240 house payment leaves $187 to cover HOA
fees and remaining housing costs.
c) A family of 4 with an income at the median in the area of $134,600 can afford a $522,667
house. Resulting in a maximum affordable housing cost of $3,365.
$3,365 - $191 utilities = $3,174 Assuming a $2,580 house payment leaves $594 to cover
HOA fees and remaining housing costs.
7 US Census Bureau's 2019 ACID Public Use Microdata HOA Payments
https://www.i nspectionsu pport.com/resources/cities-with-the-worst-hoa-fees/
8 Freddie Mac 30-year fixed mortgage rate on May 31, 2022
Rev. 7/18