2023/04/19 Council Agenda Packet

MARCH 2023 I DRAFT REPORT v.4.1 EVERETT WASHINGTON The market information identified three key influences affecting the rate of multi -family housing development in Everett: 1. Construction and financing costs exceed rental incomes. 2. Light Rail investments elsewhere in Snohomish County will create more multi -family housing sooner than Everett. 3. There is strong competition for investors and tenants based on community amenities and project financial performance. The financial analysis considered several regulatory incentives and administrative tools available to the City to help offset conditions that may be limiting multi -family housing starts. These include multi -family development incentives and fee waiver programs that directly reduce multi -family project development costs and administrative approaches to increasing the certainty of a project's financial performance to improve investor interest in Everett housing projects. Review Performance and Propose Adjustments to the City's Multi -family Housing Incentive Programs The review of incentive programs made available by the City for multi -family housing projects include: • Multi -family Tax Exemption Incentive (EMC 3.78) • Height Density Bonus Program (EMC 19.22.080) • Affordable Housing Fee Reduction and Waiver Programs, including: o System Connection Fees (formerly Ordinance 3579-17) o EMC 19.50.065 Traffic impact fee exemption for low-income housing o EMC 19.51.145 Traffic mitigation fee exemption for low-income housing o EMC 19.52.060 School impact fee exemption for low-income housing o EMC 16.72.040 Waiver of land use application fees for low-income housing The performance of current housing incentives is best found in Table 2.1. Figures 2.2A-Eshow incentive project locations. Since 2012, these programs have supported the development of over 2,600 new multi -family housing units, including over 1,000 affordable multi -family housing units. These projects have used the Multi -family Tax Exemption and Affordable Housing Fee Reduction and Waiver programs. The Height Density Bonus Program has not been utilized. In 2020, the Washington State legislature revised rules governing the Multi -family Tax Exemption program. Also, in December 2021, the City's system Connection Fee ordinance sunset. These two circumstances provide an opportunity for the City to revisit its' corresponding programs and recommend updates that reflect current legislation and respond to current market conditions. Based on the past performance of tax-exempt projects and new legislative actions (ESSB1552), this report recommends the City update its' Multi -family Tax Exemption Incentive Program and expand the residential target areas to better align with the City's urban corridors and Metro Everett housing development and zoning code. The report also recommends reinstating low-income housing waivers for system connection fees and park impact fees. The height density bonus should be re-evaluated based on building height evaluations planned for the Comprehensive Planning process.