A public-private partnership may solve San Juan Island’s affordable housing shortage.
San Juan County staff is working on a plan to lease four undeveloped lots in the Town of Friday Harbor to a developer to build middle-income rentals.
According to U.S. Census and real estate data, the county’s median household income of $65,548 is about the same as the country’s, but the median house price of $453,100 is about $100,000 more.
San Juan County Council Chairman Rick Hughes told the Journal that the project would provide housing for permanent renters who earn $15-20 an hour and do not qualify for low-income housing.
The San Juan County Land Bank has owned the 1.7 acres of empty lots at the corner of Malcolm Street and Argyle Avenue since 2003, according to data from the county assessor’s office.
At the Sept. 11 county council meeting, San Juan County Manager Mike Thomas explained that county council has appropriated funds to acquire the property from the land bank. County code, he said, mandates the land bank to receive the fair market value of $610,000 and nothing less.
San Juan County Assessor John Kulseth noted that the current fair market value was not set by his office, but a different county department.
Fair market value is the “reasonable” price both the seller and purchaser agree on, according to an online financial encyclopedia.
A public hearing on the sale is scheduled for Tuesday, Oct. 3. If the council accepts the project at that meeting, the sale would be tentatively finalized by November, explained Thomas, and bids to build developments would be accepted in early 2018. A developer’s agreement could be secured by next spring, he added.
Town of Friday Harbor staff will change the commercially zoned lot to multi-family, said Thomas. Hughes said his minimum goal is to create 30 rental units.
Discussion of the project started in 2016, said Thomas, and originated from the county’s affordable housing workgroup’s strategic plan, which was adopted by county council last March. In the plan, he said, long-term rental goals are set at $680 to $940 a month.
The town lots are a good option for the project, he explained, because there is access to affordable utilities, as well as resources within walking distance for those who cannot afford transportation. Thomas also noted that the county’s current comprehensive plan includes policies to develop affordable housing on county-owned land.
There are no current drawings of the county’s plan.
Lincoln Bormann, land bank director, said the property was originally purchased so a historic conservation easement could be added before it was sold to a commercial developer.
County staff will maintain the land bank’s historic easement, said Thomas, so the property is consistent with the area’s historic district and there is public access.
The historic easement would require developers to review designs with town staff to ensure they match Friday Harbor’s historic preservation guidelines, said Sandy Strehlou, the town’s historic preservation coordinator. These include residential structures in the style of farmhouses and craftsman homes. Strehlou noted that the exact easement’s guidelines have not been written yet.
Two private citizens are also interested in the available lots, including one who plans to build affordable housing.
During the public comment section of the Sept. 11 meeting, San Juan Islander Lynn Danaher offered to purchase the property for less than the fair market value because she would add amenities that exceed that price. Her plan is to build to half of the lot’s capacity and create a 15,000 square-foot green space along Argyle Avenue, stretching from the corner of Malcolm Street to the Big Store on Web Street to preserve open space.
Danaher’s said her vision will maintain one of the last, undeveloped, historic commercial zones in town. Changing it to a multi-family zone, she explained, would allow less rental units than her mixed-zoning plan.
Her conceptual designs include nine multi-level buildings, with 18 commercial units on the bottom floors and 36 residential units on the top. These long-term, affordable rentals would cost an average of $850 a month, including water, sewer and stormwater, states her proposal. One building would also house 12 short-term rentals for “transient workers.”
Housing for seasonal workers is not part of the county’s plan, according to Hughes.
Danaher said she has preserved six local, historic homes, including Argyle Suites, next to the available lots. One of these buildings, she explained, was originally constructed in 1893, moved from its original location near the ferry landing and restored. At the Sept. 11 meeting, she noted that she won a stewardship award in 2009 for this restoration, making her a sound developer for the area.
She added that her bank would not lend her money to build on land she did not own, so other developers, who the county wants to lease land to, may have similar issues.
Her conceptual drawings also include a possible grocery store with a parking lot, next to the available lots and near the Surina Business Park. According to Danaher, this area is owned by JAC LLC.
According to local real estate broker Greg King, his client, the owner of JAC LLC, who wishes to remain anonymous, has also placed a bid on the lots for more than the county’s fair market value. King added the county’s appraisal is low because it’s a year old. For more information on recent property purchases in town, read this article.
Land bank questions
At the Sept. 11 meeting, Danaher also questioned using property, originally purchased by the land bank, for a project outside the government agency’s mission.
According to its website, the land bank’s mission includes to perpetually preserve land with “environmental, agricultural, aesthetic, cultural, scientific, historic, scenic, or low-intensity recreational value.”
At a July Town of Friday Harbor Council meeting, where the county council joined, Town Mayor Carrie Lacher also said she feared the mission would be lost in the build out of “essentially the last green space in the town.”
“Because it was owned by the land bank, I didn’t think it’d be sold for development,” she said of the lots. “It just feels like the land bank is abandoning its mission to the town.”
Lacher added that town residents don’t always have access to drive to land bank property, like Mount Grant and Zylstra Lake, so staff should create public spaces in the town, as well as outside of it.
At the Sept. 11 meeting, Danaher noted that the land bank, like any government agency, had not paid taxes on the lots since its 2003 purchase. The money could have benefitted the community and nothing was done with the space, she added.
According to its website, San Juan County voters first approved the creation of the land bank in 1990; since then, they have approved it twice for 12-year periods. The approval continues a 1 percent excise tax on newly purchased county property, which helps the agency purchase and maintain land, said Bormann.
As of the beginning of 2017, the land bank owned a little less than 4 percent of the county’s total acreage, according to the county assessor’s data.
Kulseth explained that when the four available lots were sold by 2003, the fair market value of the land was $786,110. That would have afforded the county roughly $5,715 in taxes the following year.
Bormann said a recent study found that county property owners would each have to contribute about $10 to equal the annual taxes not collected from land bank property. He added that 75 percent of land bank property, like farmland, would receive a tax discount under private ownership.
Hughes also told the Journal that the land bank creates a public service by maintaining access to otherwise private land.
He compared the Argyle lots acquisition to the county’s work with the reuse store on Orcas Island called The Exchange, which is operated by Orcas Recycling Services. In that project, the county purchased land, built the structure and leased both to ORS staff to eventually return the loan to the county.
“Development [on the islands] just doesn’t happen on its own because land and building is so expensive,” said Hughes. “The county can help defer those costs by buying land so it’s cheaper for the developer.”
This project, he explained, will be “a test to what a private-public partnership will look like” in the county.
To watch Danaher’s and Thomas’ presentations on the project, visit www.sanjuanco.com/1077/County-Council and select the Sept. 11 meeting. Check the Journal for updates.