San Juan County is one of many communities in Washington state facing a housing crisis.
U.S. Senator Maria Cantwell, D-WA, sat down on Aug. 10 in Eastsound with OPAL (Of People and Land) Community Land Trust board members and staff, county personnel and San Juan Island Community Home Trust staff to discuss the reality of living in the San Juans.
“I’ve traveled to every corner of the state to look at housing,” said Cantwell. “And every time I learn something new.”
According to Cantwell’s office, Washington state has a more severe affordable housing crisis than the rest of the country. Since 2000, median rents have risen by 7.6 percent, which is 2.5 percentage points higher than the rest of the country. In addition, there are 16 percent fewer rental homes available in Washington compared to the U.S. average. Overall, about 400,000 Washington households are paying half their monthly income toward housing.
San Juan County surveys report that about half of the islands’ residents cannot afford to live in nearly 80 percent of the county’s total houses. The majority of houses are affordable for those who earn between $75,000 and $149,000 a year, which accounts for about 25 percent of the population. Affordable housing is defined by the county as equaling no more than 30 percent of an occupant’s gross monthly income.
“It’s not just those in the service industry (who need affordable housing),” said OPAL Board President Tim Fuller. “It’s also business owners and teachers. … People are realizing that affordable housing is the key to the future success of the San Juans.”
He also spoke of the stress for families who have to constantly move when a house is sold or turned into a vacation rental.
Board member Pegi Groundwater said one of the biggest challenges is that San Juan County has the highest property values combined with the lowest wages in the entire state. She also noted the county is second in the state for per capita income.
San Juan County Housing Program Coordinator Ryan Page spoke of the imminent need to preserve low rental costs in apartments.
“Many of these apartment complexes are coming out of USDA-restricted, low-income rentals set up in the 1990s,” he said. “Landlords will want to sell but not to nonprofits. … In five to 10 years, we are going to lose most of these apartments.”
Page said it’s hard to find developers who have expertise in both affordable housing and applying for tax credits. David Gow of the San Juan Island Community Home Trust agreed, and added that many contractors and maintenance workers only want to work on high-end projects. Cantwell said she would connect the county with partners with whom she’s had success.
“The San Juans have a local economy defined by scarcity,” Gow said. “We need a systemic solution.”
Low-Income Housing Tax Credit increase
There are two kinds of Low-Income Housing Tax Credits: 9 percent and 4 percent. The programs enable investors in an eligible project to claim credits against their federal income taxes.
This past spring, Cantwell worked with Senator Orrin Hatch, R-UT, and others to secure a 12.5 percent increase of the 9 percent housing tax program. It’s the first increase in more than a decade and will be spread out over the next four years. This $2.7 billion nation-wide expansion will help Washington state build 20 percent more affordable housing developments in 2018.
Cantwell also wants to increase the allocation for the 4 percent tax credit program (which has provided funding to OPAL’s current project April’s Grove on Orcas) and implement other technical fixes that, if passed, could make the program more predictable and attractive for investors. If passed before Dec. 1 of this year, the legislation could increase the allocation of money to April’s Grove.
“The tax credit stimulates the economy, is bipartisan and has worked for decades,” said Cantwell. “With a little more time, I think we could have gotten the 4 percent. We were really close.”
Cantwell said the housing need for retiring seniors, returning veterans and the homeless made politicians “pretty aware” of the national housing crisis. She said her “ah-ha” moment was when she learned that 95 percent of affordable housing built is from the Housing Tax Credit.
The LIHTC program was created in 1986 and is the largest source of new affordable housing in the United States. There are about 2 million tax credit units today and the numbers grow by around 100,000 units annually. The program, which is administered by the Internal Revenue Service, provides tax incentives – not housing subsidies – to encourage developers to create affordable housing. The tax credits are provided to each state based on population.
REET tax for housing projects
This November, voters will decide on a 0.5 percent real estate excise tax – or REET – on the sale of property within the county. The tax will be paid 99 percent by the buyer and 1 percent by the seller and will be used to support affordable housing efforts within the county. The measure is not a property tax. If passed, it would add $2,688 more to the sale and purchase of a median-valued county home ($537,500).
If passed, the tax would be implemented 30 days after the Nov. 6 election is certified and projects are estimated to be awarded funds by winter 2019. Recipients of the funds could include nonprofits, public agencies, housing authorities and for-profits.
Priorities for the funds are set by the county’s strategic plan on affordable housing, which was adopted in 2017 and is approved annually. Current priorities include creating long-term rentals from $0-$940 a month and homes that sell from $80,000-$275,000. If approved, the tax would be implemented through 2030 and is expected to generate $15.2 million over that period. San Juan County Council members will have the final say on the projects funded. Any leftover money can support low-interest loans – for the same type of projects — that would be expected to be paid back within five years.