Next week the Olympia City Council will talk about an ordinance that will lower impact fees for affordable housing.
More specifically, the ordinance will lower impact fees for “housing with a monthly housing expense that is
no greater than 30 percent of 80 percent of the median family income.” The idea is that since developers make the most money building high-end housing for people that can afford it, this will create an incentive to build less expensive housing for those who can’t.
But in the short term, I think we should pull back and take a look at impact fees in general and what kind of housing this ordinance is likely to encourage.
First though, let’s say that impact fees are a one time fee for initial impacts that a new house will have on Olympia. Things like new roads, new parks, new schools are paid for out of these fees. But, long-term maintenance of these public assets come out of property taxes that end up being paid on the value of each home. So, while the initial burden of new homes can be blunted by impact fees, long term maintenance is everyone’s problem. And, that is when we get into choosing what kind of housing we choose to build.
Up until very recently, most of Olympia was locked into single family home only zoning. Now, more neighborhoods are open for what is called Missing Middle housing types, like duplexes, townhomes, etc. And, a lot of people are connecting this impact fee proposal to the Missing Middle proposal. Larry Dzieza’s post on Nextdoor about the cut in impact fees is even called “Missing Middle Tax/Fee Cut for Developers.”
What people aren’t talking about is that so-called Missing Middle development leads to higher valued properties, which leads to more taxable value for the city in the long run.
Here is how that works.
Generally, downtown Olympia is pretty valuable to the city and produces a lot of tax revenue (here and here). This is generally because the auto-centered suburban development style just isn’t as valuable.
Let’s get to another good example of how this is working in Olympia. Take this block of densely packed housing along Jefferson:
And, these four house, clocking in at just over an acre, are valued at 1,617,475.73 per acre.
And, looking at this map, you see very similar values per acre among the neighbors.
I don't have a dog in this fight, but this analysis seems a little simple to me. If I lived in a single family neighborhood like the one in your map, and somebody put a four-plex up next to my house, I'd expect the market value of my house, and of the houses on the block (and the City's tax revenue from them) to go down.
Of course, the market value of the four-plex might well be higher than the market value of the house that was there before, but it seems as if you leave part of the system of changes that result out of this so far…
Emmett, that's an interesting analysis. You've shared anecdotal evidence; have there been any studies done that confirm your argument? I would ask the same question of Thad's assumption.
In general, I've sensed a polarized, white/black dynamic to the missing middle policy debate. For example, given Olympia's steadily increasing property values, is it realistic to argue that the value of a home would decrease — as opposed to rising more slowly than a comparable house elsewhere?
I also wonder to what degree the property value question is an implementation issue. In other words, carefully sited and well-designed duplexes or townhouses could plausibly impact a neighborhood very differently than ones that are poorly planned.
The sustainability website Sightline recently did a story on Olympia's policy direction. They have been championing higher density for years, so it wasn't surprising that they argued that Olympia did not go far enough. Sightline researcher Dan Bertolet presented data that suggested relatively little additional housing will end up being built. https://www.sightline.org/2018/11/09/olympia-single-family-zoning-laws/