What could Spokane Valley do to address the housing shortage? The city is trying to figure out a strategy for ‘managed growth’

Spokane County builders are busy.

“I can’t even get a hold of a lot of builders right now, they’re so busy,” Spokane Homebuilders Association Executive Officer Joel White said.

Busy as builders are, they can’t keep up with unprecedented demand and the housing shortage continues.

Would-be homebuyers and frustrated renters want more housing. Liberal and conservative politicians say they want more housing. Developers say there’s a need for more housing.

It’s hard to say how much local governments can do about it. But Spokane Valley could make meaningful changes to city code that might help spur the production of more affordable and middle housing.

The city is considering incentivizing denser development, offering tax breaks for multifamily housing construction and reducing regulations for accessory dwellings. The proposals are relatively undefined and City Council won’t vote on them for months.

Spokane Valley City Councilmembers aren’t entirely sold on all three ideas – some say they’re particularly wary of tax breaks – but they all say the concepts are collectively a good start.

“We’re going in the right direction,” Spokane Valley City Councilman Tim Hattenburg said.

The plan

This spring, Spokane Valley City Council approved a housing action plan.

It’s a 66-page document, and the first half of it explains the city’s housing shortage.

Spokane Valley needs to moderately speed up the rate of new construction and build 6,660 housing units by the end of 2037, the plan concludes. More than half of those units should be for households earning the area median income or above, and 44% should be affordable for households that make less.

The Spokane metro area’s median income in 2020 was $77,400 for a family of four, according to the U.S. Department of Housing and Urban Development.

The second half of the housing action plan proposes a handful of ideas for addressing the housing shortage.

Some are fairly small, such as making it easier for people to build and live in tiny homes. Others are more ambitious, like monitoring and preserving affordable housing so families aren’t displaced when prices increase.

Recently, City Council has discussed three of the recommendations outlined in the housing action plan: encouraging production of townhomes and cottage homes, offering tax breaks for multifamily development and easing restrictions on accessory dwelling units.

The townhome and cottage home idea relies on a “bonus density” incentive for construction in Spokane Valley’s R-4 residential zone, most of which is near Sprague Avenue.

Today, developers can build up to 10 townhomes on an acre. The bonus density incentive would allow a builder to put 15 townhomes on an acre, so long as a certain number of them are reserved for families earning 80% or less of the area median income – that would have been about $61,900 in 2020.

City Councilman Arne Woodard, who spent much of his career as a Realtor, said he likes the bonus density idea.

“That is very significant,” Woodard said. “It spreads the cost of the land across many more units.”

Hattenburg also said he thinks bonus density could be beneficial.

“It’s not only a good idea for the Valley, it’s a good idea regionally,” he said. “You’re having five more units per acre, so you’re not having as much sprawl.”

Woodard said that on a personal level, he doesn’t like the idea of denser development in the Valley. But he said it’s objectively necessary.

“We’re going to have to do it to make it so that our city can continue to be diverse in incomes and cultures,” he said. “We have got to do things that are going to attract people here.”

The second housing incentive would be more controversial.

The city could offer a multifamily tax exemption in specific areas.

Builders who construct projects that include a given number of affordable units wouldn’t have to pay property taxes on the project for up to 12 years. They’d still have to pay taxes on the land, but not the new construction.

The city hasn’t discussed how many units would need to be reserved for people earning 80% or less of the area median income, but it’s not uncommon to see a third of the units in an apartment complex set aside for affordable housing.

White said the bonus density incentive probably wouldn’t make a big difference, but the tax break could.

Spokane Valley Mayor Ben Wick said he’d be hesitant to vote for a tax break.

“I don’t know that we need to get into that tax exemption for multifamily,” Wick said. “We’ve permitted quite a bit of multifamily.”

City Councilman Rod Higgins also said he’s against the tax break idea.

“The city always loses out on a deal like that,” he said. “I like to play the game straight-up, without these kinds of incentives.”

Woodard said he’s probably opposed to the multifamily tax break. He said he worries the loss of tax revenue could cripple the community and he also doesn’t want to attract out-of-town developers who might see an opportunity to make a quick buck and do sub-par work.

Still, he doesn’t want to rule the tax break out entirely.

“I am open to it if we can write rules that ultimately really get the affordable housing long-term, that we want,” he said.

Hattenburg said the tax break needs to be considered due to the severity of the housing shortage, but before voting on it he’d want to know exactly how much revenue it could cost the city. The city hasn’t yet figured out how much money it would lose by offering the tax break.

The third incentive probably doesn’t have as much potential to increase the amount of available housing, but it could still have an impact.

Spokane Valley could ease regulations on accessory dwelling units, often referred to as mother-in-law suites. Those can be living spaces atop garages, in basements or even in entirely disconnected buildings on a property.

The city is considering reducing parking requirements for accessory dwelling units, reducing the size requirements, waiving permitting fees, reducing setbacks and allowing two units per lot, as opposed to one.

Woodard said if the city writes the new rules well, changes to accessory dwelling unit laws could help. He said he’s typically in favor of reducing regulations.

“The bigger and thicker your red book is, the worse off you’re going to be,” he said.

Hattenburg said he’s fine with allowing more accessory dwelling units as long as they don’t change neighborhood characteristics.

“There are some neighborhoods I just don’t feel like they would fit,” he said, adding that he doesn’t want to see any setback reductions.

City staff are still working on the potential incentives and regulatory changes. The proposals will eventually go through the city’s Planning Commission before returning to City Council for a vote.

White said that at the moment, the biggest factor slowing down new construction is a labor shortage, not a lack of incentives. Still, White said Spokane Valley generally has the right idea with these proposals.

“The Valley is on the right path,” he said. “They’re trying to support some growth, but some managed growth.”