(1) Background.

(a) The act calls on counties and cities to plan for and accommodate housing affordable to all economic segments of the population. Addressing the need for affordable housing will require a broad variety of tools to address local needs. This section describes certain affordable housing incentive programs (incentive programs) that counties and cities may implement.

(b) Counties and cities may use incentive programs to implement other policies in their comprehensive plan in addition to affordable housing; for instance, encouraging higher densities that reduce the need for land and increase the efficiency of providing public services.

(c) Incentive programs may apply to residential, commercial, industrial and/or mixed-use developments.

(d) Incentive programs may be implemented through fee waivers and exemptions, development regulations, conditions on rezoning or permit decisions, any combination of these, or other tools.

(e) Incentive programs may apply to part or all of a county or city. A county or city may apply different standards to different areas within their jurisdiction, or to different development types.

(f) Incentive programs may be modified to meet local needs.

(g) Incentive programs may include provisions not expressly provided in RCW 36.70A.540, 82.02.020 or chapter 84.14 RCW.

(h) Incentive programs may include preferential treatment for affordable housing development.

(2) Counties and cities may establish an incentive program that is either required or optional.

(a) Counties and cities may establish an optional incentive program. If a developer chooses not to participate in an optional incentive program, a county or city may not condition, deny or delay the issuance of a permit or development approval that is consistent with zoning and development standards on the subject property absent the optional incentive provisions of this program.

(b) Counties and cities may establish a mandatory incentive program that requires a minimum amount of affordable housing that must be provided by all residential developments built under the revised regulations. The minimum amount of affordable housing may be a percentage of the units or floor area in a development or of the development capacity of the site under the revised regulations. These programs may be established as follows:

(i) The county or city identifies certain land use designations within a geographic area where increased residential development will help achieve local growth management and housing policies.

(ii) The county or city adopts revised regulations to increase development capacity through zoning changes, bonus densities, height and bulk increases, parking reductions, or other regulatory changes or other incentives.

(iii) The county or city determines that the increased residential development capacity resulting from the revised regulations can be achieved in the designated area, taking into consideration other applicable development regulations.

(3) Steps in establishing an incentive program.

(a) When developing incentive programs, counties and cities should start with the local housing needs of each economic segment, as identified in the housing element and develop incentive programs as a strategy to make adequate provisions for existing and projected housing needs of all economic segments of the county or city as required by RCW 36.70A.070 (2)(d). Incentive programs could include the following for housing affordable to low, very low, or extremely low-income households, or permanent supportive housing, transitional housing, emergency housing or emergency shelter projects:

(i) Reduced or waived development requirements such as parking and height limitations;

(ii) Reduced or waived fees, such as infrastructure connection fees and/or impact fees;

(iii) Expedited permitting and density bonuses for projects that set aside a percentage of units or all units as affordable;

(iv) Incentive programs that specifically encourage permanent supportive housing, transitional housing, indoor emergency shelter, and indoor emergency housing.

(b) Counties and cities should identify incentives that can be provided to residential, commercial, industrial or mixed-use developments providing affordable housing, including tiny house communities as defined in RCW 35.21.686. Incentives could include density bonuses within the urban growth area, height and bulk bonuses, fee waivers or exemptions, parking reductions, expedited permitting, or other benefits to a development. Counties and cities should provide a variety of incentives to accommodate housing needs of all economic segments and may tailor the type of incentive to the circumstances of a particular development project.

(c) Counties and cities may choose to offer incentives through development regulations, fees, processes, or through conditions on rezones or permit decisions.

(4) Criteria for developing a program under RCW 36.70A.540. When developing an affordable housing incentive program, counties and cities must establish standards for low-income renter or owner occupancy housing consistent with RCW 36.70A.540 (2)(b). The housing must be affordable to and occupied by low-income households.

(a) Low-income renter households are defined as households with incomes of 50 percent or less of the county median family income, adjusted for family size.

(b) Low-income owner households are defined as households with incomes of 80 percent or less of the county median family income, adjusted for family size.

(c) Adjustments to income levels: Counties and cities may, after holding a public hearing, establish lower or higher income levels based on findings that such higher income and corresponding affordability limits are needed to address local housing market. The higher income level may not exceed 80 percent of county median family income for rental housing or 100 percent of median county family income for owner-occupied housing.

(d) Affordable units developed under RCW 36.70A.540 should be committed to affordability for 50 years; however, a local government may accept payments in lieu of continuing affordability.

(e) The powers granted in RCW 36.70A.540 are supplemental and additional to the powers otherwise held by local governments, and nothing in RCW 36.70A.540 shall be construed as a limit on such powers.

(5) Maximum rent or sales prices: Counties and cities must establish the maximum rent level or sales prices for each low-income housing unit developed under the terms of their affordable housing programs. Counties and cities may adjust these levels based on the average size of the household expected to occupy the unit. These levels may be adjusted over time with changes in median income and factors affecting the affordability of sales prices to low-income households.

(a) For renter-occupied housing units, the total housing costs, including basic utilities, excluding telephone, as determined by the jurisdiction, may not exceed 30 percent of the income limit for the low-income housing unit.

(b) For owner-occupied housing units, affordable home prices should be based on conventional or Federal Housing Administration lending standards applicable to low-income first-time homebuyers.

(6) Types of units provided when a developer is using incentives to develop both market rate housing and affordable housing.

(a) Market-rate housing projects participating in the affordable housing incentive program should provide low-income units in a range of sizes comparable to those units that are available for other residents. To the extent practicable, the number of bedrooms in low-income units should be in the same proportion as the number of bedrooms in units within the entire development.

(b) The provision of units within the developments for which a bonus or incentive is provided is encouraged. However, programs may allow units to be provided in a building located in the general area of the development for which a bonus or incentive is provided.

(c) The low-income units should have substantially the same functionality as the other units in the development.

(7) Enforcement of conditions: Conditions may be enforced using covenants, options, or other agreements executed and recorded by owners and developers of the affordable housing units. Affordable units developed under an incentive program should be committed to affordability for 50 years; however, a local government may accept payments in lieu of continuing affordability.

(8) Payment in lieu of providing units allowed. Counties and cities may also allow a payment of money or property in lieu of low-income housing units if the jurisdiction determines that the payment achieves a result equal to or better than providing the affordable housing on-site. The payment must not exceed the approximate costs of developing the same number and quality of housing units that would otherwise be developed. The funds or property must be used to support the development of low-income housing, including support provided through loans or grants to public or private owners or developers of housing.

(9) Jurisdictions with affordable housing incentive programs should consider customized zoning and development regulations for development on real property owned or controlled by a religious organization, but must allow increased density consistent with RCW 36.70A.545, 35A.63.300 and 35.63.280.