Island works to keep homes affordable

Originally published Saturday, July 26, 1997

By GORDY HOLT
SEATTLE POST-INTELLIGENCER REPORTER

Donna Dahlquist loves this island.

If only she could afford it.

With the vacancy rate at nearly zero, rents have risen at a 30 percent annual clip the past two years, and real estate prices have climbed, if not steadily, to more than double what they were in 1989. The last big bump came last year, when housing prices jumped an average 20 percent.

These results of the community's success put the squeeze not only on students such as Dahlquist, but on others with annual incomes of $40,000 or less.

And that worries Bainbridge Island Mayor Dwight Sutton, who said he fears the island's diversity, long a community asset, will fade "unless we do something now."

"Already, half our city staff lives off the island because they can't afford to do otherwise, and that just isn't healthy," he said. "It is unraveling the fabric of this community."

Bainbridge has begun looking for solutions to its affordability problems. A few programs already are in place, and more are in the works.

The Bainbridge efforts reflect similar attempts to control living costs in the Northwest, and to comply with the growth-control mandates of the state Legislature's Growth Management Act.

In part, the act requires communities to increase their population density while preserving open space. This has let cities offer incentives to developers to include affordable units in exchange for greater densities in their developments.

In East King County, for example, Bellevue, Issaquah, Kirkland, Bothell and Woodinville have used various laws and funding formulas to build an estimated 150 affordable housing units in the 1990s.

Dahlquist and her family have been able to stay on Bainbridge Island, although she is a divorced mother of three with few resources and is trying to finish a degree in social work at the University of Washington. She expects to graduate in June and keep her family together, thanks in large measure to the Bainbridge Island Housing Resources Board.

The 10-year-old board is a non-profit organization that helps low-income people with housing needs.

"We're lucky," Dahlquist said. "I don't know that I would insist on staying here after I graduate. But there are four lives that have been improved by having the stable, comfortable housing we're living in, and I'm not the most significant. My kids are."

A native of nearby Poulsbo, Dahlquist likes Bainbridge because she can stay close to her hometown, hop a ferry to school and keep her kids in territory they know rather than the big city they don't.

With its saltwater views, semirural lifestyle and 35-minute ferry ride to Seattle, Bainbridge Island is an alluring place to live.

For Helen Dinel, a secretary at the island's Woodward Elementary School, and her husband, John, a Bainbridge School District custodian, the island still has its allure, but housing has long been a sore point. The Dinels can't afford to live here and, as a result, they are among those the mayor worries about.

The Dinels rented on Bainbridge through much of the 1980s, Helen Dinel said. But in 1990, when they decided to buy, they found they could not afford acreage on Bainbridge and moved north across Agate Passage to Poulsbo, where they found land enough for some sheep, pygmy goats and potbellied pigs.

"But now we have to drive that very dangerous two-lane road (state Route 305). We'd love to live where we work, but we just can't afford to," Helen Dinel said.

Bainbridge Island's attractive environment has lured 350 to 500 new residents yearly for the past decade, city planners say. If that growth continues, said chief planner Marti Stave, Bainbridge's population of 19,080 will jump to 24,280 in 2012.

The newcomers will continue to buoy real estate prices, which have climbed for more than a decade. Last year, the average price for a single-family Bainbridge Island home reached $335,000 for the first time.

By comparison, the average price for a Bellevue home east of Interstate 405 last year hit $297,147, with the median price at $242,500. On the west side of I-405, in an area that includes Lake Washington waterfront, the average 1998 sale hit $640,311, while the median price was $442,500, according to Jack Johnson of the Northwest Multiple Listing Service in Kirkland.

A classified ad in the Post-Intelligencer 10 years ago offered a three-bedroom, two-bath Bainbridge Island home "in good location" for $115,000, while a building lot on Bainbridge that went for $20,000 in 1989 would go for $75,000 today.

A month-old city program to buy open space could exert even more pressure on prices. The City Council recently earmarked $500,000 for such purchases. Open-space proponents call it just a start.

Prices are worrisome, said real estate broker Ed Kushner, a founder and former president of the Housing Resources Board.

"Are we going to turn this market around? No, but will we make a difference for some people? Yes, we will," he said.

Kushner said the board aims to help people who earn 80 percent or less than the Kitsap County median on a scale related to family size. The median for a Kitsap County family of four was $48,100 in 1998.

Through grants and contributions, the board owns or controls 22 low-income and emergency houses and apartments in the Winslow area. They'll be needed, Kushner said.

"In this market, it's rare for us to have a first-time buyer anymore," he said. "Even with 20 percent down at the $200,000 level, which is the bottom for a decent house in a decent neighborhood, you wind up with a $1,000 (monthly) mortgage payment, which converts to a requirement that you have an income of . . . at least $40,000 a year."

By comparison, Bellevue's median income in 1996, the last year available, already had topped $47,500.

Efforts are being made to ease the strain.

Bainbridge Island's 1994 comprehensive plan calls for 600 more affordable housing units to be built by 2012. While city planners say only 40 are in the planning pipeline, a year-old ordinance gives the plan some bite islandwide.

Ten percent of homes built in new developments of eight houses or more must be financially accessible to moderate- and low-income buyers. That's the stick.

The carrot: For every affordable house they include, builders may squeeze an extra market-value house into their projects.

In June, Bainbridge developer Rod McKenzie was first off the line under the new ordinance. He started Winslow Mews, a 22-unit project on 14 acres along Wyatt Way just west of Erickson Avenue, 10 minutes by foot from the Winslow ferry dock. When built, two of the units will be offered in the $150,000 range -- affordable in the language of the new ordinance. The rest, already in various stages of completion, are market priced from $199,000 to $223,500.

"You'll never know which units are and which are not affordable," McKenzie said. "We'll use the same exterior materials. The quality of finish will be the same."

There will be important differences for the buyers, however.

Under the ordinance, an "affordable" property's deed of sale will require that for 30 years, resale of the property must follow the affordability requirements outlined for initial buyers, and -- a key point -- the property's value cannot appreciate faster than the national Consumer Price Index. (For example, prices for all items in the CPI rose 3 percent in 1996 and 2.7 percent in 1997, the latest figures available.)

Bainbridge builder Jim Laughlin, a Planning Commission member, says buyers could see the appreciation restriction as a problem.

"The trick is to convince someone this is a good idea even when, at some future date, the value of your neighbor's house is going through the roof while you're stuck somewhere around a 2 percent annual increase. Seems to me you might feel left out. On the other hand, you will have had affordable housing," he said.

The Kitsap County Consolidated Housing Authority also is trying to ease the Bainbridge housing crunch. This spring, it will launch a nine-home, build-it-yourself "sweat-equity" development for qualified buyers on Weaver Road near Rotary Field, also in Winslow. Appreciation limits also will apply to resales there.

Roger Wade, deputy director of the housing authority, said buyers must work 30 hours a week on the project.

To keep prices down, the authority will continue to own the land under each house, and mortgage and lease-hold payments will be kept affordable. There will be no down payments or closing costs.

Wade said sweat-equity programs allow first-time buyers unable to produce a down payment to use their perspiration instead. That sweat is worth "about $20,000," he said.

For others, a proposal that goes before the Bainbridge Island City Council tonight would create a housing trust fund to help the city support an inventory of affordable housing and help finance it.

The trust fund would be financed through special building and development fees and voluntary contributions from private agencies and companies involved in real estate, said Garnie Quitslund, a member of the committee that proposed the idea and co-chairman of the Housing Resources Board.

"At the thought of another fee, some of the people we talked to about this initially squawked a little," Quitslund said. "But everyone does seem to recognize that we have a problem, and that the whole community should be contributing to a solution."

For Sutton, the mayor, there is no choice. "What's going to happen 20 years out if we don't do something now?" he asked. "The people living here who are in the $10,000-to-$25,000 income range are going to be extremely hard pressed to continue. They just won't be able to afford it. I don't think we want that."