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Leveraging Public-Private Partnerships to Meet Bellingham’s Housing Affordability Goals

colorful houses of different types

The deficit of affordable housing is a nationwide issue that is felt more acutely in Bellingham, Washington. As the city continues to grow and attract new residents, the gap between the housing supply and demand widens, affecting low- to moderate-income households. Meeting the Area Median Income (AMI) requirements for housing is not only a regulatory mandate but also a social and economic imperative that ensures all residents have access to safe, affordable living conditions.

This article explores the potential of leveraging public-private partnerships to address Bellingham’s affordable housing shortage and meet the State’s affordability requirements by 2045.

Current Affordable Housing Landscape in Bellingham, Washington

Bellingham, a city known for its scenic beauty and vibrant community, faces significant challenges in its housing market. The growth in population has put considerable pressure on the housing supply. As of May 2024, the Redfin Compete Score™ ranks Bellingham’s housing market 89 out of 100, categorizing it as “Very Competitive.” In a recent article, we note that Bellingham’s Housing Affordability Index scores are among the lowest in the entire state. 

Current Housing Market Conditions

The housing market in Bellingham is characterized by high demand and limited supply, leading to rising prices in both the rental and homeownership sectors. According to recent data, the median home sale price in Bellingham has increased significantly over the past decade. As of May 2024, the median home sale price in Bellingham was approximately $650,000, a figure that is out of reach for most working families. Similarly, rental rates have surged, with the average monthly rent for a two-bedroom apartment exceeding $1,800.

The rental vacancy rate remains low, hovering around 2%, which exacerbates the affordability crisis. This tight market condition makes it difficult for low- and moderate-income households to find affordable and adequate housing. And as we know, there is a direct correlation between housing and homelessness. The number of senior citizens (people 60 years old and older) experiencing homelessness increased 141% between 2019 and 2023. In response to the 27% increase in houseless people from December of 2022 to December of 2023, Chris D’Onofrio, Housing Program Supervisor at Whatcom County Health and Community Services, said, People are becoming homeless faster than we can get them back into housing. We’re working hard to prevent and resolve homelessness for many households, but these growing numbers show the gap between what we’re able to do and where we need to be in terms of services and affordable units.

Unfortunately, the need is greater than there are resources. In a 2023 article, we reported on the community impact of cost-burdened citizens, sharing that Bellingham and Whatcom County Housing Authority spends over $22 million per year on rental assistance, but only one in every four households who qualify receives support from the program. City staff reported that the total need is equivalent to $90 million a year.

What is the City Doing to Address the Housing Need?

The City of Bellingham has implemented several initiatives and policies aimed at addressing the affordable housing crisis. Key among these is the Bellingham Home Fund, a levy approved by voters in 2012 and renewed in 2018, which provides funding for the construction and preservation of affordable housing. The Home Fund has been instrumental in supporting various projects, including the development of low-income housing units, emergency shelters, and supportive housing for individuals experiencing homelessness. The program provides essential support, but federal and state funding are limited and access to funding is highly competitive and not enough to address the full scope of the affordable housing crisis. 

Additionally, Bellingham provides a Multi-Family Tax Exemption (MFTE) program that offers an 8-year or 12-year property tax exemption on projects that create four or more additional affordable housing units in one of five designated urban villages. This policy aims to integrate affordable housing within market-rate developments to promote socioeconomic diversity. Though some argue the MFTE program needs to be restructured as the 12-year option has not yet been implemented whereas the 8-year option is heavily utilized.

The city's 2016 Comprehensive Plan outlined goals and strategies to increase affordable housing through promoting higher-density development, encouraging accessory dwelling units (ADUs), and leveraging public land for housing projects. Since 2019 a number of low-income housing apartments have been built in partnership with developers, the Opportunity Council and the City like Eleanor Apartments, Heart House, Trailview Apartments, Evergreen Ridge Apartments, Samish Commons, Laurel & Forest and Millworks resulting in 623 new homes over the past 5 years. However, the 2023 Consolidated Plan estimates that the City needs 425 affordable housing units per year to meet the demand. 

In an article by the Whatcom Housing Alliance, Samya Lutz, City of Bellingham Housing & Services Program Manager, said, “It used to cost about $300,000 to build one affordable housing unit. Now it’s closer to $500,000. What we’re seeing is that the sheer cost of building is keeping our most vulnerable community, vulnerable.” 

Moreover, the cost of land in Bellingham is high, making it difficult for developers to produce housing that is affordable to many segments of the population without significant subsidies. And construction costs have also risen due to increased prices for building materials, labor shortages, and wage increases.

Despite the City’s efforts, the scale of the problem remains daunting and the heart of the issue is that production of housing in general has not kept pace with demand. Addressing the housing crisis in Bellingham requires a multifaceted approach that involves overcoming significant challenges. The city has laid important groundwork through its existing initiatives and policies, but more robust and innovative solutions are needed to create enough housing to meet the State’s AMI requirements for 2045.

Washington State's AMI Housing Requirements for 2045

The Area Median Income (AMI) is a critical metric used to determine eligibility for various affordable housing programs. It is the midpoint of a region's income distribution, meaning half of the households earn more and half earn less. AMI is calculated annually by the U.S. Department of Housing and Urban Development (HUD) and varies by location and household size. The significance of AMI lies in its use to set income eligibility thresholds for affordable housing programs and to ensure that housing is affordable for a range of income levels. This metric helps policymakers and developers align housing production with the financial realities of the community. Typically, to qualify for affordable housing programs households earn between 30% and 80% of the AMI.

Projected AMI Requirements for 2045

In 2021, the Growth Management Act (GMA), was amended to require communities to plan for future housing that is affordable to all income brackets. House Bill 1220 officially goes into effect June 2026. By that time all required cities must have removed permitting barriers to allow property owners to develop housing at income levels across the spectrum.

Housing affordability is typically defined by households that spend no more than 30% of their income on rent or mortgage. When people can take the remaining 70% of their monthly budget to cover utility, transportation and groceries costs and still have some to put into savings, it’s considered a wider benchmark for economic stability. 

This amendment to the GMA is a step towards reducing homelessness and housing inequality in Washington state. To help jurisdictions plan, the Department of Commerce created the Housing for All Planning Tool (HAPT) which accounts for current county populations and adds the low, medium or high 20-year population projection estimate provided by the Office of Financial Management (OFM) to help planners identify how many homes will be needed to meet their goals.

If Whatcom County were to adopt the OFM’s medium population projection estimate, it would need approximately 35,624 net new homes by 2045. As the cultural and economic center of the County, Bellingham should take at least 50% of new population growth which means Bellingham will need an average of 891 new homes per year to accommodate the population increase and 425 of those homes must be affordable to those earning below 80% of AMI. Pulling this off will require collaboration between policymakers, developers, and community stakeholders. 

graph shows how many homes are needed in Bellingham affordable to each income bracket by 2045

Potential Partnerships Between Private Firms, Nonprofits and the City

To address the housing shortage in Bellingham and meet the state requirements, it is essential to foster strong partnerships between builders, developers, and the City. These partnerships can leverage various incentives, funding mechanisms, and collaborative strategies to create a sustainable framework to produce affordable housing development. In an earlier article we outlined the importance of public-private partnerships, also known as P3s, and reviewed the advantages and disadvantages of these relationships, concluding that with the right partners and clear terms, public-private partnerships are beneficial for serving the greater public good. And in this case, the greater public good is more housing.

P3s typically involve a combination of public sector support, private sector investment, and nonprofit organization participation. Successful models often include:

  1. Land Trusts: Public land trusts can provide land at reduced or no cost to developers who commit to building affordable housing. This reduces the overall project cost and makes it feasible to include more affordable units.

  2. Tax Increment Financing (TIF): TIF districts can be established to use future increases in property taxes generated by new developments to finance infrastructure improvements and affordable housing projects.

  3. Mixed-Income Developments: Encouraging developments that include a mix of affordable and market-rate units ensures socioeconomic diversity and financial viability.

Some incentives that can help attract and engage partnerships resulting in not only more housing but affordable housing include:

  1. Tax Credits and Abatements: Property tax abatements or credits can significantly reduce the operating costs for developers, making affordable housing projects more attractive. Currently the City has its MFTE program.

  2. Density Bonuses: Allowing higher density in developments in exchange for affordable housing units is designed to help increase the profitability of projects for developers. Density bonuses were implemented in the Old Town Master Plan and Samish Way Urban Village Plan. 

  3. Expedited Permitting: Streamlining the permitting process and providing priority review for projects that include affordable housing can reduce the time and cost associated with development.

  4. Infrastructure Support: Covering infrastructure development costs through grants and funding can lower the initial investment required from developers. The City or County can also waive impact and connection fees if the development results in affordable housing.

While tax credits and density bonuses are incentives available to developers right now, these tools alone have not resulted in enough housing. The City is aware of its permitting challenges and we understand the Planning Department is actively working to streamline the permitting process. After all, an increase in housing supply should lower prices. Regarding infrastructure support, Whatcom County has an Economic Development Investment program that retains a portion of sales tax to finance public facilities like public water, sewer and stormwater conveyance and transportation improvements like streets, sidewalks and trails. Whatcom’s Economic Development Investment program is, “intended to finance public facilities that will stimulate private investment and will facilitate the expansion, retention or attraction of businesses and increase employment opportunities in Whatcom County.” However, private firms cannot apply for the grants or loans. Only local governments or public entities can apply for the funding. 

Similarly, local officials also have access to HUD’s Economic Development Initiative (EDI) funds within the Community Development fund which can help cover water, sewer or road infrastructure costs for the purpose of increasing the affordable housing supply in a local community. 

The City of Bellingham, private investors and nonprofit organizations like Habitat for Humanity or the Kulshan Land Trust can potentially partner to coordinate their resources and generate the types of housing Bellingham needs to meet its 2045 AMI affordability goals. In exchange for the City obtaining funding for needed infrastructure improvements or reducing impact fees, developers may be able to donate private land to nonprofits to manage long-term affordable housing initiatives. Or, developers could shift the dollars that would be spent on infrastructure into the development of mixed-income housing to increase both affordable and market-rate housing while still maintaining profitability. The City can further support these partnerships through expedited permitting, reduced parking minimums and tax credits.

Housing is a to Key to Bellingham’s Future Economic Stability

It is estimated that, “the shortage of affordable housing opportunities costs the American economy $2 Trillion a year.” Housing affordability is core to attracting employment and economic development. Without affordable housing employers have difficulty attracting qualified talent and are less likely to bring jobs to Bellingham leaving families with fewer opportunities for economic mobility. 

High housing costs also limit renters from entering the housing market and prevent current homeowners from scaling the property ladder which can open smaller, more affordable starter homes to first-time home buyers or to older residents looking to downsize. As we noted earlier, when people spend only 30% of their income on housing, it frees up discretionary income that can be funneled back into the local economy. 

Through well-structured public-private partnerships, the City can achieve its housing goals for 2045 while attracting employers to foster sustainable urban growth. Investing in strategies that result in housing affordable to all income levels is not only a matter of social equity but also results in long-term economic sustainability to improve prosperity for all of Bellingham’s residents. 

It is imperative for the City to collaborate with private entities to create innovative solutions that generate the types of housing our community needs at the prices they can afford.


Housing for Bellingham is a community resource that works to explain the fundamental processes and terminology associated with housing related decisions in effort to inform the public. When we understand land use planning processes, we can make more informed decisions about housing and land use policies in our community.


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Contact your Bellingham City Council representative and tell them you support a proactive plan for sustainable growth.

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