Kirkland City Council discusses potential affordable employee housing initiative

The initiative is the result of a partnership between the City of Kirkland and Sustainable Kirkland

The Kirkland City Council continued talks surrounding a potential initiative that would increase affordable housing options for eligible city and public-sector employees at its Aug. 7 meeting.

The initiative is between the City of Kirkland and Sustainable Kirkland (comprised of Kirkland Sustainable Investments LLC and Sustainable Kirkland LCC). Sustainable Kirkland owns and operates Arete and will soon operate the under-construction Plaza multifamily development project, the downtown Kirkland properties the initiative would affect.

The partnership with the city is a result of a year’s worth of discussions surrounding affordable housing.

“As we all know, Kirkland is an expensive place to live,” said Kevin Raymond, city attorney of Kirkland. “We believe … that our employees would benefit from affordable housing options downtown.”

The initiative would amend the city’s Multifamily Housing Property Tax Exemption (MFTE) ordinance, Chapter 5.88 of the Kirkland Municipal Code, which targets the affordable housing issue in Kirkland. Through the initiative, 23 new MFTE rental housing units would be available at Plaza with 34 city-employee/public-sector employee rental housing units at both Plaza and Arete.

A recent survey released by the city showed that there was a strong interest on the part of commuting Kirkland employees in living in the area.

Of the 226 respondents, 75 percent did not live in Kirkland. Of that number, about 75 percent were interested in living in Kirkland. About 20 percent of respondents who currently live in Kirkland were intrigued by the prospect of living in the Plaza and Arete units regardless of there being a rent discount.

Kirkland Sustainable is prepared to share 65 percent of the developer’ s property tax savings on the MFTE Plaza units, which will mostly encompass residential suites, but will include some studios. It is envisioned that both the MFTE and city-employee units remain available for at least 12 years.

The city, however, would work with the developer to choose the number and mix of city-employee units on an annual basis for the latter set of units.

Although Raymond made the distinction between the MFTE and city-employee units, the projects are intertwined through their relationship with the developer. Raymond said that the developer has offered to share with the city two-thirds of its property tax savings over the 12-year MFTE period, which is connected to the value of the improvements at the Plaza location. The developer’s estimate, according to Raymond, is that it would result in about $100,000 to the city during the first year of the project and more than $1.4 million over the 12-year period.

The initiative includes the implementation of Kirkland Sustainable master lease agreements. Its basic terms include a landlord-tenant-style primary employment contract, a responsibility on the part of the city for unpaid rent if lease remedies are exhausted, annually negotiable rent and an ability by the city to assign units to other public employers.

Without the initiative, the Plaza units would be rented at fair market value. If passed, it could go into effect shortly after construction on the Plaza is completed in September.

In addition to increasing multifamily affordable housing units in the downtown area, Raymond said that the initiative would make the processes of recruiting and retaining city employees easier and increase the ability to get to work in an emergency.

To proceed with the initiative, amendments will have to be made to the MFTE code. It also requires council approval by the city manager and needs a city staff recording of a contract and covenant related to the 23 MFTE Plaza units.

Both of these items, according to Raymond, need to be executed before the Plaza’s certificate of occupancy is issued.

The initiative has been described as a “pilot” and receivedcritical feedback from the council at the Aug. 7 meeting. The council for the most part praised the project’s intentions, but voiced some reservations about its details. Still, talks will continue at the next council meeting.

“I obviously support the goal, trying to help with affordable housing,” Councilmember Tom Neir said. “That said, I also am excited that we are analyzing MFTE. And I think we should continue no matter what we do here with this project to actually analyze it and come out with financials we can look at … to know exactly who gets what.”

Neir added that he would like to see a more comprehensive and transparent financial breakdown of the project. He also voiced skepticism about the maintenance of the process, the new and potentially complicated human-resources logistics, MFTE amendments, and the affordable housing that already exists in Kirkland.

“I’m also concerned that we don’t truly appreciate what we’re stepping into in administering a housing program,” Neir said. “It is hugely complex. I speak from experience. From the experience I had, it doesn’t end well because the inherent unfairness of it for every other employee becomes very evident. You’re subsidizing an employee. Others want the same subsidy. And out of fairness and equity, you might say they deserve it, even if they make $200,000.”

Councilmember Dave Asher liked the aspect of the landlord-tenant relationship with the employee and the property owner as discussed in the initiative. But he had concerns about potential city involvement.

“It seems to cross the line when we’re talking about payroll deduction,” Asher said. “I’d like to keep that at arm’s length … It seems like we’re trying to mix that, and I’d like to keep it at arm’s length as much as possible.”

Councilmember Kelli Curtis, who’s also a member of the Housing Strategy Plan Advisory Group, was mostly enthusiastic about the proposed initiative.

“I think this is an opportunity to be creative and be bold,” she said. “It is a pilot program. We do have a chance to back out of it if it turns out that it’s not working or it’s a disaster. I do respect Councilmember Neir’s concerns, but I do think we need to be creative about solving our housing problems. We talk about workforce housing … we need to prove that concept. This is an opportunity to prove that concept. So I’m intrigued.”

Curtis added that although she would like to move the conversation about the initiative forward, she wants to also explore issues related to financial transparency, management and compliance in the future.

“As we go out to outreach to the community and we start talking about this, we need to continue to figure out the story of why we need workforce housing,” Curtis said. “I think we need to set up quantifiable goals, what kind of housing we need in this community and how we’re going to get there. This is one of the ways to do it.”

The initiative isn’t the only option the city manager and his staff are considering to address the housing issue. According to Raymond, telecommuting and other housing possibilities have also been discussed.

The initiative will be further discussed at the next Kirkland City Council meeting.

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