Frequently Asked Questions about Housing in Bellingham
The City of Bellingham’s goal is to include a full range of housing choices appropriate for all income levels that meets the diverse and growing needs of our community, while ensuring Bellingham remains a desirable place to live. The information below addresses common questions about housing issues in Bellingham, including what the City is doing now and will be doing next.
- There was a lag between population growth and home construction. Housing prices are driven by the regional as well as the local economy. Up and down the I-5 corridor, home values have increased as the region attracted high-paying jobs and subsequent population growth. Rents soon followed suit. Bellingham’s growth has been no exception – nor is it unique. Between 2000 and 2020 the population for both Bellingham and Washington State grew by more than 30%.
This growth continued throughout the Great Recession of 2006 to 2013 when Bellingham’s population increased by over 6,500 residents. During this same seven-year period housing construction slowed by more than 70% and the City issued building permits for just 1,889 housing units. As housing production fell behind population growth, increasing demand drove prices further upward. - Market forces have affected housing costs. In recent years labor rates and the cost of building materials have risen significantly. Beginning in 2022 the cost of financing construction and home loans also increased dramatically as interest rates climbed from 4% to nearly 8%. As of late 2024 rates are beginning to soften but are unlikely to return to pre-2022 levels.
- There is a gap between average incomes and housing prices. The inventory that is affordable to middle-income households is shrinking. Demand is increasing, but wages have not kept pace with housing costs. From 2000 to 2020, the median family income in Bellingham increased by 20% while the median home value increased by nearly 80% (adjusted for inflation). The homes that are being built on the private market continue to serve the needs of higher-income households, but as some buyers are willing to pay more, there are fewer and fewer units available within a price range that is affordable to a median-income family. Our zoning historically offered only limited areas where more affordable types of homeowner housing (duplexes, condos, and townhomes) were allowed to be built. Recent efforts such as the changes to the Residential Multi (RM) codes, Infill Toolkit, and updated Accessory Dwelling Unit regulations have started to address this growing concern.
- This is a nice place to live. Bellingham residents are extremely positive about the quality of life in Bellingham. More than 90% of respondents in the recent Bellingham Residential Survey rated our city’s quality of life as either excellent or good. Our high quality of life – including natural beauty, public services and amenities, and good schools – will keep home and land values high and continue to attract new residents. That is a success!
The cost of building housing is influenced by many factors. A local government does not have control over factors such as natural population increases, mortgage interest rates, regional economic growth, or the price of building materials, supplies, and labor. These comprise the majority of the costs associated with creating new housing.
The following are the tools that a city does have at its disposal, which can directly or indirectly affect the price of housing:
- Zoning (density) – adding more density increases land values, but can also reduce the cost of land per housing unit
- Taxes and fees – make up a percentage of the cost of new housing which are needed to fund services provided by the City
- Incentives – tax breaks or density bonuses, for example, can help spur the private market to build in desired areas
- Land supply (through annexations) – land is needed to build housing, but must be done in accordance with the Growth Management Act
- Permitting processes and timeline – time equals money, and faster processing of permits can help save money
- Housing investments – voter-approved levies or other state-authorized funding mechanisms that support the construction of homes affordable for low-income and vulnerable populations
Federal and State law limits the options available to any city. Some of the strategies that are not within a municipality’s legal options include:
- Enacting rent controls
- Limiting the number of people who choose to move to Bellingham
- Gifting of public land or credit to individuals or organizations that are not low-income
- Requiring private property owners to sell their land, or use it for a specific purpose (such as more housing)
- Addressing the current Condominium liability regulations
Although not limited by law, some other commonly suggested strategies have significant shortfalls:
- Constantly expanding boundaries in search of cheap land is a false economy. The cost of providing services to new development at the outskirts of a city is 2.5 times more expensive than closer in. New residential development on the “fringe” is typically of a density that does not fully cover the cost of services. This cost deficit falls on existing residents and businesses.
- Reducing fees does not guarantee lower home prices or that these savings will be passed on to residents; the market plays a more substantial role in determining housing cost.
Experts agree that increasing supply of all housing types is important and will affect affordability. But, housing affordability is a complex, pervasive issue evolving from decades of land use practices, persistently slow wage growth, and other systemic issues. Solving the problem will require broad and significant change in land use, employment, financing, and other related arenas.
- Is Building More the Only Way Out of the Housing Crisis? – Multifamily Real Estate News (multihousingnews.com)
- Why we can’t build our way out of this hot housing market – HousingWire
- Can we build our way out of the housing affordability crisis? UNC Charlotte Urban Institute | UNC Charlotte
A healthy housing market is one piece of the affordability puzzle. There are many metrics for success, some of which include:
- The number of units produced should keep up with population growth, meaning there are enough units on the market available for rent and for sale.
- A healthy residential vacancy rate would keep rents from rising too quickly. A healthy vacancy rate is 5-7% for rentals and around 2% for homeowners. Bellingham’s rate is currently around 3% for rentals and around 1% for homeowners.
- A balanced proportion of homes are affordable for homeowners earning the area’s median family income. It is estimated that less than 30% of Whatcom County housing is affordable to a household earning median family income. A more balanced proportion is around 50%.
- An adequate supply of publicly subsidized housing. Those earning below 50% of the median income cannot afford housing in today’s private housing market. The community needs to have a supply of housing for low-income households, including: rent-restricted housing, permanent supportive housing, transitional housing, emergency shelter, and related support services to help vulnerable low-income individuals and families remain in housing.
Between 2013 and 2016 Bellingham’s composite (owner and renter) vacancy rate dropped from about 3% to about 1.7%. Since 2016 it has been slowly recovering and is at about 2.5% now. The vacancy rate only goes up when housing production out-paces population growth. The City’s adopted 2016-2036 population forecast assumes growth of about 1,350 people per year. Over the past five years Bellingham has grown by an average of about 1,450 people per year. Over the past 10 years Bellingham has issued building permits for about 7,500 housing units or an average of 750 per year. About a quarter of these units were single-family homes and three-quarters were multi-family units. There were 1,286 new units permitted in 2021, which is almost 2x Bellingham’s ten-year annual average. However, in 2023 only 422 units were permitted.
If population growth and household size remain steady Bellingham would need to build about 210 single-family units and 650 multi-family units (860 total units) each year for the next five to six years to return to a 2% homeowner vacancy rate and a 5% rental vacancy rate. This represents a production increase of about 15% or about 30 more single-family homes and 80 more multi-family units per year compared to the average of the past 10 years.
Returning to a healthy vacancy rate can help to stabilize prices, but it will not lower housing costs. Strong demand will continue to mean that home values will appreciate, and low-income residents will require subsidized housing to continue to live in Bellingham.
Urban Villages – A housing unit built near pre-existing infrastructure is less expensive for everyone. To that end, Bellingham has adopted six urban village plans and is working on a seventh. These dense, mixed-use developments leverage decades of public investment in infrastructure and provide opportunities for diverse resilient communities where people live close to jobs, transit, schools, services, and other amenities. The City has established incentives to make development in urban villages economically feasible and the 2006 and 2016 Comprehensive Plans allocated about a third of future growth to these areas. Since 2006 about 3,000 housing units have been built in urban villages or about 30% of all housing built in Bellingham. These areas have also accommodated about 700,000 square feet of new commercial and industrial space.
Infill Toolkit – Adopted in 2009 and updated in 2021, Bellingham’s Infill Toolkit encourages the creative use of smaller vacant lots or underused land, to reduce sprawl, encourage sustainability, and provide a variety of smaller housing forms (townhomes, cottages, etc.). Under these development tools more than 500 housing units have been completed or approved, and an additional 470 are currently in the application phase.
Accessory Dwelling Units (ADUs) – In 2018 Bellingham amended the ADU development code allowing detached units throughout the city. The codes were amended again in 2022 improving development standards, streamlining the permitting process and to ensure consistency with new state legislation. Since then more than 350 have been permitted in the City. These small units provide a relatively affordable option for people to enjoy the advantages of living in an established neighborhood with convenient access to services, transportation, schools, parks, and trails.
Multi-family Code Update – In 2021 Bellingham adopted revised multi-family zoning regulations that are simpler to understand and administer and include minimum density thresholds to ensure properties are not underdeveloped and housing goals are met.
Land Supply – Since establishment of the Urban Growth Area (UGA) in 1995, Bellingham has approved 22 annexations (averaging one every 1-2 years). These areas total over 3,300 acres, and today accommodate more than 4,300 homes, 9,000 residents and 8,000 jobs. The City has invested more than $150 million dollars to develop infrastructure and provide urban services to these areas.
Preserving Existing Affordable Housing – Sometimes low-income homeowners face housing instability if they can’t afford basic repairs on their home, such as fixing a roof or updating their plumbing. Since 1977, the City’s Home Rehabilitation Program has helped over 1,400 homeowners stay in their homes by offering low-interest loans for essential repairs. Typical loans today are about $30,000.
In 2022 Bellingham adopted a Manufactured Home Park Overlay Zone that provides a level of protection for owners of the 850 unsubsidized affordable homes in the City’s ten manufactured home parks.
Over the past six years, the City has provided funding to the Opportunity Council for their Manufactured Home Repair Program to assist owners with essential home repairs (approx. $220,000/year).
The City also assists existing owners of affordable multifamily housing and shelters in repairing or rehabilitating facilities through the emergency repair program or annual competitive funding program.
Building Affordable Housing – The City directs about $10 million dollars each year to fund local housing programs. These funds come from our community through the local Affordable Housing Sales Tax, and Bellingham Housing Levy; and from federal Housing and Urban Development (HUD) Community Development Block Grant and HOME Investment Partnership Program funds. Additional one-time emergency federal and state funds may supplement the typical annual spending.
About $7 million of these dollars are directed annually to the production or preservation of affordable housing. The City partners with non-profit developers and leverages local funds with other funding sources at more than a 1:8 ratio. To date, these programs have built or maintained over 1,700 housing units and include income-restricted rentals, new homeownership development, and supportive housing which includes case management services.
Rental and Homebuyer Assistance – The City provides about $3 million dollars annually in rental assistance and supportive services to assist low-income tenants to remain in their housing and support other human services. And Bellingham partners with Kulshan Community Land Trust and the WA State Housing Finance Commission to help low-income home buyers with down payment assistance and to help cover closing costs. To date, the City has helped 128 low-income families purchase homes in Bellingham. The average down payment assistance provided has been $26,000.
Multi Family Tax Exemption – In 2024 a report was completed evaluating the local housing market and the performance of Bellingham’s program incentivizing construction of multi-family housing. Based on key insights and recommendations in this report the City plans to adjust the program to increase the likelihood of production of affordable housing.
Consolidated Plan Update – The City’s Consolidated Plan was updated in 2023. This 5-year plan provides the framework within which the City’s spending on services and housing that benefit low-income households takes place. Each year, an annual Action Plan describes the implementation activities taking place, and a Consolidated Annual Performance and Evaluation Report looks back at accomplishments from the prior year.
Infill Toolkit – The City will also be evaluating opportunities to create greater housing availability and choice by revisiting areas that the Infill Toolkit is allowed.
Comprehensive Plan Update – Work on the 2025 Comprehensive Plan update began in 2023 and will conclude by December 2025. This effort will include community-wide discussions of how Bellingham can improve housing supply, choice, and affordability for households in all income levels.
Process Improvements – Staff will be evaluating options for further process improvements to help streamline the City’s land use and permitting timelines.
November 2024 Housing Executive Order – Additional actions the City is taking to support housing opportunities in Bellingham can be found on our Housing Executive Order webpage.
