Kenmore council adopts $6/$8 per‑sq‑ft fee‑in‑lieu for middle‑housing affordability

The Kenmore City Council voted 4–2 to adopt a fee in lieu of providing on‑site affordable housing units for middle‑housing in the R4 and R6 zones, setting the rate at $6 per square foot for owner‑occupied units and $8 per square foot for rental projects, effective Jan. 1, 2026.

City staff and a consultant told the council the fee is an alternative for fractional affordable‑unit requirements created by the city’s June ordinance implementing middle‑housing rules. Assistant City Manager and Community Development Director Debbie Bent and planner Mike Stanger of the Regional Coalition for Housing presented the analysis and recommended rates.

The council adopted the fee after a presentation explaining the methodology for valuing an affordable unit, the range of prototype developments tested and sensitivity to market feasibility. "We recommend a fee per square foot for all the new units ... $6 a square foot, if it's owner occupied or $8 a square foot, if it's renter occupied," Mike Stanger said during the presentation.

Stanger described the technical approach: staff compared market sales and development cost assumptions across several building prototypes to estimate the residual land/development value that could support affordability. He said for owner‑occupied middle‑housing the midpoint of prototypes produced a recommended fee just under $6 per square foot; for rental prototypes the capitalized rental‑income difference produced roughly $8 per square foot.

Council discussion focused on potential effects on development and the need to monitor outcomes. Councilor Lutzes said she was concerned the fee could discourage development and asked staff to track impacts; Councilor Marshall sought flexibility to review rates more often than the two‑year minimum in the proposed code. Staff said the code allows the council to reset the rate but advises not to do so more frequently than every two years to provide certainty to developers.

Staff said the fee would be collected at building permit issuance and deposited into the city’s affordable housing account. The council may direct contributions to the ARCH (Regional Coalition for Housing) trust fund, but staff said final spending decisions remain with the council. Mike Stanger noted the city could tie annual adjustments to CPI.

Councilors also heard that the Master Builders Association reviewed the proposal and offered comments; staff characterized the Kenmore rate as “reasonable” and below fees in some neighboring jurisdictions. Stanger noted a state law exception: projects located more than one‑quarter mile from a major transit stop that propose more than two units must provide an on‑site affordable unit if they opt to build three or four units, so the fee option does not apply in that specific circumstance.

The clerk read the motion as: "Authorize a fee in lieu rate effective 01/01/2026 of $6 per square foot for providing affordable housing units for residential development in the R4 and R6 zones and for rental development projects at a rate of $8 per square foot." The vote was Culver, Sassen, Deputy Mayor O'Kane and Mayor Herbig in favor; Marshall and Lutzes opposed. The motion passed 4–2.

Councilors requested staff return with monitoring data and to report any material impacts on local development activity or evidence that the fee is discouraging housing production. Staff said administration of the fee would be handled by development services at permit intake and that early projects may require more staff time for calculation and coordination with ARCH.