Planning commission weighs mandatory inclusionary zoning, ADU exemptions and nexus study

The Leavenworth Planning Commission on Aug. 6 discussed a potential mandatory inclusionary zoning approach that would require new development in zones permitting housing to include affordable units or pay a fee in lieu. Commissioners and staff debated whether ADUs should be exempted and whether the city needs a Nexus (NexSys) study to set a lawful fee level.

Commissioners said the central questions are where an inclusionary requirement can legally apply, whether to exempt ADUs or existing-lot additions and what fee level would be defensible under state law and the Growth Management Act. Staff described advice received from the Municipal Research and Services Center (MRSC) and said the NexSys study would show the maximum fee envelope the city could lawfully charge and how much revenue a given fee would generate for affordable housing.

Why this matters: the Growth Management Act and state precedent limit how jurisdictions structure development fees and in-lieu payment programs. Commissioners flagged a tension the planning staff described: a fee high enough to produce equivalent housing outcomes to on-site units can be much larger than political or development stakeholders expect. Commissioners repeatedly returned to two policy choices: require an affordable component on every project in zones that allow housing, or require it only for certain project types and rely on a fee in lieu.

Discussion highlights and clarifications included: - ADU exemption: Multiple commissioners favored exempting ADUs and additions on existing lots from any mandatory fee so as not to discourage small-scale infill that increases housing supply. Staff said the commission had already discussed waiving requirements for “secondary units on a property already in existence.” - Scope: Staff recommended making the requirement apply to any development in a zone that permits housing rather than picking project types, noting state law prevents picking and choosing across potentially similar projects. That would include single-family zones where housing is permitted (for example, new triplexes being proposed for single-family zones) but not industrial-only areas where housing is not permitted. - Fee level and Nexus study: Staff said MRSC advised a Nexus study was necessary to demonstrate that an in-lieu payment “achieves a result equal to or better than providing the affordable housing on-site” under state law. Commissioners noted Nexus-driven fees often run higher than simple targets such as “1% of project cost” which had been discussed as an aspirational number. Staff emphasized the NexSys analysis would produce a lawful maximum and revenue estimates; council would choose a level within that envelope. - Target incomes and incentives: Staff described existing incentives tied to income targets (for example, renters up to 80% AMI and owner-occupied up to 100% AMI were discussed as possible program thresholds); a staff participant noted 100% AMI for a single-person household is about $74,000–$75,000 in current figures. - Alternatives and legal limits: Commissioners and staff explored alternatives such as permit‑fee waivers or discounts tied to providing affordable units; staff cautioned permit fees must be cost‑based and cannot be used as a disguised tax or profit center. They also noted development impact fees (e.g., water and sewer) follow different rules and cannot simply be repurposed as affordable-housing fees.

Direction to staff: The commission asked staff to take a “dive” back into the inclusionary zoning options, clarify where an ordinance could legally apply, and prepare draft code language that would: (1) exempt ADUs and secondary units on existing lots, (2) apply the requirement in zones that allow residential use, and (3) identify Nexus study scope and likely next steps for council review. Staff said they would return with a redlined approach and work with the NexSys vendor to estimate fee envelopes and revenue implications.

What the commission did not decide: No ordinance was adopted or voted on. Commissioners did not set a specific fee, did not adopt final income targeting, and did not authorize spending for a Nexus study during the meeting; they instead requested staff follow up with options and cost estimates.

Next steps: Staff will draft language reflecting the directions above and provide an analysis of Nexus-study costs and expected fee envelopes for council consideration. The commission asked staff to emphasize clarity on exemptions (especially for ADUs) and implementation details such as deed restrictions and monitoring costs in future materials.