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Mercy Housing Northwest says rising insurance, nonpayment and land costs threaten affordable portfolio
Summary
Mercy Housing Northwest President Joe Thompson told the Senate committee the organization faces large capital needs in an aging portfolio, rising operating costs and tenant nonpayment; he urged increased and more flexible Housing Trust Fund funding and changes to per-project funding limits to support both preservation and new construction.
Joe Thompson, president of Mercy Housing Northwest, told the Senate committee he has spent 37 years working in affordable housing and described operations and development challenges that threaten the nonprofit's ability to deliver and maintain subsidized homes.
"During those 37 years, I've never seen a greater need for affordable housing than today," Thompson said. He described an aging portfolio—about 60 percent of Mercy's Washington properties are more than 20 years old—and estimated roughly $15,000,000 in outstanding capital needs across that portfolio.
Thompson told senators that nonpayment of rent remains high following the pandemic and that Mercy is carrying more than $1,100,000 in tenant rent unpaid for more than 60 days. At the same time, operating costs have risen sharply; he cited property insurance hikes approaching 50 percent in recent years as an acute pressure.
On the development side, Thompson said Washington needs nearly 650,000 affordable homes below 60 percent of area median income over the next 20 years and that funding programs are oversubscribed. Mercy reported a development pipeline of nearly 1,700 new units targeting families and special-needs populations, but Thompson argued that state funding must be increased and more flexible to respond to higher per-unit and per-project costs.
He urged changes to the Housing Trust Fund's funding rules: eliminate the current per-project cap (which he said has been $5,000,000 for a single project), consider per-bedroom rather than per-unit caps so larger family units are funded appropriately, and balance funding between preservation of existing affordable stock and new construction.
Thompson also described operational strain from nonpayment and rising costs that have pushed some organizations into the red for the first time. "We currently have over $1,100,000 in nonpayment of tenant rent that is over 60 days past due," he said, and added that insurance and other operating cost increases have squeezed margins.
Despite those challenges, Thompson highlighted resident services results such as Mercy Scholars, a youth-focused program at some properties that he said improved high school graduation rates at one farmworker property to 98 percent after program investments.
Why it matters: Mercy Housing Northwest asked the committee to consider higher, more flexible per-unit funding levels in the state Housing Trust Fund and targeted preservation dollars to keep a large, aging subsidized portfolio viable while also supporting new units where shortages are greatest.
The presentation was followed by questions from senators about Mercy's geographic focus and willingness to pursue projects in eastern Washington; Thompson said Mercy currently concentrates in western counties and has transferred eastern holdings to local operators in several communities.
