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Study session: consultants warn Woodinville’s inclusionary zoning must be calibrated to local market
Summary
At a lengthy study session, staff and consultants presented inclusionary‑zoning (IZ) modeling showing mixed results: Redmond‑style IZ has produced units elsewhere but Woodinville’s market, higher construction costs and current interest rates make many modeled projects infeasible without incentives such as density increases, tax exemptions, or fee waivers.
City planning staff and consultants returned to the Woodinville City Council on Oct. 7 to present detailed modeling of inclusionary zoning (IZ) options for the Eastrail Mixed‑Use (EMU) and downtown zones.
The presentation described a range of scenarios combining IZ requirements, multifamily tax exemptions and density assumptions. Presenter Brian said the analysis compares local projects to neighboring jurisdictions and shows that IZ can create affordable units when paired with appropriate incentives. "IZ is working very successfully in some, some ARCH communities," he said, adding that Redmond is a standout in the region because of program longevity and market conditions.
But the models also underscore constraints. The presenter said higher construction costs, higher borrowing rates and land‑price sensitivity have pushed many modeled mixed‑use rental projects below the return thresholds developers require. In one set of scenarios the modeled project showed a multi‑million‑dollar gap between target and projected returns; removing a multifamily tax exemption lowered the modeled return below typical cap‑rate benchmarks, reducing developer interest.
Council members questioned which elements of the Redmond model drive results and which are replicable in Woodinville. Councilmember Vascamo summarized the concern: "The reason the Redmond model doesn't work in Woodinville is because we just can't charge higher rents here." Presenters said differences include rent levels, transit and job proximity, parking ratios and developer assumptions about land cost and below‑grade parking.
The presentation also analyzed for‑sale housing and accessory dwelling units (ADUs). Modeling showed ADUs and modest for‑sale products can produce residual land values that compete with by‑right development, while regulated townhome affordability can create large foregone revenue for developers unless paired with added density or fee waivers. Presenters identified policy levers that could improve feasibility—density bonuses, targeted tax exemptions, fee waivers, payment‑in‑lieu options and allowing an extra primary unit to increase developer yield.
Council asked for the spreadsheet and model inputs so members could test sensitivity (land cost, rents, interest rates, parking). Staff said they will return with refined options, additional scenario breakdowns (parking reduction vs. density vs. tax exemption), and recommended next steps, including payment‑in‑lieu frameworks and further analysis of affordable commercial space binding to IZ policy choices.
No binding policy decision was requested at the study session; council provided direction to staff and consultants to refine analyses for future deliberation.
