Mercer Island planning commission reviews rezones, higher heights, 10% inclusionary requirement and step‑housing rule changes

Mercer Island’s Planning Commission on May 13 reviewed proposed development‑code amendments aimed at increasing housing capacity in the town center, implementing an inclusionary requirement for new developments and revising how the city regulates step housing.

Adam Zack, the city’s principal planner, told commissioners the phase‑1 rezone would convert adjacent MF‑2 and MF‑2L areas into a town‑center subarea (creating a TCMF‑6 area) and condense six existing town‑center subareas into three to reflect the station subarea plan. "Phase 1 is in reference to the station sub area plan," Zack said, and the rezones are limited to the area around the town center.

Zack said the proposal creates two TC‑8 subareas (TC‑8A and TC‑8B) and the TCMF‑6 subarea. He told the commission the two TC‑8 subareas would have a maximum height of about 105 feet (eight stories) and TCMF‑6 would allow roughly 78 feet (six stories). The presentation emphasized that most design standards adopted after House Bill 1293 remain in place, but some design requirements will be adjusted to align with the increased heights.

On permitted uses, Zack said adult entertainment must remain allowed by conditional use permit in the area formerly known as TC‑7 (now TC‑8A) because a wholesale prohibition raises a constitutional issue; the rest of TC‑8 (TC‑8B) would continue to prohibit adult entertainment. Council direction, he said, also instructed staff to prohibit warehousing throughout the town center.

Zack outlined a proposed inclusionary zoning requirement that would apply to TC‑8A, TC‑8B and TCMF‑6: "The proposal is that 10% of units must be affordable at 50% of the area median income," he told the commission (MICC 19.11.040). The code would provide a fee‑in‑lieu option so developers can pay a one‑time fee rather than construct some of the required units; Zack said the fee rate itself will be set in the council’s fee schedule by resolution and supported by a nexus study. A staff member clarified that fee payments do not count as constructed units for state reporting until those funds are used to create actual affordable units, though holding funds can demonstrate progress toward obligations.

Commissioners pressed staff on how the fee is calculated and whether it is a one‑time or ongoing subsidy. Staff said the fee is a one‑time payment tied to building square footage and that a nexus study will document the method and rationale for the rate. The nexus work will quantify how new development produces housing demand that the fee helps address.

Zack also reviewed proposed changes to 'step housing' — the city’s umbrella term for shelters, temporary emergency housing and permanent supportive housing — noting state limits on local regulation. Citing House Bill 2266 and related state law, he said the draft code removes the conditional‑use‑permit requirement, spacing and operational requirements for step housing and shifts design review to an administrative process rather than a predecisional public hearing. New operational provisions in the draft would require an applicant to certify the managing entity and its licenses, notify residents within 500 feet (up from the current 300 feet), hold at least one public meeting, designate an emergency contact and document policies for admissions, exits, handling complaints, staffing and safety.

Zack framed the package of changes as an interconnected strategy to increase capacity and meet the city’s affordable‑housing obligations under the Growth Management Act and a hearings‑board finding that the city has adequate emergency‑housing capacity so long as such uses remain allowed.

Staff said public materials including the land capacity analysis, barriers analysis, displacement risk evaluation and draft comp‑plan and code documents are posted on the city’s "Let’s Talk" site and summarized in the Mercer Island Weekly newsletter. The commission was told commissioner comments on the materials are due May 26. Staff also said the May 20 commission meeting will likely be canceled, with a follow‑up discussion on capital facilities, utilities and transportation scheduled for May 27, a public hearing on June 3, and a recommendation aimed for June 10 for council consideration by June 16.

The meeting included one formal vote: commissioners approved the May 6, 2026 special‑meeting minutes (motion by Commissioner Perez; second by Vice Chair Gibson; roll call votes recorded as ayes and the motion passed). The special meeting was adjourned at 7:07 p.m.

What’s next: The commission will hold a public hearing on the code amendments on June 3; staff will publish the fee‑nexus analysis and proposed fee schedule for review, and commissioners are due to submit written comments by May 26.