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Affordable Housing Techniques and Incentives

This page provides an overview of techniques and incentives for local governments in Washington State to encourage the construction of new affordable housing, including density bonuses, design standards, parking standards, reduced infrastructure fees, short-term rental (STR) regulation, and use of preapproved plans.

It is part of MRSC's series on Affordable Housing.

Overview

Local governments can encourage the development of affordable housing through a variety of regulatory and non-regulatory techniques. This page reviews some techniques being used in Washington State and around the United States, including functional density bonuses, design standards, parking standards, reduced infrastructure fees, short-term rental (STR) regulation, and use of preapproved plans.  

The level of complexity to implement these techniques along with their effect on housing affordability varies. If combined in a way that is appropriate to the specific community and housing market, these incentives will likely result in an effective approach to help local governments make housing easier to build and potentially more affordable.  

Density Bonuses 

Density bonuses are an example of incentives intended to spur action by private sector housing developers. Density bonuses can be used to achieve certain common goods – such as preserving common open space or building public amenities – in exchange for the capacity to build more square footage/ housing units than normally permitted. Functional density bonuses often give a developer the ability to construct more units in exchange for providing a public benefit (e.g., affordable housing units). Developers can take advantage of the increased density to create more economic value for themselves while cities and towns benefit from the addition of more affordable housing units. 

This image shows how a density bonus might work on a proposed, four-story building.

AH_Density-Bonus

A density bonus program should be designed to provide enough of an incentive so that the desired public benefit is achieved. In some cases, a development code contains an impressive set of density bonuses that look good on paper but don’t offer enough incentives to entice a developer. In other cases, a density bonus may be too generous to a developer, resulting in too much of a benefit to the private sector and fueling potential public resentment at what may be viewed as a “give-away.” For these reasons, it is important for a local government to: 

  • Learn from other communities that have a successful density bonus program;
  • Monitor local market conditions and talk with local developers to determine what they would need to use such a program; and 
  • Communicate with the public about the rationale for a density bonus program. 

It should be noted that the usefulness of this tool is often limited to areas with strong real estate markets with demand for new construction at prices where density bonuses can subsidize public goods. 

Examples of City Regulations Using Density Bonus to Encourage, Not Require, Affordable Housing 

  • Bellingham Municipal Code Ch. 20.29 – Facilitates construction by offering a  density bonus up to 50% if steps are taken by the owner to ensure that at least 51% of the units remain affordable for at least 50 years for single-family homeownership.
  • Kirkland Zoning Code Ch. 112 – All developments with over four units located in certain zones must provide some affordable units. A variety of density bonuses, dimensional standard modifications, and fee or property tax exemptions are used as incentives to provide additional affordable units.
  • Marysville Municipal Code Sec. Ch.22C.090 – Residential density bonus incentives available for permanently restricted, low-income rentals and low-income senior rentals. Also available for mobile home space for mobile homes displaced from closed mobile parks. Density bonuses for other public purposes are also delineated.
  • Poulsbo Municipal Code Sec. 18.70.070(B) – A small-city example where a density bonus is granted at varying levels for developments of five or more units if certain percentages of units are affordable for low-income households.
  • Redmond Zoning Code Sec. 21.20.030 – In addition to a variety of density bonuses and fee or property tax exemptions for affordable units, the code includes an affordable senior housing bonus program; all programs are subject to an affordable housing agreement.
  • Shoreline Municipal Code Sec. 20.40.230 – Example of a relatively simple density bonus code.

Examples of County Regulations Using Density Bonus to Encourage, Not Require, Affordable Housing

  • King County Affordable Housing Planning – Includes development incentives such as credit enhancement, density bonus program, fee waivers, and surplus property for affordable housing and other public benefits. Ch. 21A.34 offers density bonuses ranging from 1-1.5 bonus units per benefit unit. For 100% affordable projects, the density allows 200% above the base.
  • Pierce County Code Ch. 18A.65 – Financial and regulatory incentives (subject to criteria) include expedited permit processing, fee waivers, bonus units, and alternative development standards. Requires compensation to the county when units are sold prior to the required affordability period, which is dedication to future incentives for additional affordable units.
  • San Juan County Code Sec. 18.60.260 – Offers density bonuses for provision of long-term and permanently affordable housing, with no more than 50% moderate-income housing able to be counted. Sec. 18.30.200 (D) offers a density bonus specifically for the density district of Doe Bay Hamlet Activity Center.

Inclusionary Zoning

Inclusionary zoning (IZ) refers to municipal and county planning ordinances that require a given share of new construction to be affordable for people with low to moderate incomes. In Washington, housing programs must offer density bonuses or other incentives to offset the developer's project costs and “compensate” for the requirement to provide affordable units. This approach enlists private sector help in contributing to the affordable housing supply and reducing segregation of affordable and market-rate housing.

RCW 84.14.020 expanded the Multi-Family Tax Exemption program. Cities with populations of at least 15,000 and mandatory inclusionary zoning may offer 20-year tax exemptions for projects within one mile of high-capacity transit. Clark, Kitsap, and Snohomish counties may offer 12-year exemptions for projects within 0.5 miles of transit corridors with service at least 10 times per day.

RCW 36.70A.840-842 require cities to allow higher density residential and mixed-use development near major transit stops, eliminate parking requirements in these areas, and include affordable housing. Projects meeting these requirements qualify for 20-year tax exemptions and 50 percent impact fee reductions.

Examples of In-State Regulations Requiring Provision of Affordable Housing

The samples below require developers provide affordable housing in areas within designated inclusionary zones.

  • Federal Way Zoning Code Sec. 19.110.010 – Multi-family residential projects over 25 units must provide affordable units and may then build bonus units. Single-family developments have the option of reduced lot size in exchange for affordable units if built in identified zoning areas.
  • Kirkland Municipal Code Ch. 112 – All developments with over four units and located in certain zones must provide some affordable units. 
  • Redmond Municipal Code Ch. 21.20 – Affordable housing is defined by up to 80% median income; housing developments over 10 units in specified planning areas must provide affordable units and may then build bonus units. Off-site provision of units or cash payments in lieu of affordable units and dimensional modifications are options. All programs are subject to an affordable housing agreement.

Examples of Out-of-State Regulations Requiring Provision of Affordable Housing

Resources for Inclusionary Zoning

Partnerships with Nonprofit Housing Developers and Public Housing Authorities

Nonprofit housing developers and public housing authorities (PHA) create and maintain many affordable housing units throughout Washington and the Unites States. PHAs are federally recognized public entities that focus on providing and advocating for housing for low-income households, while nonprofit housing developers can offer a wider scope of services.

Both types of organizations have independent governing boards and can often gain access to funding sources not available to a city or county. These organizations usually have staff with expertise solely devoted to solving affordable housing problems and producing new housing units. Oftentimes, nonprofit housing developers and PHA's can do their work more effectively in cooperation with local government. As a result, it is important for both sides to reach out to one another and explore potential partnerships when applicable.

Resources for PHA/Local Government Partnerships

Examples of PHA/Local Government Partnerships

Permit Streamlining

Having a clear and consistently applied permit review process is of benefit to everyone, whether you are an applicant developer, local citizen, or government staff. Many communities have taken steps to streamline their development review processes to make them more efficient while still requiring projects to meet all applicable zoning and development standards. Some communities have focused these expedited processes on projects that address key community priorities, such as affordable housing.

Why is a streamlined development review process so important? Shorter permit processing times will save applicants time, which can translate into significant money savings when there are costs associated with holding property until it is put to productive use. While permit streamlining will not by itself create more affordable housing, the achieved cost savings may be enough to give the financial “green light” to allow an affordable housing developer to proceed with a development project.

In addition, efficient and predictable permit timelines can help affordable housing developers meet deadlines for federal or state funding sources.  A development project receiving any type of incentive should be required to maintain a pre-determined level of affordability for an established number of years (via a covenant or similar mechanism that “runs with the land”).

Examples of streamlined permitting processes (includes expedited permitting code provisions that apply to more than just affordable housing) include:

Lot Splitting 

RCW 58.17.145 requires cities to establish an administrative approval process for lot splits, allowing property owners to divide an existing residential lot into two lots. The process may be combined with concurrent review of a residential building permit for single-family or middle housing and must not require a public hearing or design review beyond administrative review.

Reduction/Waiver of Fees

Several communities have adopted exemptions, waivers, or a reductions of charges normally assessed to residential development in exchange for the construction of affordable housing. Examples of this approach includes impact fee waivers/exemption/reductions, discounted building or planning fees, or reduced sewer and water connections fees. While some community members may feel it is unfair to provide a financial break to a select type of housing development, fee reductions and waivers can be an effective tool for those local governments looking to encourage construction of new affordable housing. 

Application Fee Waivers and Reductions

Reduced or waived project application fees, while usually not as large as impact fees or utility connection fees, reduce the costs for an affordable housing developer. Examples of local governments that offer such fee waivers or reductions include:

Impact Fee Waivers and Exemptions

Impact fee waivers/exemption/reductions for low-income housing are authorized under RCW 82.02.060(2) and (4), subject to conditions. Subsection (2) states that exempted impact fees must be repaid from public funds other than impact fee accounts, while subsection (4) has less stringent repayment standards but imposes more requirements on which low-income housing qualifies for a partial or full exemption.

Examples of local governments that offer impact fees exemptions include:

Reduced Infrastructure Connection Charges

Infrastructure connection fees are used to cover the cost related to connecting a new development to a public utility system, such as public water and sewer. Such fees are usually based on the real costs of extending a physical connection (i.e., a pipe) to the development and are assessed on a per-unit basis, based on the type of development (for example, single-family or multi-family housing). These connection fees should not be confused with impact fees, which are not utility connection-oriented and only apply to capital facilities relating to transportation, parks and recreation, public schools, and fire protection.

Infrastructure connection fees can often be a significant cost for developers. For example, the Port Orchard Municipal Code Sec. 13.04.025 notes the following connection fees: $11,571 for a public water connection, $8,993 for a public sewer line connection, and $3,795 for a wastewater treatment facility fee per residential unit (either detached home or apartment unit). This totals to $24,359 per unit, plus an additional $1,000-$2,000 in installation and materials costs. Such fees may serve as an impediment for affordable housing developers in cases where the connection fees contribute to a project not being able to “pencil out” financially on the development’s pro forma.

Because high connection fees may discourage construction of affordable housing, some municipalities waive or offer reduced connection fees for these developments. Any local government that might consider reduced connection fees should establish clear eligibility criteria, such as a threshold level of affordability (e.g., less than 50% of the Median Family Income), a minimum number or percentage of units that must be affordable, and the time period within which these units must remain at the set affordability level.

Examples of local governments with reduced infrastructure fees include:

  • Ephrata Municipal Code Sec. 13.04.112(g) – Allows for water connection fee waiver, while Sec. 13.08.050(f) allows for sewer connection fee waiver.
  • Kirkland Zoning Code Sec. 112.20 – Kirkland is an example of a community that uses several different types of fee waivers and exemptions. The code includes dimensional standards modification as well as reduced fees for traffic and/or park impacts, and eligible planning, building, plumbing, mechanical, and electrical permits.
  • Pierce County Municipal Code Sec. 18A.65.040 – Offers financial incentives, including the waiver of sanitary sewer system/facilities charges, for affordable housing (e.g., If 20% of units are affordable to low-income households, the development is exempt from park impact fees).
  • Port Townsend Municipal Code Sec. 13.03.110 – Allows for deferral payment of system development charges for water and sewer for low-income housing.

Rental Registries 

Rental registries allow municipalities to formally register rental properties and, in many cases, require inspections for safety and habitability standards. Sometimes, landlords also have to obtain business licenses to offer rental properties to tenants. Some registries also track rent prices over time.

By maintaining these records, cities and towns can regularly assess their housing stock, which helps preserve the safety and comfort of local communities, as well as aiding in planning and resource allocation, according to the Rental Housing Association of Washington (RHAWA).

Washington State law permits municipalities to require registration of rental properties and enforce inspection frequency (RCW 59.18.125). A number of cities and towns of all sizes and in all regions have implemented registries. These programs allow municipalities to proactively monitor rental properties, identify potential violations, and act before housing conditions deteriorate.

Examples of rental registries include: 

Short-Term Rental Regulation

One challenge to addressing affordable housing comes from the conversion of existing long-term housing units to short-term rentals (STRs) for use as hospitality units by out-of-town visitors, which reduces the overall housing supply. Housing prices will typically rise if the supply shrinks, but demand remains the same. This phenomenon is often found in high tourism communities and other areas where there is widespread marketing of STRs through online platforms, such as VRBO and Airbnb. 

Short-term rentals can benefit individual property owners by providing extra income for owners to pay a mortgage, especially where the property owner lives on the same property that contains the STR. In high-tourism communities that do not have enough hotel/motel rooms to meet the demand, STRs can help meet that unmet need and benefit the local tourism economy. Without local regulation, however, investors may buy up an entire house or apartment building and convert it to STRs, reducing the supply of long-term housing. 

Examples of Short-Term Rental Regulations

The impact of STR conversions on local housing supplies and the resulting reduction in affordable housing has led many jurisdictions to take significant steps to regulate them. Several Washington local governments have regulations for STRs to address affordability concerns, including: 

  • Chelan County Code Sec. 11.88.290 – References affordable housing as one reason for regulation. Defines three tiers of STRs and limits them to a maximum share of the housing stock in residential zoning districts within specific subareas.
  • Langley Municipal Code Sec. 5.40.030(F) and 18.22.070 – Defines four tiers of STRs and limits the maximum number of multifamily units, ADUs, and non-hosted STRs.
  • Leavenworth Municipal Code Sec. 18.52.120 – Prohibits the rental of entire dwellings as vacation rentals but allows the short-term rental of a portion of a person’s home, subject to several conditions. Limits all bed and breakfast facilities to no more than 4% of total housing stock.
  • Olympia
  • Walla Walla Municipal Code Ch. 20.139 – The purpose statement in the short-term rentals section cites regulation of STRs as “necessary to provide adequate housing opportunities to low- and moderate-income persons.”
  • San Juan County Code Sec. 18.40.275 – Provides standards for vacation rental of residences or accessory dwelling units (ADUs). Includes vacation rental permit limits for different areas of San Juan County.

For other examples related to STRs and accessory dwelling units, see the section titled “Short-Term Rental of ADUs and Enforcement” on our Accessory Dwelling Units page.

Resources on STRs

Surplus Public Property

Local governments have traditionally been required to receive fair market value for the sale of surplus real property. However, RCW 39.33.015 allows local governments to transfer, lease, or dispose of surplus property at low or no cost a public, private, or nongovernmental body for affordable housing projects. This applies to any municipality or political subdivision for which accounts are kept on an enterprise fund or equivalent basis, regardless of the primary purpose or function of such agency.

To implement this statutory authority, the governing body or legislative authority must enact rules to regulate the disposition of property for such purposes. Any transfer, lease, or other disposition approved under must be consistent with existing comprehensive plans.

For cities and towns, any real property originally acquired for public utility purposes is exempt from the requirements of RCW 35.94.040 if it is being transferred for affordable housing purposes. See the examples below:

Examples of Policies

Examples of Surplus RFPs and Resolution

Anti-Displacement Strategies

Increasing housing costs in established neighborhoods can result in the displacement of existing residents.  To reduce the risk of displacement, some communities across the state have adopted anti-displacement policies and plans, while others have included anti-displacement strategies in their housing action plans.

 Local governments planning under the Growth Management Act are required to include anti-displacement policies in the housing elements of their comprehensive plans (RCW 36.70A.070(2)(h)).

Housing Action Plans

Housing Action Plans (HAPs) are optional tools available to local governments to specifically plan for needed housing in their communities. RCW 36.70A.600(2) encourages cities and counties choosing to adopt HAPs to minimize displacement in their communities. Some examples include:

  • Ellensburg Housing Action Plan (2021) – Proposes updates for mixed use and middle housing development and their MFTE program.
  • Oak Harbor Housing Action Plan (2021) – Plans for displacement by beginning to establish a Multifamily Tax Exemption (MFTE) program and changing densities in residential areas.
  • Poulsbo Housing Action Plan (2021) – Offers multiple options for pursing anti-displacement such as preservation of affordable housing

Anti-Displacement Plans

A few communities have created plans focusing specifically on anti-displacement. These plans include actions targeting a broad number of root causes of displacement in accordance with best practices suggested in academic literature.

  • Tacoma Anti-displacement Strategy (2024) – Includes a comprehensive set of actions aimed at guiding the City in mitigating displacement.
  • Vancouver Reside Vancouver (2019) – Created in collaboration with  Portland State University, this plan includes a package of strategies for enhancing existing city programs, and another package of new actions to consider.

Design Standards 

Many local governments require a design review process to ensure that new development fits a desired visual aesthetic of a community or neighborhood. Such standards serve an important purpose in encouraging a design treatment that will likely make a housing development more compatible with nearby buildings, potentially causing neighbors to be more accepting of it. Having a well-designed building is especially important for affordable housing sites due to the historic underfunding of affordable housing design and the unfair stereotype that many such developments are poorly built, a stereotype that persists today.

RCW 36.70A.810, 36.70A.812, and 36.70A.815 prohibit cities and counties planning under the Growth Management Act from requiring façade modulation or upper-level setbacks for affordable housing, passive house construction, modular construction, mass timber construction, or conversion of existing buildings to housing. The legislation also eliminates parking requirements for these project types and allows buildings to exceed height limits to accommodate additional insulation or rooftop solar panels.

RedmondYMCA_SteveB

Photo Credit: Steve Butler

Design review is sometimes criticized because it can add extra time to the development application and review process, particularly when the process involves a citizen-led design review board or committee. To address these concerns, RCW 36.70A.630 sets standards and limitations on design review processes for cities and counties planning under the Growth Management Act. Some cities and towns have further tailored their design reviews for certain types of developments to make construction faster, easier, and less costly. Pre-approved plans may be another solution to speeding up the design review process. 

lakeview-by-duncan-haas

Photo Credit: Duncan Haas, Low Income Housing Institute

Examples of Codes with Design Standards and Guidelines for Smaller Scale Developments

Reducing Parking Standards 

Parking requirements can be a major factor in determining the affordability of a real estate development project. For housing projects requiring surface parking, that parking often occupies land that could otherwise be used to add more income-producing housing units. Conversely, structured parking allows for the efficient use of land but significantly adds to a new development’s construction cost, which gets passed on in the rental rate or sales price of each housing unit. While reducing parking requirements alone won’t by itself result in production of more dwelling units affordable to less than 80% of low- and moderate-income households, it will help reduce what might otherwise be viewed as unnecessary development costs.

RCW 36.70A.817 further restricts parking requirements by prohibiting cities and counties from requiring off-street parking for affordable housing, passive house construction, modular construction, or mass timber construction, unless the jurisdiction can demonstrate through an empirical study that eliminating parking would be significantly less safe.

RCW 36.70A.842 prohibits parking requirements for residential development within station areas near major transit stops.

The graph below is from the Victoria Transport Policy Institute's (VTPI) 2020 report, Parking Requirement Impacts on Housing Affordability.

AH_Parking-Graph_618x402

Graph courtesy of the Victoria Transport Policy Institute

The VTPI found that when included as part of a new multi-family building in 2020, parking decks cost an average of approximately $18,000/parking space. This cost increases substantially if the parking is located underground.

Fortunately, there are multiple ways to reduce development-related parking costs, including reducing parking space requirements, lowering the dimensional requirements of parking spaces (Note: reduced standards should not result in parking spaces so small as to be rendered unusable by most vehicles), allowing tandem spaces, and encouraging the unbundling of parking and rent. Residents of small-unit affordable housing may not need the same amount of parking as other types of housing. For example, micro-housing developments have demonstrated a reduced rate of car ownership.

Other types of developments may be located in walkable areas served by good transit service, thereby appealing to a car-free or “single car ownership” demographic, which reduces the need for on-site parking. Requiring more parking spots than are needed for an affordable housing project does not make sense and will unnecessarily increase the development costs of such housing, leading the developer to decide that it is not financially worthwhile to pursue it. 

The Washington State Legislature has set limits on minimum residential parking standards that may be adopted by local governments in RCW 36.70A.620 and .622. Cities and counties planning under the Growth Management Act may not adopt minimum residential parking requirements greater than one parking space per bedroom or .75 space per unit within ¼-mile of a transit stop receiving frequent service, unless certain exceptions apply. The same limitations apply to housing units affordable to individuals with very low or extremely low-incomes, and housing units that are specifically for seniors or people with disabilities.

It should be acknowledged that some community members may not like a reduction in parking requirements, which they may perceive as having a negative impact on the availability of on-street parking. There are a few approaches, however, that can be used to mitigate this concern. For example, some micro-apartments in the Puget Sound have a requirement that all automobile-owning tenants must pay for and use an on-site parking spot, while tenants without cars don’t have to pay for parking (if they sign an affidavit stating they do not own a car). Monitoring and enforcement of such on-site parking use by tenants is also an essential part of such an arrangement. 

Examples of Codes with Different Parking Standards for Affordable and Smaller-Unit Housing Developments

  • Everett Municipal Code Sec. 19.34.020 – Requires one parking spot per two micro-housing units. 
  • Kenmore Municipal Code Sec. 18.40.030 – Requires .75 parking spots per micro-housing unit if within a quarter mile of the major arterial SR 522; otherwise requires one spot per dwelling unit.  
  • Kirkland Municipal Code Sec. 112.20(4)(b) – Reduces required parking to one space per affordable housing unit, with no additional guest parking required. If parking is reduced through this provision, the owner signs a covenant restricting the occupants of each affordable housing unit to a maximum of 1 automobile. 
  • Olympia Municipal Code Sec. 18.38.100 – For multifamily dwellings (3+ units): 0.5-1.5 spaces; for any residential development within half-mile of frequent transit routes: 0-1.5 spaces; for single-family homes, townhouses, duplexes, cottage housing, manufactured homes: 0.5 spaces; for accessory dwelling units: no required spaces.
  • Port Townsend Municipal Code Sec. 17.34.180 – Reduces requirements for off-street parking for cottage housing developments to “less than normally required for detached single-family residences," based on the idea that the smaller cottages contain fewer occupants.  
  • Washougal Municipal Code Sec. 18.45.070(7) – Reduces parking requirements for cottage housing developments.  

Preapproved Building Plans

The project-related steps involved in designing a housing development project and having those individual designs approved by a local government take a lot of time, which has cost implications for the developer and architect. To achieve efficiency and cost savings, some municipalities are opening the door to having architects prepare design plans that have been preapproved for construction. This is an approach that might also be well-suited to units that can be factory built off-site, such as modular housing and tiny homes.

It can be difficult for municipalities to set up and administer a preapproved plans program: A local government must find an architect who can create a variety of pre-approved plans that are compatible with neighborhood character and meet local market demands. The jurisdiction then needs to find a way to encourage builders to use those preapproved plans instead of their own designs.

The benefit of preapproved plans is that planning staff are already familiar with the proposed buildings’ design and related documents, which can significantly speed up the development review process. This shortened review time will result in cost savings to the developer, since each month saved is a month in which the developer does not have to pay construction loan debt service and is time that can be used to construct and bring the housing unit(s) to market faster.

Several west coast cities, including in Washington, have programs that provide preapproved building plans for accessory dwelling units (ADUs). See the examples below.

Examples from Washington State

Examples from Outside Washington State


Last Modified: January 30, 2026