Bellingham's Housing Crisis

Introduction: The Story You’ve Been Told vs. The Truth You Haven’t

For years, Bellingham officials and outside advocacy groups like the Sightline Institute have pushed one message:

This phrase is repeated so often that many people assume it must be true. However, when I look at the data, follow the money, and compare Bellingham’s actions to its past promises, a very different story emerges.

This is not a housing strategy. It’s a revenue strategy. And residents deserve to see how we got here.

The 2005 Growth Plan: A Promise Bellingham Never Kept

In 2005, Bellingham adopted a bold, long-term Comprehensive Plan. It identified 15 Urban Growth Areas (UGAs) that the city promised to annex by 2025. The logic was simple:

But from 2005 to 2025, something remarkable happened.

Annexations completed: 0 of 15

Not one. Despite repeated commitments, no meaningful expansion occurred. At the same time:

This wasn’t an accident — it was a policy choice. You can’t grow people and freeze land without driving costs through the roof. And that’s exactly what happened.

Today, Bellingham is one of the most expensive cities in the United States for its size.

“Growth Pays for Growth” — But the Money Never Built Growth

Here’s where the real story begins. Washington requires that new development pay impact fees and connection fees so existing residents aren’t subsidizing growth. These fees are legally restricted for:

In other words:

These revenues must fund EXPANSION — not payroll, not administration, not internal projects.

But in Bellingham, those funds disappeared into the City Hall budget with no equivalent expansion of city infrastructure.

Developers Build the Infrastructure — Not the City

Here’s the part most people don’t know:

When a new subdivision or apartment complex is built, the developer pays to install:

And when the project is complete?

The developer donates the entire utility system to the City.

That’s right — the City receives a fully built, fully functioning system for free. And then still charges:

This is a revenue engine — not an affordability tool.

Don't Forget About the REET!

Washington State imposes a Real Estate Excise Tax (REET) on most real estate transactions. The amount charged is a progressive percentage, starting at under $500,000 and increasing.

Cities and counties may impose their own local REET taxes in addition to the state REET, each with a maximum rate of 0.25%, with differences primarily in which municipalities can levy them and how the funds can be used. 

Recent Legislation (Effective July 27, 2025)

Recent legislation (HB 1791) has significantly reduced the differences between the two, providing greater flexibility. Key changes include: 

In short, while they were historically distinct in their use limitations and the local governments that could levy them, new laws are making the two local taxes nearly interchangeable in how the revenues can be applied to capital and maintenance projects.

Bellingham collected an estimated $20 million in just five years.

Where Did the Growth Money Go?

It went into the City budget. The payroll exploded from ~800 employees to ~1,100. The city budget grew from ~$56 million to over $140 million. Internal departments grew at record pace, yet:

Growth fees didn’t pay for growth — they paid for Bellingham’s internal operating costs.

Bellingham: The Least Efficient City in Western Washington

Here’s the most telling statistic:

Employees per 1,000 residents

Bellingham is the least efficient city relative to its population size and geographic footprint. A bloated city government requires a massive revenue stream. And where does that come from?

Dense, fee-heavy development.

Not single-family homes. Not ownership housing. Not moderate growth. Not boundary expansion. Apartments = more units = more money.

The Final Myth: Density = Affordability

But every major academic study shows the opposite — including three of the strongest peer-reviewed analyses available today.

Study #1 (Ahlfeldt & Pietrostefani, 2019) – Full breakdown here

Study #2 (Stacy, Davis & Larson, 2023) – Full breakdown here

Study #3 (NIH Gentrification Study, 2021) – Full breakdown here

What All Three Studies Agree On

Across the Harvard, NIST, and NIH research:

❌ Density does not reduce rents

❌ Density does not create affordable units

❌ Density does not help low-income renters

❌ Density does not lower construction costs

Instead:

✔ Density raises land values

✔ Density raises construction costs

✔ Density raises municipal overhead

✔ Density accelerates gentrification pressures

✔ Density produces high-rent units first

✔ Density benefits city budgets — not residents

And in a city like Bellingham, where land supply has been intentionally frozen for 20 years, density compounds scarcity rather than relieving it.

The Real Reason Bellingham Pushes Density

Because dense development:

Meanwhile, renters pay:

Density is not affordability. Density is a revenue strategy for an inefficient city government. And the research proves it.

Density increases land values. Density increases development costs. Density increases municipal overhead. Density increases pressure on infrastructure. In Bellingham, density isn’t even replacing scarcity — it’s being built on top of it.

That’s why renters pay the highest cost per square foot in the city — and why the City has every incentive to keep the system going.

Conclusion: Follow the Money

When I step back and connect the dots:

This isn’t a housing strategy. This isn’t an affordability strategy. This is a financial survival strategy for an inefficient City Hall.

And Bellingham residents — renters, buyers, families — are the ones paying the price.