Bellingham City Council

The Bellingham City Council took major action on housing policy Monday night, unanimously approving sweeping changes to the Multi-Family Tax Exemption (MFTE) program that will expand tax incentives to spur housing construction across much more of the city. The amendments to BMC 17.82 represent one of the most significant housing policy moves in years, extending the 8-year market-rate tax exemption to the Fairhaven, Barkley, and Waterfront urban villages while dramatically expanding the 12-year affordable housing exemption to all areas where middle housing is allowed. The changes also introduce new housing types and incentive structures. For the first time, co-living housing projects — where individual bedrooms are rented separately with shared common areas — will be eligible for tax exemptions. A new 20-year tax exemption was created for permanently affordable homeownership projects, and existing properties approaching the end of their exemption periods can now extend their benefits by committing to affordable units. Council's action came after extensive public testimony supporting the expansion, with developers, the Port of Bellingham, and housing advocates all endorsing the changes. The amendments respond to a market feasibility study showing that multi-family construction in Bellingham is currently "infeasible" under existing conditions, but that modest market improvements combined with adjusted tax incentives could restart development. Beyond the housing tax exemption, the evening included routine infrastructure approvals — two major contracts totaling over $7 million for water main replacement and fish passage improvements — and committee reports covering the city's challenging 2026 budget outlook and substantial utility rate increases ahead. Council also approved final passage of middle housing regulations with reduced floor area ratios and heard updates on rental fee ordinances that will be discussed further at a June 2nd special meeting. The meeting concluded with Council Member Stone providing an update on her work to draft both a resolution reaffirming city values around inclusion and an ordinance establishing concrete policies to protect LGBTQI+ community members, particularly transgender residents. Mayor Lund announced the city will implement the National Safe Place Program by July 1st to support hate crime victims.

**Multi-Family Tax Exemption Program Expansion (AB 24540)** — PASSED 7-0 - Approved first and second reading of comprehensive MFTE amendments - Expands 8-year market-rate exemption to Fairhaven, Barkley, and Waterfront urban villages - Extends 12-year affordable housing exemption to all areas allowing middle housing (outside Lake Whatcom watershed) - Creates new 20-year exemption for permanently affordable homeownership - Allows co-living housing projects with 10+ bedroom units - Increases AMI thresholds from 60% to 80% for rental units - Establishes extension option for existing properties at 70% AMI - Staff recommendation: Approve — Council aligned with staff **Russell-Irving Water Main Replacement Contract (AB 24557)** — PASSED 7-0 - Awarded $2,688,577 contract to Colacurcio Brothers, Inc. - Replaces water mains dating to 1918-1927 across 8 blocks - Includes 58 ADA-compliant ramp upgrades - Engineer's estimate was $3,558,180; came in well under budget - Staff recommendation: Approve — Council aligned with staff **Padden Creek Fish Passage Contract (AB 24546)** — PASSED 7-0 - Awarded $4,326,715.82 contract to Faber Construction Corporation - Removes fish passage barriers at two Interurban Trail creek crossings - Construction from late June through February - Staff recommendation: Approve — Council aligned with staff **Middle Housing FAR Amendment (AB 24550/24478)** — PASSED 7-0 - Reduced floor area ratio from 0.6 to 0.4 for single-dwelling unit lots - Final passage as Ordinance #2025-05-008 - Staff recommendation: Approve amendment — Council aligned with staff **Canadian Municipalities Letter (AB 24548)** — PASSED 7-0 - Approved goodwill letter to 9 Canadian cities - Staff recommendation: Approve — Council aligned with staff **Mayor's Appointments** — PASSED 7-0 (each) - Aaron Miller to Transportation Commission (first term, expires 2028) - Blake Hudson to Bellingham Arts Commission (first term, expires 2029) - Steve Walker to Parks & Recreation Advisory Board (second term, informational) **Lake Whatcom Property Acquisitions** — PASSED 7-0 (each) - Authorized $860,000 purchase of 37.55-acre Faunt Visser property - Authorized $240,000 purchase of 7.45-acre Patterson property

**Chris Behee, on the market feasibility study:** "The market report that was done to examine the MFTE projects to date and the current market conditions really concluded that multi-family construction of any type within the city and the way the market is right now is infeasible." **Council Member Anderson, on supporting expansion despite preferences:** "I feel that if we're on that upside down kind of bell curve and we have four years of this, how long is it going to take to come out the other end? We very well could be up against where at the state level they're making a decision, do they continue it? So probably it might make some people nervous on the first to speak because I'm the one that typically is really pushing, you know, inclusionary zoning, creating more opportunities to have that mixed affordable housing." **Council Member Lilliquist, on mixed-income housing:** "Mixed income is a community value. That's why I like this program and I'd like extending to middle housing in particular because those are modest scale, naturally affordable and made more affordable with a tax break." **Ben Bessley, Barkley Village developer:** "I can tell you that I was on the phone this afternoon with our ownership and our CFO and our architect working very hard on a multi-family project that would qualify for this if it's passed and I think in the case of Barclay Village it really would make housing production happen at a greater pace. I can guarantee that." **Council Member Anderson, on utility rate challenges:** "We have pipes underground for our water that are probably 100 years old and 50 years past replacement so We'll be making some hard decisions going forward because it's not fair to pass these type of decisions on 5-10 years to other council because the cost will be substantially higher overall to our ratepayers." **Council Member Stone, on comprehensive approach to LGBTQI+ protections:** "If we're going to take on the work, I want that to be meaningfully done, and I want it to be something that withstands, you know, time as well, and that it filters through sort of all layers of and levels of our work as a city government as well to make sure that it is a collective commitment not just from the council but from you know staff as well in the mayor because that's where the implementation happens."