Income Covenant Model

The subsidy spiral has no ceiling. Housing costs do.

When policy makes housing artificially expensive, subsidies don’t solve the problem. They pay for it — indefinitely, and on someone else’s tab.

Housing gets more expensive every year. Every year, governments spend more subsidizing it. When land-use policy restricts supply, every unit built inherits a higher cost floor — and subsidies don’t lower it. Costs rise; subsidy commitments rise to match. There is no ceiling on that dynamic.

And not all of it shows up in the budget. In Whatcom County, 93 residential properties owned by housing nonprofits have left the tax rolls under a state law requiring no vote and no ballot — $285.5M in assessed value, an estimated $2.57M per year in foregone property tax.

The Income Covenant Model™ is a structural alternative — addressing the policy conditions that drive costs up, rather than finding new ways to pay for them.

Overview

Whatcom County residential parcels removed from the tax rolls under RCW 84.36.560

$285.5M

Combined assessed value currently exempt from property tax

$2.57M/yr

Estimated annual property tax foregone — never on a budget line, never on a ballot

This cost doesn’t appear in any city or county budget. Every other property owner in the affected tax districts makes up the difference. See the full investigation →

The Income Covenant Model™ is a housing policy framework developed by Real Housing Reform Initiative that links income-based eligibility covenants with explicit recognition of how land-use policy shapes housing costs.

The model is designed to be evaluated, discussed, and applied by policymakers, planners, and practitioners. It is not a subsidy program, a zoning mandate, or a protected-class designation.

Instead, it provides a structural approach for aligning affordability mechanisms with the policy environment that determines land and housing costs.

Whatcom households are out of slack.

Hidden subsidies on one side, exhausted household budgets on the other — both shaped by the same policy regime.

Whatcom County’s rank in Washington for severe renter cost burden — ahead of King, Pierce, and Snohomish (30.1% of renters paying ≥50% of income on housing)

$307/mo

What a severely-burdened Whatcom renter on the county median income has left after housing, transport, state & local taxes, and energy

$133/mo

What a half-median Whatcom household has left for food, healthcare, childcare, and debt — after rent, transport, taxes, and energy

Whatcom County leads Washington’s major rental markets in severe housing cost burden — not because incomes are low, but because policy has driven housing costs faster than incomes for over a decade. That’s not a poverty story. It’s a land-use story. See the full affordability dashboard →

Bellingham already taxes three different ways for housing.

Two property levies and a dedicated sales tax. Combined, they collect about $9.5 million a year — against Bellingham’s own identified need of $133 million a year.

$4.04M

Fund 181 · Affordable Housing Levy

City special property tax levy at $0.1775/$1,000 AV. Voter-approved 2019 for a 10-year, $40M term.

$2.80M

Fund 182 · Sales Tax

0.1% sales tax under RCW 82.14.530. Council-adopted 2021. Collected by WA DOR and remitted to the City.

$2.69M

BHA District 13 · Property Tax

Junior taxing district levy at $0.1132/$1,000 AV. Goes directly to the Bellingham Housing Authority.

The four public entities collecting these taxes held $36.6 million in cash at the close of FY2024.

Entity	Cash (FY2024)	Source
Bellingham City Fund 181	$9.25M	City 2024 ACFR
Bellingham City Fund 182	$7.57M	City 2024 ACFR
Bellingham Housing Authority	$17.20M	SAO audit AR1038946
Whatcom County Housing Authority	$2.60M	SAO audit AR1038945
TOTAL CASH ON HAND	$36.62M

BHA’s own cash position grew $5.8M in 2024 alone (from $11.4M to $17.2M) — the Authority brought in more federal grant and tax-levy dollars than it deployed. The City’s two housing funds added another $2.5M to their combined balances over the same year. WCHA was the only entity to decrease its cash (down $0.3M, used to pay off the Sumas Square mortgage).

Why is so much cash accumulating in dedicated affordable-housing accounts? The constraint was never the dollars in the account. It is the price floor that the same policy regime keeps driving higher every year.

Sources: City of Bellingham 2024 Annual Comprehensive Financial Report (audited by WA State Auditor’s Office, published September 29, 2025) for Funds 181 & 182 and the $4.04M Affordable Housing Levy collection at the audited rate of $0.1775/$1,000 AV. Housing Authority of the City of Bellingham 2024 Financial Statements Audit (SAO Audit Report 1038946, released November 2025) for BHA cash balance and net position. Whatcom County Housing Authority 2024 Financial Statements Audit (SAO Audit Report 1038945, released November 2025) for WCHA cash balance. The City’s REET 2nd-quarter allocation (~$2.3M/year) permits affordable housing as one of several allowable uses but is not restricted to it. See all 57 Bellingham revenue sources →

Bellingham’s own number is $133 million per year.

And it would still produce 220 units a year while the underlying policy keeps prices climbing on all the others.

$133M/yr

The additional annual funding Bellingham’s Long Range Planning division identified as needed to subsidize 220 affordable housing units per year for the next 20 years

$3,000/HH

The additional annual assessment per Bellingham household required to fund it — roughly equal to the entire current city budget

220/yr

Affordable units the subsidy would produce annually — against a Whatcom County housing stock of 110,000+ units whose prices continue rising under the same policy

Source: Whatcom County Planning Commission, January 22, 2026 — the final public hearing on the County Comprehensive Plan update. The $133M/year figure was presented by Chris Behe, Bellingham Long Range Planning Division Manager, as Bellingham’s own identified affordability gap. Commission Chair Red Brown observed: “$133 million is the entire city of Bellingham budget.” Behe’s response: “We all agree that $133 million is a huge gap. All we’ve done in that analysis is identify that number and say if we were to subsidize all of those houses that we think are likely to come online at market rate.” Read the full briefing →

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Core Concept

At its core, the Income Covenant Model™ uses income-based eligibility covenants for housing access—whether ownership or occupancy—while rejecting the assumption that high housing costs are an inevitable market outcome.

The model is built on a simple premise:

Housing affordability is shaped first by land-use policy, not solely by market economics.

When land is made scarce by regulation, land prices rise before construction begins. Every housing unit built on that land inherits higher costs. Affordability mechanisms that ignore this reality are structurally limited.

Read LANDLOCKED

Design Premise: Policy-Created Land Scarcity

A defining feature of the Income Covenant Model™ is the explicit recognition that land-use restrictions created by policy are a primary contributor to housing costs.

Rather than treating land scarcity as a fixed market condition, the model treats it as a policy variable. This distinction matters because:

Artificial land scarcity inflates land values upstream
Higher land costs set a higher price floor for all housing
Subsidies or covenants applied downstream cannot undo those costs

The model therefore requires that affordability tools operate in a policy context that does not assume scarcity as a given.

Read LANDLOCKED

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Relationship to Existing Housing Policy Tools

The Income Covenant Model™ differs from common approaches in important ways:

Rental subsidies allocate affordability but do not lower system-wide costs when land is scarce
Inclusionary zoning often embeds affordability requirements into already inflated land prices
Tax-based subsidies disproportionately benefit higher-income households
Age-restricted (55+) covenants demonstrate that eligibility-based covenants are already normalized

The Income Covenant Model™ builds on the logic of eligibility-based covenants while explicitly addressing the policy environment that determines base housing costs.

See the Case Studies

Use and Attribution

The Income Covenant Model™ was developed by Real Housing Reform Initiative, a 501(3)(c) non profit.
The model is intended to be discussed, evaluated, and applied freely.

Attribution Standard

Income Covenant Model™ is a term developed by Real Housing Reform Initiative. Use of the term in professional publications, policy documents, or marketing materials should acknowledge Real Housing Reform Initiative as the originating source.

Use of the term for commercial marketing, consulting services, or proprietary products requires permission.

How This Model Is Used on This Site

The Income Covenant Model™ is referenced in:

Case studies examining housing affordability mechanisms
Analysis of land-use policy and housing costs
Discussions of ownership access and eligibility-based housing tools

When referenced elsewhere on the site, this page serves as the canonical definition.

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Density Doesn't Mean Affordability

This case study examines the relationship between increased residential density and housing affordability across multiple cities and timeframes. The analysis reveals that density alone does not create affordability.

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Why Housing Subsidies Don’t Lower Overall Housing Costs

How property tax exemptions function as a hidden subsidy that lowers government revenue without lowering housing costs. In Whatcom County, 93 nonprofit-owned residential parcels have left the tax rolls under RCW 84.36.560 — $285.5M in assessed value and $2.57M per year in foregone revenue — with no public deliberation.

Is the Income Covenant Model™ legal?

Yes. The Income Covenant Model™ is based on income-based eligibility, which is already widely used in housing policy.

Income-based criteria are common in:

Rental assistance programs
Deed-restricted affordable housing
Public financing and lending programs
Tax-based housing benefits

The model does not rely on protected-class distinctions (such as race, ethnicity, or religion). It uses income thresholds as an eligibility mechanism, which is a long-established and legally recognized approach in housing policy.

How is this different from rent subsidies or affordable housing programs?

Rent subsidies and many affordable housing programs operate downstream of housing costs — they help households afford prices that have already been inflated.

The Income Covenant Model™ differs in two key ways:

It uses eligibility covenants rather than ongoing subsidies
It explicitly recognizes that land-use policy drives base housing costs

The model is designed to avoid layering affordability tools on top of policy-created scarcity.

Isn’t this just another form of inclusionary zoning?

No.

Inclusionary zoning typically:

Requires a percentage of units to be affordable
Embeds affordability requirements into already high land prices
Often relies on cross-subsidization or public incentives

The Income Covenant Model™ does not mandate unit set-asides or pricing formulas. It focuses on who is eligible for housing access, while requiring that land-use conditions do not artificially inflate costs upstream.

Why focus on land-use policy instead of market forces?

The model does not deny market forces. It distinguishes between:

Market-driven scarcity (natural limits, geography, demand), and
Policy-created scarcity (zoning, growth boundaries, regulatory constraints)

Peer-reviewed research shows that when land is made scarce by policy, land prices rise before construction begins. Every unit built on that land inherits higher costs.

The Income Covenant Model™ treats land scarcity as a policy variable, not an immutable economic fact.

Does this mean land-use reform is required?

The model recognizes land-use policy as a key determinant of housing costs. It does not prescribe a specific reform.

What it does require is that affordability mechanisms:

Do not assume artificially scarce land
Do not rely on subsidies to compensate for policy-created costs
Are aligned with realistic, buildable land supply

How jurisdictions address land-use constraints is a separate policy decision.

Could this reduce housing supply?

No. The model does not restrict housing production or impose caps on development.

In practice, it is designed to:

Avoid disincentivizing construction
Function alongside increased housing supply
Support ownership or occupancy access without suppressing development

The model does not replace supply-side policy; it assumes supply matters.

Isn’t this discriminatory?

No. Income is not a protected class under fair housing law.

Income-based eligibility is already used widely in housing policy and is legally distinct from discrimination based on protected characteristics. The model is designed to operate within existing fair housing frameworks.

How is this different from age-restricted (55+) housing?

Age-restricted communities demonstrate that eligibility-based covenants are already normalized in housing markets.

The Income Covenant Model™ applies a similar covenant concept but uses income rather than age. Both rely on eligibility criteria rather than protected-class distinctions.

Does this solve the housing crisis by itself?

No.

The Income Covenant Model™ is not presented as a standalone solution. It is a framework for avoiding structural mistakes that undermine affordability.

It is most effective when combined with:

Realistic land supply
Predictable permitting
Market-feasible development conditions

The model is designed to avoid making affordability worse, not to promise a single-policy fix.

Why create a new term for this?

Because existing labels do not accurately describe the approach.

The Income Covenant Model™ is:

Not a subsidy
Not inclusionary zoning
Not rent control
Not a protected-class policy

Naming the model allows it to be discussed, evaluated, and critiqued precisely, rather than being misclassified under existing frameworks.

Who developed the Income Covenant Model™?

The Income Covenant Model™ was developed by Real Issues / Real Housing Reform as part of ongoing research into housing affordability, land-use policy, and ownership access.

The model draws on peer-reviewed economic research, planning frameworks, and real-world development constraints.

Can others use or adapt the model?

Yes.

The model is intended to be:

Discussed
Evaluated
Adapted
Tested in different contexts

Use of the term Income Covenant Model™ should acknowledge Real Issues as the originating source. Use of the term for commercial marketing or proprietary services requires permission.

How does this relate to your Case Studies?

The Income Covenant Model™ is informed by findings documented in:

Density Doesn’t Mean Affordability
Why Housing Subsidies Don’t Lower Overall Housing Costs

Those case studies establish the empirical context that led to the model’s design.

The Income Covenant Model

The subsidy spiral has no ceiling. Housing costs do.

Overview

Whatcom households are out of slack.

Bellingham already taxes three different ways for housing.

Bellingham’s own number is $133 million per year.

Core Concept

Design Premise: Policy-Created Land Scarcity

What the Model Is (and Is Not)

What the Income Covenant Model™ Is

What the Model Is Not

Relationship to Existing Housing Policy Tools

Use and Attribution

How This Model Is Used on This Site

Related Case Studies

Density Doesn't Mean Affordability

Why Housing Subsidies Don’t Lower Overall Housing Costs

Disclosure

Income Covenant Model™ — Frequently Asked Questions

Why America’s housing crisis is no accident

Why America’s housing crisis is no accident

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