Why Bellingham Is REALLY Pushing Density
- Brian Gass
- Nov 21
- 5 min read
Updated: Nov 27
A Real Issues Analysis
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:
“Density equals affordability.”
It’s repeated so often that many people assume it must be true. But when you look at the data, follow the money, and compare Bellingham’s actions to its own 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) the city promised to annex by 2025. The logic was simple:
Bellingham would grow.
The population would increase.
The city needed more land to support homes, parks, roads, and utilities.
But from 2005–2025, something remarkable happened.
Annexations completed: 0 of 15
Not one. Despite repeated commitments, no meaningful expansion occurred. At the same time:
Population grew over 30%
Housing demand surged
Land supply remained frozen
Prices skyrocketed
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:
New sewer and water capacity
New transportation infrastructure
Park expansion
School impacts
Stormwater capacity
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:
Roads
Sidewalks
Gutters
Streetlights
Fire hydrants
Water lines
Sewer lines
Stormwater systems
Meters
Engineering
Inspections
On-site utilities
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:
Full water/sewer connection fees
Full impact fees
Full frontage fees
Full utility hook-up fees
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.
Key Distinctions between REET 1 and REET 2 | ||
Feature | REET 1 (First Quarter Percent) | REET 2 (Second Quarter Percent) |
Rate | A 0.25% tax. | An additional 0.25% tax (total local REET can be 0.5%). |
Eligible Municipalities | Any city, town, or county can impose it. | Only cities and counties that are fully planning under the Growth Management Act (GMA) can impose it. |
Use of Funds | Primarily for capital projects and limited maintenance, with a broader definition of "capital projects". | Primarily for capital projects and limited maintenance, but with a more restrictive definition of "capital projects". |
Specific Allowable Uses | Eligible uses include public facilities like law enforcement, fire protection, libraries, administration, courts, and park land acquisition. | Funds are more specifically directed to infrastructure and parks capital projects, but historically did not allow for the acquisition of park land, nor public facilities like law enforcement or libraries. |
Recent Legislation (Effective July 27, 2025)
Recent legislation (HB 1791) has significantly reduced the differences between the two, providing greater flexibility. Key changes include:
Allowing REET 1 revenues to be used for REET 2 purposes and vice versa, essentially harmonizing their authorized uses.
Removing distinctions between GMA and non-GMA jurisdictions for the use of REET 1 funds.
Making permanent the authority to use a portion of REET funds (up to 35% or $100,000, whichever is greater) for operation and maintenance of existing capital projects.
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:
No new UGAs were annexed
No major capacity expansions occurred
No new growth infrastructure was built
No meaningful land supply was added
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
Vancouver: ~6
Bellevue: 6–7
Redmond: ~7
Kirkland: ~7
Everett (runs its own transit system): ~8
Bellingham: 11.5–12
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:
Generates the highest fee revenue
Produces the highest REET intake
Raises assessment values
Maximizes utility and connection fees
Expands the City budget without expanding the city boundaries
Funds payroll growth instead of infrastructure expansion
Meanwhile, renters pay:
The highest cost per square foot
The highest transportation burden
The highest instability
The highest share of city revenue per resident
Density is not affordability. Density is a revenue strategy for an inefficient city government.
And the research proves it.
The densest cities are the least affordable cities.
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 you step back and connect the dots:
The City ignored its own expansion plan
Froze land supply
Collected growth-related revenue
Didn’t expand anything
Redirected funds internally
Became the least efficient city of its kind
Now sells “density = affordability” as a solution
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.