Market Study for Affordable Multi-Family Rental Housing … · Market Study for Affordable...

Market Study for Affordable Multi-Family Rental Housing on Orcas Island

Prepared for: OPAL Community Land Trust

August 2015

Prepared by:

J Robertson and Company ED Hovee and Company

Orcas Island Affordable Housing Market Study OPAL Community Land Trust i

TABLE OF CONTENTS

I. Executive Summary 1

II. Project Description 3

III. Market Area Economy 5

IV. Competitive Rental Market 28

V. Analysis of Rent Gap 29

VI. Project’s Effect on the Market Area 31

VII. Conclusion 31

Orcas Island Affordable Housing Market Study OPAL Community Land Trust 1

I. EXECUTIVE SUMMARY This market study analyzes and provides contextual data related to a proposal to develop a 30-unit affordable housing development on Orcas Island, San Juan County, Washington. The report’s sponsor, OPAL Community Land Trust, commissioned the report to address Washington State Housing Finance Commission requirements for qualifying for the Low-Income Housing Tax Credit program. The following provides a high-level summary of findings. Additional details are provided in the remainder of the report. Project Description – OPAL Community Land Trust plans to develop 30 units of affordable housing on a 3.79 acre tract adjacent to Eastsound, Orcas Island’s urban center. The project will primarily serve 30%, 40% and 60% AMI households. Set-asides are planned for people with disabilities and large families. The project will include a variety of amenities including gardens, community meeting space, bike and equipment storage, common laundry and patio/porch space. At present, OPAL envisions a variety of unit types, including:

• 4 Studio Units @ 384 sf = 2,304 sf • 6 1-Bedroom Units @ 576 sf = 1,728 sf • 10 2-Bedroom Units @ 1024 sf = 10,560 sf • 10 3-Bedroom Units @ 1,280 sf = 12,500 sf

OPAL intends to finance the project through a combination of private equity, bank loans, subsidized loans, grants, donations and low-income housing tax credits. The 30-unit development is the first phase of a project that can be expanded to accommodate an additional 15 units, for a total of 45 affordable housing units. Market Area Economy – Orcas Island is home to approximately 5,400 people. It has an annual growth rate of 4.42% from 2010-2015, but previously experienced a growth rate of 16.9% from 2000-2010. The median age on Orcas is 54.7 compared to 38.1 statewide. The median household income on Orcas Island is $51,490 (Claritas) / $68,200 (HUD) compared to a statewide average of $60,320 (Claritas)/ $73,600 (HUD). Compared to the State as a whole, Orcas has twice as many employed in arts and entertainment, buildings and grounds maintenance and construction/extraction professions; and less than half the state average employed in health, computer and math professions. Orcas Island has a significantly higher percentage of self-employed workers relative to the state as a whole – nearly 31% compared to 10% statewide. According to the most recent US Census/ACS data, 592, or about 12% of all islanders, live below the federal poverty level. An estimated 70% of Orcas Island housing is owner-occupied, and just over 30% renter-occupied. The vast majority of housing is in the form of single-family detached units (just over 85% compared to a statewide average of 63%). There are an estimated 203 total units of multi-family housing on Orcas Island, compared to 3,883 single-family detached units.


More than one-third of Orcas Island housing is considered vacant. By far and away, the largest class of vacant housing is used for seasonal, recreational or occasional use purposes. Data indicate that very little of this housing is available to rent (est. 57 of 1,861 units). Orcas (and San Juan County, generally) have the highest median home values of any county in the state. Estimated median home value on Orcas Island as of 2015 is estimated to be $544,199 compared to a statewide average of $276,110. Approximately 54% of all housing is valued above $500,000. Eighteen percent is valued above $1 million, compared to 11% valued below $200,000. Only 10% of housing is valued at $200,000-$300,000. Rental vacancy and availability is currently at or near zero. According to locals, most rental housing is secured through word of mouth, with many individuals and families living in multiple locations over the course of a year due to seasonal fluctuations in availability. Competitive Rental Market – Three rent-restricted properties were identified for comparison. The properties provide a combined total of 47 units. 33 units are studio/1-BR, 10 are 2-BR and 4 are 3-BR. None of the units are vacant. Two market-rate property management firm comparables were also examined. Vacancy for market rate multi-family rentals is described as “low to none.” OPAL’s proposed rental rate caps are in-line with existing rent-restricted rents. They are considerably lower that some market-rate single-family rents. Analysis of Rent Gap – OPAL intends to provide subsidized housing for persons in the 30%, 40% and 60% set-aside categories as part of its proposed project. Units will include studios, 1-, 2- and 3-bedrooms. Rents are projected to be at maximum restricted rent levels (less utility allowances). OPAL rents will be less than current market rents. No gap is anticipated. Project’s Effect on the Market Area – It would be difficult to envision any negative impacts of the OPAL project on the local market area. Given extremely low vacancy rates, a high-volume vacation market and dearth of year-round rental units, it is unlikely the addition of subsidized housing would compete with the private market supply. Similarly, there is currently zero and rarely at any time, any vacancy in existing rent-restricted supplies. On the other hand, the addition of 30 units of affordable housing could provide a positive solution for many families earning below the AMI. As confirmed through housing focus groups, and evident in the data, many of the core service providers (teachers, retail clerks, utility staff, etc.) are unable to afford local housing, if they can find it in the first place. Conclusion – OPAL has developed a thorough development program, including pro forma performance estimates. It has a proven track-record developing and operating other rent-restricted housing facilities. OPAL has also tested the market through stakeholder interviews, focus groups and outreach to market experts. The project is viable as proposed.


II. PROJECT DESCRIPTION About the Market Study OPAL Community Land Trust, a 501c3 charitable corporation, intends to develop approximately 30 units of affordable rental housing on North Beach Road in the Eastsound village area of Orcas Island. OPAL believes subsidized rental housing may be needed to ensure more islanders are able to remain on the island, given persistently high and rising housing and rent prices. OPAL commissioned this Market Study in order to analyze the project’s market viability and satisfy Washington State Housing Trust Fund and Washington State Housing Finance Commission (WSHFC) requirements related to qualified use of federal Low-Income Housing Tax Credit Program. The study addresses a range of data points and topic areas per established WSHFC requirements.

A) Market Area Description Primary Market – Orcas Island Orcas Island encompasses 57 square miles and is home to an estimated 5,439 residents (Claritas, 2015 Est.), or about one-third of the total San Juan County population. Orcas Island has grown at a rate of 4.42% per year since 2010, compared to 2.56% for San Juan County and 5.34% for Washington State as a whole. This moderate growth rate was preceded by a precipitous growth spurt from 2000-2010, when Orcas grew at an average rate of 16.69% annually. Access to and from Orcas Island is restricted to ferry, personal watercraft or airplane. The island is predominately rural/sub-urban in nature. Eastsound village serves as the primary commercial hub near the geographic center of the island, with smaller commercial nodes in Olga, Deer Harbor and Doe Bay. Significant tourist activity swells Orcas’ summer population and has, over time, increasingly impacted the island’s housing market (see Market Area Economy). Secondary Market – San Juan County Because Orcas is an island, there is no true secondary market to be considered in this study. On the other hand, some San Juan County residents do live and work on different islands, and many have lived on multiple islands. More importantly, for the purposes of this study, certain important data points are only made available at the County level. While it is difficult to infer precise conclusions about Orcas from San Juan County-level data, islanders often recommend “dividing County information by three” to estimate Orcas’ share of a volume question, and to assume “ballpark accuracy” when evaluating county-level averages. They base this recommendation on the fact that Orcas encompasses 1/3 of San Juan County’s geography and population (in all, San Juan County totals approximately 174 square miles and serve as home to an estimated 16,172 (Claritas, 2015 Est.) residents.


B) Proposed Site Amenities and Improvements Site Amenities OPAL recently negotiated a purchase and sale agreement for a 3.79 acre site located near the village of Eastsound, Orcas Island’s primary commercial center. The site’s proximity (walking, biking distance) to essential services, entertainment and the waterfront makes it particularly appealing for a wide range of potential tenants. The site is currently undeveloped/uninhabited, but zoned to accommodate 45 residences. The site is situated between other residences, including one multi-family unit, to the south, a high school sports field to the east, and several early learning centers to the west. OPAL is working with an arborist and landscape architect to develop a forestry and tree preservation plan so it can effectively incorporate unique and healthy trees and undergrowth into the site design and development plan. Unit Mix and Amenities OPAL’s vision is to develop the site in two phases. This market study focuses on the first phase, which OPAL hopes to initiate in 2016. A second phase, if executed, would not take place for a number of years. OPAL’s preliminary scheme for phase one includes 30 rental housing units as follows:


In addition, each unit would come with 48 sf of unheated storage space (1,440 sf total) and shared use of an additional 320 sf of covered bike storage. The development will also feature a 1,400 sf commons building including a gathering space and kitchen of sufficient size to accommodate up to 25 people, as well as two offices, restroom, laundry and small maintenance and storage spaces. Additional amenities and design goals include:

• Design Certifications: Evergreen Sustainable Design Standards/Enterprise Green Communities • Mix of distributed/centralized parking to facilitate access by seniors/people with disabilities • Remote parking for visitors and second vehicles • Pedestrian connection to main village • Integrated internal trail and landscaping features • Garden and workshop space • On-site property manager’s office

Other notable building design features include:


• Ground floor/accessible units • Internal stairs (no exterior stairs) • Unheated storage space for each unit. • Porches and decks • Possibly Passive House design concept: 30% more energy efficient than current building code. • High degree of sound buffering between units • Durable materials to minimize maintenance and operating costs

Target Market and Financing Strategy OPAL intends to finance development through a combination of capital campaign contributions, grants, loans and federal low-income housing tax credits. The estimated 30 units will be priced so that:

• 10 are affordable for 30% AMI and less • 5 are affordable for 40% AMI and less • 5 are affordable for 60% of AMI or less • 10 are unrestricted by governmental agencies (but would likely serve up to 120% AMI)

In addition, six (20%) units will be reserved for larger families (e.g. 4-person households or larger) and six (20%) will be reserved for people with disabilities. Comparison to Market Rate Projects There are very few market rate projects on Orcas Island. OPAL is moving forward with the project because the private sector has not been able to make multi-family housing work from a financial standpoint, due primarily to the high cost of land and construction. Comparison to Other Rent-Restricted Projects There are three other existing rent-restricted residential options on the island, though none have any current vacancies. Combined, they provide 47 units of subsidized living space. No additional rent-restricted projects are planned or in motion.

III. Market Area Economy

A) Market Area Delineation As described earlier, the primary market area is defined as Orcas Island, in its entirety. OPAL intends to serve existing islanders who are housing-burdened or without housing all-together. For data purposes, San Juan County is considered a secondary market.


B) Population and Household Trends

Population Trends

Orcas Island encompasses 57 square miles and is home to an estimated 5,439 residents (Claritas, 2015 Est.), or about one-third of the total San Juan County population. Orcas Island has grown at a rate of 4.42% per year since 2010, compared to 2.56% for San Juan County and 5.34% for Washington State as a whole. This moderate growth rate was preceded by a precipitous growth spurt from 2000-2010, when Orca grew at an average rate of 16.69% annually.

Claritas

Claritas

5,717 5,439 5,209 4,464

16,745 16,172 15,769 14,077

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

2020 Projection2015 Estimate2010 Census2000 Census

Figure 1: Population Change by Volume: 2000-2020

Orcas Island San Juan County

0%

5%

10%

15%

20%

Orcas Island San Juan County Washington State

16.6

9%

12.0

2%

14.0

9%

4.42

%

2.56

%

5.34

%

5.11

%

3.54

%

5.41

%

Figure 2: Population Growth by Percent: 2000-2020

2000-2010 2010-2015 2015-2020


Household growth has slightly outpaced population growth on Orcas Island. From 2000-2010, growth averaged nearly 23% annually. Although this rate has slowed over the past five years and is projected to drop incrementally over the next five, it still remains high compared to the rest of San Juan County and the statewide average. 650 households were added to Orcas from 2000 to 2015 (2015 est.: 2,755 total households), and approximately 200 more are projected to be added between 2015 and 2020.

Claritas

Population Projections

The Office of Financial Management (OFM) provides projections of future residential populations as part of the Growth Management Act. Looking forward, the OFM “medium series” projects San Juan County’s population reaching 16,256 by 2020, while the high and low series projections suggest a range as high as 19,736, to as low as 13,688. Assuming Orcas were to continue serving as home to almost exactly one-third of the County’s residents, the 2020 population could be as high as 6,579 or as low as 4,632.

Figure 4: Population Projection – San Juan County, 2020-2040 by 5-Year Intervals

Projections

2020 2025 2030 2035 2040

High Series 19,736 21,204 22,654 24,043 25,378 Medium Series 16,256 16,606 16,939 17,216 17,443 Low Series 13,896 13,688 13,464 13,189 12,868

Washington State OFM It is difficult to imagine the higher-end figure given limited new development sites and relatively low job creation activity. It is equally difficult to imagine the low-end, given the islands allure as a place to live. On the other hand, anecdotal information from various public engagement activities, including a recent “Housing Solutions” community conversation series, indicate that many Orcas island residents have seen “friends or family have to leave the island because they could no longer afford to live here.”

0%

5%

10%

15%

20%

25%

Orcas Island San Juan County Washington State

22.8

1%

17.7

4%

15.3

5%

6.44

%

4.40

%

5.73

%

6.40

%

4.76

%

5.72

%

Figure 3: Household Growth by Percent: 2000-2020

2000-2010 2010-2015 2015-2020


Age of Population

Orcas has a disproportionate percentage of people aged 55-84 compared to Washington State as a whole. As a result, it also houses far fewer young people, with the most notable gap being the age 25-34 cohort. In some cases, people in that age bracket have simply left to pursue career and employment opportunities. In other cases, they cannot afford to live on the island given high rent or lack of sufficient equity or capital to purchase an Orcas home.

Claritas The median age on Orcas is 54.7 compared to 38.1 statewide, while the average age is 49.2 compared to 38.8 (Claritas, 2015). Educational Attainment

Orcas educational attainment is relatively high, with 47% of the population achieving a bachelor’s degree or higher, compared to 33% of the population statewide.

Claritas

05

10152025

Age 0 -4

Age 5 -9

Age 10- 14

Age 15- 17

Age 18- 20

Age 21- 24

Age 25- 34

Age 35- 44

Age 45- 54

Age 55- 64

Age 65- 74

Age 75- 84

Age 85andover

Figure 5: Age of Population, 2015

Orcas Island Washington State

0 5 10 15 20 25 30

Less than 9th grade

Some High School, no diploma

High School Graduate (or GED)

Some College, no degree

Associate Degree

Bachelor's Degree

Master's Degree

Professional School Degree

Doctorate Degree

1

5

16

26

5

29

13

3

2

4

6

24

25

10

20

8

2

1

Figure 6: Educational Attainment Age 25+ by %: Orcas Vs. Washington State, 2015

Washington State Orcas Island


Household Characteristics

Household Size

Out of 2,755 Orcas households, 2,192 (or about 80%) are 1- or 2-person households, and a mere 564 households are 3-person or higher. Statewide, 1- and 2-person households account for approximately 62% of all households. Orcas’ median household size in 1.97 compared to a statewide average of 2.51.

Claritas

Orcas Island is also characterized by an above average percentage of non-family households (non-family households constitute nearly 44% of all households). There are also three times as many married-couples without children, as there are married couples with children. Figure 8: Percentage of Family, Non-Family Households

Orcas Island

San Juan County

Washington State

2015 Est. Households by Household Type 2,755 % 7,948 % 2,770,334 %

Family Households 1,552 56.33 4,634 58.30 1,781,320 64.30 Nonfamily Households 1,202 43.63 3,314 41.70 989,014 35.70

Claritas

Claritas

0 200 400 600 800 1,000 1,200

1-person2-person3-person4-person5-person6-person

7-person <

1,032 1,160

297 185

56 23

2

Figure 7: 2015 Est. Households by Size (2,755 total)

Married-Couple Family, own children

Married-Couple Family, no own children

Male Householder, own children

Male Householder, no own children

Female Householder, own children

Female Householder, no own children

Nonfamily Households

0 500 1,000 1,500

321

965 51

38

110

67 1,202

Figure 9: 2015 Est. Households by Type (2,755 total)


Household Income Orcas Island has more households earning less than $35,000 (35% vs. 29% statewide) and fewer households earning above $75,000 (31% vs. 39% statewide).

Claritas

Claritas

0 100 200 300 400 500 600

< $15,000$15,000 - $24,999$25,000 - $34,999$35,000 - $49,999$50,000 - $74,999$75,000 - $99,999

$100,000 - $124,999$125,000 - $149,999$150,000 - $199,999$200,000 - $249,999$250,000 - $499,999

$500,000+

333 317 317

376 564

331 168

72 95

42 73

66

Figure 10: Orcas Household Income Array by #HHs at Various Income Levels: 2015 Est. (2,755 Total)

0

5

10

15

20

25

12.0

9

11.5

1

11.5

1

13.6

5

20.4

7

12.0

1

6.10

2.61

3.45

1.52

2.65

2.40

Figure 11: Distribution of Household Income by % HHs at Various Income Levels: 2015 Est.



Employment

With few exceptions, Orcas employees live on-island, and most residents work on or from the Island. While the percentage of Islanders employed in various job types is consistent with the state average in many areas, there are notable variations: twice as many employed in arts and entertainment, buildings and grounds maintenance and construction/extraction professions; less than half the state average employed in health, computer and math professions. Orcas Island has a significantly higher percentage of self-employed workers relative to the state as a whole – nearly 31% compared to 10% statewide.

Claritas

Claritas

47.88

10.09 10.64

30.77

0.65 Figure 12: 2015 Est. Employment by Class of Worker

For-Profit Private Workers

Non-Profit Private Workers

Government Workers

Self-Employed Workers

Unpaid Family Workers

0 100 200 300 400 500

Architect/EngineerArts/Entertainment/Sports

Building Grounds MaintenanceBusiness/Financial Operations

Community/Social ServicesComputer/MathematicalConstruction/Extraction

Education/Training/LibraryFarming/Fishing/Forestry

Food Prep/ServingHealth Practitioner/Technician

Healthcare SupportMaintenance Repair

LegalLife/Physical/Social Science

ManagementOffice/Admin. Support

ProductionProtective Services

Sales/RelatedPersonal Care/Service

Transportation/Moving

71 159

235 79

42 38

340 231

13 196

70 70

101 25

8 466

220 80

57 236

74 94

Figure 13: 2015 Est. Employment by # Employed per Job Type (2,905 total, age 16+)


Unemployment Trends

San Juan County unemployment rates have trended lower than the statewide average over the past 2.5 years. Given the islands’ heavy tourist-based economy, unemployment tends to spike in the winter and stabilize in summer months. Notably, while more employment opportunities exist in the summer, housing is often harder to come by given a healthy seasonal temporary rental market and a discord between market rental rates and service industry incomes.

Washington State Employment Security Department, Labor Market and Performance Analysis

Poverty

According to the most recent US Census/ACS data, 592, or about 12% of all islanders, live below the federal poverty level. As shown in the figure below, poverty is more prevalent in certain population segments. Most of the individuals living in poverty are of working age, as opposed to seniors. Children and people working part-time or part-year are the most impacted by percent of segment.

ACS 5-Year Estimates, 2009-2013

0%

2%

4%

6%

8%

10%

Jan

Feb

Mar Ap

rM

ay Jun Jul

Aug

Sep

Oct

Nov De

cJa

nFe

bM

ar Apr

May Jun Jul

Aug

Sep

Oct

Nov De

cJa

nFe

bM

ar Apr

May

2013 2014 2015

Figure 14: Unemployment Rate: Jan 2013-May 2015

San Juan CountyWashington State

0

500

1000

1500

2000

2500

3000

142

403

47

84 58 26

267

Figure 15: Volume of People Living Below Poverty by Pop Segment

# Below Poverty Level# Above Poverty Level


ACS 5-Year Estimates, 2009-2013 Assistance for the Homeless and Low-Income Residents The Opportunity Council provides a variety of housing and health assistance programs for Orcas Islanders. Over the 12 month period from June 2014 through May 2015, the Center assisted 12 households ranging in size from 1 to 6 persons. Two clients who entered the system homeless were provided re-housing services; while 10 other household received some form of homeless prevention service. All but one household earned a total HH income at or below 30% AMI.

Figure 17: Households Served by Opportunity Council Household Size Prevention Services Re-housing Services Grand Total

1 4 1 5 2 1 1 3 2 2 4 3 3 6 1 1

Grand Total 10 2 12 Opportunity Council Locals indicate the Homeless Count in Time figures for Orcas Island may not necessarily be accurate at this point, and thus not an appropriate data point for this market report. However, local information (Orcas Family Connections) suggests there may be as many as 55 homeless individuals on Orcas Island.

0%

10%

20%

30%

40%

50%

11.8% 18.6%

13.7%

3.5%

41.2%

27.1%

17.6% 17.2%

Figure 16: % People Living Below Poverty by Pop Segment


With respect to DSHS client services, the most recent figures for San Juan County indicate significant use with respect to the basic food program, child support services and medically-eligible Title 19/non-Title 19 programs. County-wide, 137 clients receive TANF services, equating to 45 individuals/families locally, assuming one-third of those clients reside on Orcas. Through direct outreach, San Juan Health and Human Services identified an immediate need for 5-6 subsidized housing units for clients with developmental disabilities currently receiving service, with additional housing units likely needed as other service recipients near suitable transition points.

Figure 18: DSHS Client Services, July 2012-June 2013 (All Ages) San Juan County # Served Use Rate

Population 16,000 Aging and Adult Services Total 76 0.50% Comprehensive Assessments and Case Management 27 0.20% In-Home Services 22 0.10% Nursing Facilities 59 0.40% Additional Services 2 0.00% Alcohol and Substance Abuse Total 133 0.80% Adoption and Adoption Support Payments 14 0.10% Behavioral Rehabilitation Services 1 0.00% Child and Family Welfare Services Case Management 22 0.10% Child Care Services 6 0.00% Child Protective Services (CPS) Case Management 145 0.90% DLR Child Protective Services Case Mgt 1 0.00% Family-Focused Services 8 0.10% Foster Care Placement Services 4 0.00% Foster Care Support Services 1 0.00% Other Intensive Services 1 0.00% Developmental Disabilities Total 28 0.20% Employment and Day Programs 12 0.10% Field Services 15 0.10% Other Community Services 5 0.00% Personal Care Services 11 0.10% Professional Services 1 0.00% Residential Programs 2 0.00% Economic Services Total 2,527 15.80% Aged, Blind, or Disabled Assistance 43 0.30% Basic Food Program 1,830 11.40% Child Support Services 1,174 7.30% Supplemental Security Income-State 38 0.20% TANF and State Family Assistance 137 0.90% Working Connections Child Care 94 0.60% Additional Services 20 0.10% Medical Eligibility Total 2,062 12.90% Medically Eligible Title 19 1,928 12.10% Medically Eligible not Title 19 195 1.20% Mental Health Services Total 170 1.10%


Figure 18: DSHS Client Services, July 2012-June 2013 (All Ages) - Continued Community Hospital 6 0.00% Crisis Services 35 0.20% Other Outpatient 163 1.00% State Hospitals 1 0.00% Vocational Rehabilitation Total 10 0.10% Medical and Psychological Services 1 0.00% Placement Support 1 0.00% Support Services 3 0.00% Training, Education, and Supplies 3 0.00% Vocational Assessments (Job Skills) 1 0.00% Vocational Rehabilitation Case Management 10 0.10%

Washington State Department of Social and Health Services Multi-Family Tax Subsidy Project Income Limits According to the US Department of Housing and Urban Development (HUD), San Juan County’s 2015 median family income is $68,200. Accordingly, the WSHFC has established the following household income limits for all tax credit and bond financed (MSTF) properties. Figure 19: San Juan County Multifamily Tax Subsidy Project Income Limit (March, 2015) Set-Aside % 1 Person 2 People 3 People 4 People 5 People 6 People 7 People 8 People

80% $37,120 $42,400 $47,680 $52,960 $57,200 $61,440 $65,680 $69,920 60% $27,840 $31,800 $35,760 $39,720 $42,900 $46,080 $49,260 $52,440 50% $23,200 $26,500 $29,800 $33,100 $35,750 $38,400 $41,050 $43,700 45% $20,880 $23,850 $26,820 $29,790 $32,175 $34,560 $36,945 $39,330 40% $18,560 $21,200 $23,840 $26,480 $28,600 $30,720 $32,840 $34,960 35% $16,240 $18,550 $20,860 $23,170 $25,025 $26,880 $28,735 $30,590 30% $13,920 $15,900 $17,880 $19,860 $21,450 $23,040 $24,630 $26,220

Washington State Housing Finance Commission: Effective 3/6/15 In addition, the WSHFC has established maximum rents for Low-Income Housing Tax Credit Program projects based on housing size, as shown below. Figure 20: San Juan County LIHTC Program Maximum Rents (March, 2015) Set-Aside % Studio 1 Bedroom 2 Bedroom 3 Bedroom 4 Bedroom 5 Bedroom

60% $696 $745 $894 $1,032 $1,152 $1,271 50% $580 $621 $745 $860 $960 $1,059 45% $522 $559 $670 $774 $864 $953 40% $464 $497 $596 $688 $768 $847 35% $406 $434 $521 $602 $672 $741 30% $348 $372 $447 $516 $576 $635

Washington State Housing Finance Commission: Effective 3/6/15


C) Housing Trends Housing Stock Snapshot An estimated 70% of Orcas Island housing is owner-occupied, and just over 30% renter-occupied. The vast majority of housing is in the form of single-family detached units (just over 85% compared to a statewide average of 63%). There are an estimated 203 total units of multi-family housing on Orcas Island, compared to 3,883 single-family detached units. Nearly a quarter of all Orcas housing was built from 1990-2000, and 21% constructed thereafter. Sixty-one percent of current residents moved into their current home within the last fifteen years.

Claritas

Claritas

1,903 69%

852 31%

Figure 21: Proportion of Owner/Renter-Occupied Housing: 2015 Est. (2,755 total units)

Owner Occupied Renter Occupied

0102030405060708090

1 UnitDetached

1 UnitAttached

2 Units 3 or 4Units

5 to 19Units

20 to 49Units

50 orMoreUnits

MobileHome or

Trailer

Boat, RV,Van, etc.

85.4

7

1.83

1.61

0.79

1.76

0.20

0.11

7.35

0.86

63.1

2

3.61

2.61

3.73

9.98

4.44

5.26

7.04

0.20

Figure 22: 2015 Housing by Unit Structure : Orcas vs. State Average (4,543 total units)



Claritas

ACS 5-Year Estimates, 2009-2013 Vacant Housing More than one-third of Orcas Island housing is considered vacant. By far and away, the largest class of vacant housing is used for seasonal, recreational or occasional use purposes. Data indicate that very little of this housing is available to rent (est. 57 of 1,861 units). Information gleaned through focus groups with community leaders and housing seekers confirmed these figures and provided additional, anecdotal, information about the impacts. For instance, observers note that not only are many of Orcas Island homes not available for rent, most of those that are available, are only reliable for fall and winter months, reverting to vacation rentals (higher market value) in the spring and summer. While there was a modest increase in availability during the great recession, the persistent lack of affordable rental housing has resumed with improved market conditions and visitor activity.

0.00 5.00 10.00 15.00 20.00 25.00

2010 or later2000 to 20091990 to 19991980 to 19891970 to 19791960 to 19691950 to 19591940 to 1949

1939 or Earlier

5.06 15.96

24.70 16.93 17.28

5.06 2.84

3.65 8.50

Figure 23: Orcas Housing by Year Structure Built (2015 Est.)

16.70%

44.20%

25.10%

10.40%

2.10% 1.60%

Figure 24: Current Home Move-In Date by %/Time Period

Moved in 2010 or later

Moved in 2000 to 2009




Moved in 1969 or earlier


ACS 5-Year Estimates, 2009-2013 Housing Values Orcas (and San Juan County, generally) have the highest median home values of any county in the state. Estimated median home value on Orcas Island as of 2015 is estimated to be $544,199 compared to a statewide average of $276,110. Approximately 54% of all housing is valued above $500,000. Eighteen percent is valued above $1 million, compared to 11% valued below $200,000. Approximately 10% of housing is valued between $200,000-$300,000 (within range of statewide affordability).

Claritas

57

17 58 14

1,503

212

Figure 25: Vacant Housing by Status (1,861 total units)

For rent

Rented, not occupied

For sale only

Sold, not occupied

For seasonal, recreational, or occasional use

Other vacant

0 50 100 150 200 250 300 350 400 450

Less than $20,000$20,000 - $39,999$40,000 - $59,999$60,000 - $79,999$80,000 - $99,999

$100,000 - $149,999$150,000 - $199,999$200,000 - $299,999$300,000 - $399,999$400,000 - $499,999$500,000 - $749,999$750,000 - $999,999$1,000,000 or more

6 0

17 26

15 54

97 201

215 244

424 251

351

Figure 26: Orcas Owner-Occupied Housing Value, # Units by Value Range (2015 Est.)


Claritas Due to the high cost of housing, and relatively average household incomes on the islands, San Juan County is the least affordable place to purchase a home in Washington State for first-time homebuyers earning a median income, but without the equity of an existing home1. Even in the brief period between 2011 and 2013 where housing was moderately affordable for “all” buyers, housing for the first-time buyer in San Juan County remained out of reach. As show below, this has been the case since the Housing Affordability Index was initiated in 1994.

1 Notes on WCRER Index Methodology The Housing Affordability Index measures the ability of a middle income family to carry the mortgage payments on a median price home. When the index is "100," there is balance between the family's ability to pay and cost. Higher indices indicate housing is more affordable. First-time buyer's index assumes the purchaser's income is 70% of the median household income. Home purchased by first-time buyer is 85% of the area's median price. All loans are assumed to be 30-year terms at prevailing interest rates. The "all buyer" index assumes down-payment of 20%; the first-time buyer index, 10%. It is further assumed that 25% of income can be used for principal and interest payments.

0 10 20 30 40 50 60

$150,000>

$150,000-$300,000

$200,000-$400,000

$500,000 <

$1,000,000 <

6.20

15.66

21.86

53.91

18.44

16.84

39.31

42.26

16.92

2.87

Figure 27: Orcas vs. State Ave, % Owner-Occupied Housing Units by Value Range (2015 Est.)



Washington State Affordability Index, Washington Center for Real Estate Research

D) Supply and Demand Analysis (1) Market Rate Supply Existing According to ACS estimates, there are 765 renter-occupied housing units on Orcas Island. The majority of rental housing is single-family detached. Out of an estimated 1,388 people living in rentals, over 1,000 live in single-family units, vs. 224 in multi-family, 143 in mobile homes and 16 in some other form of shelter. The majority of renters are 1-2-person households (620 of 765 identified rental households).


20

40

60

80

100

120

140

160

180

200

1994:Q2 1996:Q1 1997:Q4 1999:Q3 2001:Q2 2003:Q1 2004:Q4 2006:Q3 2008:Q2 2010:Q1 2011:Q4 2013:Q3

Figure 28: Housing Affordability Index: San Juan County v. State Ave: Q2, 1994 - Q3, 2013

San Juan All Buyers

State Ave. All Buyers

San Juan First-Time Buyers

State Ave. First-Time Buyers

0

200

400

600

800

1,000

1,200

1, detached orattached

2 to 4 5 or more Mobile home Boat, RV, van,etc.

1,005

136 88 143 16

Figure 29: Renter Housing by # People in Structure (1,388 total people in rentals)



Interviews with realtors, employers, service providers and housing seekers indicate rental vacancy and availability is currently at or near zero. According to locals, most rental housing is secured through word of mouth, with many individuals and families living in multiple locations over the course of a year due to seasonal fluctuations in availability. In other cases, rentals are occupied by individuals performing service in lieu of cash (“no cash rent”). The dearth of rental housing has become acute with improving markets. Those that have secured rental housing pay a premium. Accordingly to slightly outdated ACS estimates, the largest share of rentals command $1,000 or more per month. Relatively few rentals are available below $750/mo., regardless of size. Recent focus groups with community stakeholders and housing seekers indicate rents have increase over the past two years, and with few exceptions, no rentals are currently available below $1,250/mo.


0

50

100

150

200

250

300

350

1-personhousehold

2-personhousehold

3-personhousehold

4-personhousehold

5-personhousehold

313 307

89

40 16

Figure 30: Renter-Occupied Housing by HH Size

0

20

40

60

80

100

120

140

Less than$200

$200 to$299

$300 to$499

$500 to$749

$750 to$999

$1,000 + No cash rent

0 17

9

36

14 0 0 0

10

66 56

30 19

35

0 0 12

40

79

136

56

2 0 6

34

9

73

26

Figure 31: Gross Rent by # Rooms Distribution

No bedroom 1 bedroom 2 bedrooms 3 or more bedrooms



Potential/Developing

No additional multi-family housing is in the development or permitting stage, per public records and consultation with realtors. In fact, since 1994 only 58 multi-family housing permits have been filed in all of San Juan County. This equates to about 1.35% of all building permits filed in the past twenty years.

WCRER: Washington State Building Permits

0 20 40 60 80 100 120

Less than $100$100 to $149$150 to $199$200 to $249$250 to $299$300 to $349$350 to $399$400 to $449$450 to $499$500 to $549$550 to $599$600 to $649$650 to $699$700 to $749$750 to $799$800 to $899$900 to $999

$1,000 to $1,249$1,250 to $1,499$1,500 to $1,999

$2,000 or moreNo cash rent

0 0

2 7

20 45

25 0

23 8

50 36

46 26

32 57

43 106

51 64

7 117

Figure 32: Gross Rent by Cost Range - All Renters

020406080

100120140160

1994

:Q1

1994

:Q4

1995

:Q3

1996

:Q2

1997

:Q1

1997

:Q4

1998

:Q3

1999

:Q2

2000

:Q1

2000

:Q4

2001

:Q3

2002

:Q2

2003

:Q1

2003

:Q4

2004

:Q3

2005

:Q2

2006

:Q1

2006

:Q4

2007

:Q3

2008

:Q2

2009

:Q1

2009

:Q4

2010

:Q3

2011

:Q2

2012

:Q1

2012

:Q4

2013

:Q3

Figure 33: San Juan County Building Permits: 1994-2013

SJC w Multi-Family Permits

SJC Single-Family Permits Only


(2) Market Rate Demand Vacancy, Rates and Incentives According to local realtors, there are only a handful of market-rate rental options available. Rate ranges are shown below. No move-in or other incentives were identified. Vacancies are reported to be few to none depending on the economy.

Figure 34: Trade Area Market-Rate Multi-Family Rentals

Total

Unit Breakdown Units

7

1 Bed 2 Bed 3 Bed Property 1 # of Units 0 7 0 Rent/Range $775 - $2,500 Unit Size (sf) NA NA NA Utilities Includes water, sewer, garbage

6

1 Bed 2 Bed 3 Bed Property 2 # of Units 1 3 2

Rent/Range $525 $700 - $770 $900 - $1025

Unit Size (sf) NA NA NA Utilities Includes sewer, water, electric, trash

Rent Trends Real estate stakeholders report an overall increase in rents on the island, including multi-family rents. As noted above, rent amounts tend to vary widely, though there is very little stock available at or near affordable levels for average or below-average income earners. As the economy has improved, tourism has increased. This has improved the vacation rental market and decreased stock available for lower-cost, year-round rentals. Absorption As indicated in the data above, very little market rate housing is available for year-round rental use. However, as one of the primary housing conduits on Orcas Island, OPAL maintains an inventory of individuals and families seeking housing (market-rate or rent-restricted). That data suggests immediate demand far in excess of OPAL’s proposed 30-unit addition. (3) Rent-Restricted Supply Existing Identified rent-restricted housing supply includes:


Figure 35: Trade Area Rate-Restricted Multi-Family Rentals

Total Units Unit Breakdown Income Limits

Lavender Hollow

22

1 Bed 2 Bed 3 Bed 7 – 65% AMI

or less; 5 – 50% or less; 2 – 80% or less; 2- homeless

or special needs

# of Units 12 8 2 Rent/Range $660 $715 $763 Unit Size (sf) 562 800 970

Utilities Includes water, sewer, garbage

Longhouse

18

1 Bed 2 Bed 3 Bed All 80% AMI

or less # of Units 18 0 0 Rent/Range $480 0 0 Unit Size (sf) 570 0 0


Reddick

7

1 Bed 2 Bed 3 Bed All 80% AMI

or less # of Units 5 0 2 Rent/Range $450 - $550 0 $685 - $785 Unit Size (sf) 400 - 450 0 760

Utilities Includes water, sewer, garbage For these units, there are 34 pre-qualified applicants awaiting openings, and 2-4 call weekly seeking affordable housing solutions. Potential/Developing No rent-restricted housing is planned or under construction, beyond OPAL’s proposed project. (4) Rent-Restricted Demand Vacancy Rates There is little to no existing vacancy in existing rent-restricted housing developments. Market Penetration Analysis Given the small sample size for Orcas Island data, and the heavy presence of vacation housing as a percent of overall housing, traditional market penetration analysis may not provide particularly helpful analysis. Two other indicators may shed more light on potential market penetration for OPAL’s project. First, OPAL maintains an active inventory of rent-restricted housing interested parties. The number of individuals and families on that list far exceeds the number of units OPAL is proposing to construct. On July 15, 2015, 73 households had submitted applications or were pre-qualified for a rent restricted unit, more than twice the 30 housing units that OPAL is proposing to construct.


Second, a comprehensive analysis conducted by OPAL in partnership with San Juan County in 2008, identified the following challenges and needs:

• By 2025, the minimum of an additional 2,248 housing units will need to be constructed to house the projected population increase. Of these units, approximately 1045 must be affordable to households earning $100,000 or less (1 ½ x median household income).

• Even if the minimum 2,248 housing units are built, by 2025, an additional 3,000+ workers will need to be brought to the islands daily to meet the projected labor shortfall.

• By 2025, the projected population will not contain enough working age people to fill the expected jobs in the county. In order to reverse this trend, a further 1,594 workforce housing units will need to be built.

• To house the entire projected workforce in 2025, 2639 affordable housing units will be need to be built.

• Median income earners in the county cannot afford to buy a house in the county. • In order to purchase a median priced house in the county, a family, would need to be earning

almost 2 ½ x the median family income, $150,000, and possess a further $100,000 for a down payment. Wages in San Juan County are about 30% lower than they are on the mainland.

• Housing in San Juan County is the least affordable in the state. • Working families which do not have access to affordable housing provided by non-profits are

consistently cost burdened. Finally, according to the 2015 Washington State Housing Needs Assessment, there are 560 cost-burdened or severely cost-burdened households in the 30-50% AMI and over 200 50-80% AMI range within San Juan County. Assuming, again, that Orcas is home to one-third of those households, there could be well over 180 existing household looking for relief. Presumably some percentage of OPAL’s 30 proposed units could be accessed by those individuals and families. Figure 36: Cost-Burdened Households – San Juan County


Projected Absorption for Project

OPAL recently conducted a series of focus groups with the community to develop an on-the-ground understanding of rental demand and demand by price and unit size. Forty individuals completed a brief questionnaire, indicating significant demand in that group alone.

Figure 37: Local Survey re Housing Demand

1. How Would you characterize the need for affordable rental housing?

Ext. High High Moderate Low

35 3

2

2. In addition to HH <$25K, what segments are in need?

Retail / Service

Essential Service Families Seniors Disabled

Income <$25K

$25K - $34.9

$35K -

$44.9

$45K -

$54.9

< $55

K

29 26 27 29 29 24 23 16 13 6

3. What do you consider affordable rent?

$1K or more $750 - $1K

$500 - $749

$250 - $499

$249 or less

1 17 23 7 4

5. What concerns do you have about the development of rental housing on Orcas?

Look & Feel Density

Fit with surround.

Impact on priv. mkt.

Ppl taking advantage

My income too high

Not avail

to me Other

20 20 22 2 7 10 6 4

6. What features would most help multi-fam. Housing succeed?

Near ferry/walk

to town Near

schools

Common area/ play

area Adequate

Parking Vegetable

garden

Accessible for age

and disability Other

20 25 25 21 18 26 4

9. What size of affordable (attached) rental housing would you live in?

2 units 3 or 4 units

5 to 19 units

20 to 49 units

50 or more units

12 10 8 1 1

10. How many bedrooms are you looking for?

1 room 2 rooms 3 rooms 4 or more

rooms

8 10 7 1

11. What best describes the nature of your household?

Married with

children

Married no

children Male HH w

children

Male HH no

children Female HH

children

Female HH no

children

Non-family

HH

2 3

5 7 2 3

12. What is your annual income, before taxes?

Less than $15,000

$15K - $24.9

$25K - $34.9

$35K - $49.9

$50K - $74.9

More than $75K

10 1 4 5 1 1

13. What could you afford to pay in monthly rent?

$399 or less

$400 - $499

$500 - $599

$600 - $699

$700 - $799

$800 or more

8 2 1 2 6 6

OPAL also has prior experience marketing and finding renters for its rent-restricted housing ventures. OPAL staff members plan to promote the opportunity to rent these apartments, once constructed, in social media, at public functions, and through regular press releases. They will also attend public venues such as the farmer’s market numerous times throughout the design and lease-up stages. Considering this manifest demand, OPAL will likely be able to rent all units in three months or less.


(5) Analysis of Project’s Special-Needs Set Asides Elderly No specific percentage of the proposed development is designated exclusively for the elderly, although the overarching goal is to include a mix of residents including seniors. Residences will be designed with flush entries, ground floor restrooms and ground floor bedrooms, whenever feasible. Non-elderly disabled 6 units (20%) have been set-aside for people with disabilities. Low-income 20 units (66%) have been set-aside for individuals and families below 30% 40% and 60% AMI income levels. Large Family Set Aside 6 units (20%) will be set-aside for families of four or more people. Out of 34 individuals on OPAL’s pre-qualified housing wait-list, 19 represent families of four or more, compared to just five senior households. Analysis of Specific Demand for Special Needs Units As noted earlier, San Juan County Health and Human Services (HHS) has indicated need for up to six units of housing for existing recipients of disability care. OPAL will continue to coordinate with the agency to identify real-time need as the development comes to fruition. OPAL will also work with HHS and other service providers to identify any specific needs required to serve clients as needed, in addition to building in general accessibility features as standard practice. (6) Conclusion: Project’s Competitive Position The project is in an extremely competitive position. No additional market-rate or rent-restricted multi-family housing developments are underway or planned. Market-rate multi-family construction appears to be financially infeasible for the private sector given the strong real estate and construction market. The existing supply of market-rate and rent-restricted housing is fully utilized with significant waiting lists. Low median incomes and high rents provide a built-in demand supply is not likely to satisfy at any point in the near future. OPAL has a proven track record of developing, managing and promoting its rent-restricted housing infrastructure, and is confident it could lease all of the 30 units almost immediately upon completion. Rising home prices and rents, coupled with stagnant wages and earnings indicate the project will be well received in the renter market, yet not likely to impact the private renter or home sales markets.


IV. Competitive Rental Market (1) Analysis of rents, including amenities and utilities

Three rent-restricted properties are identified for comparison. The properties provide a combined total of 47 units. 33 units are studio/1-BR, 10 are 2-BR and 4 are 3-BR. None of the units are vacant.

Figure 38: Trade Area Rate-Restricted Multi-Family Rental Comps

Units Unit Breakdown Income Limits

Lavender Hollow

22

1 Bed 2 Bed 3 Bed Combination

of 30% / 50% # of Units 12 8 2 Rent/Range $660 $715 $763 Unit Size (sf) 562 800 970


Longhouse

18


of 30% / 50% # of Units 18 0 0 Rent/Range $480 0 0 Unit Size (sf) 570 0 0


Reddick

7


of 30% / 50% # of Units 5 0 2 Rent/Range $450 - $550 0 $685 - $785 Unit Size (sf) 400 - 450 0 760


Real estate and property management professionals provided the following inventory of existing market-rate rental properties. Due to the small sample size of available rental properties on the island, information providers have requested properties not be expressly named:

Figure 39: Trade Area Market-Rate Multi-Family Rental Comps Units Unit Breakdown

7

1 Bed 2 Bed 3 Bed Property 1 # of Units 0 7 0 Rent/Range $775 - $2,500 Unit Size (sf) NA NA NA Utilities Includes water, sewer, garbage

6

1 Bed 2 Bed 3 Bed Property 2 # of Units 1 3 2

Rent/Range $525 $700 - $770 $900 - $1025

Unit Size (sf) NA NA NA Utilities Includes sewer, water, electric, trash


Vacancy for market rate multi-family rentals is described as “low to none.” Property managers also provide insight into comparable market-rate single-family housing. Year-round inventory is said to include:

Figure 40: Single-Family Rental Comps

Studio 1-BR 2-BR 3-BR 4-BR

Single-Family Units 0 2 24 10 2 Rent Range NA $850-$875 $775-$2,500 $1,250-$1,750 $1,500-$2,500

(2) Conclusion of rents by type of unit type

Assuming the new OPAL project will be funded using low-income housing tax credits, the maximum rent for 1-3 bedroom units will be capped as follows (or lower for lower set-aside thresholds): Set-Aside % Studio 1 BR 2 BR 3 BR 4 Bedroom

30% $348 $372 $447 $516 $576 40% $464 $497 $596 $688 $768 60% $696 $745 $894 $1,032 $1,152


Proposed rate caps are in-line with existing rent-restricted and market-rate multi-family rents. They are considerably lower that some market-rate single-family rents.

V. Analysis of Rental Gap This section analyzes the gap between max restricted rents, projected rents and existing market rents. Maximum Restricted Rents Maximum restricted rents in San Juan County by size, per AMI threshold, are as follows: Figure 41: San Juan County LIHTC Program Maximum Rents (March, 2015) Set-Aside % Studio 1 Bedroom 2 Bedroom 3 Bedroom 4 Bedroom 5 Bedroom

60% $696 $745 $894 $1,032 $1,152 $1,271 50% $580 $621 $745 $860 $960 $1,059 45% $522 $559 $670 $774 $864 $953 40% $464 $497 $596 $688 $768 $847 35% $406 $434 $521 $602 $672 $741 30% $348 $372 $447 $516 $576 $635



Rent Gap for Restricted Rents OPAL intends to provide subsidized housing for persons in the 30%, 40% and 60% set-aside categories as part of its project. Units will include studios, 1-, 2- and 3-bedrooms. Rents have not yet been set, but are projected to be at or below max restricted rent levels (less utility allowance). Thus no rent gap is assumed at this point.

Figure 42: Rent Gap between Maximum Restricted and Projected Rents

Set-Aside % Studio

1 2 Bedroom

3 Bedroom Bedroom

60% Max Restricted Rents $648 $668 $805 $921 Projected Rents $648 $668 $805 $921 Rent Gap $0 $0 $0 $0



Rent Gap for Market Rents OPAL rents will be less than current market rents, which are indicated to range from near to well above restricted rent caps. No gap is anticipated. The table below shows the rent gap between maximum restricted and current average market rents. For the market rents, we have utilized HUD’s 2015 Fair Market Rent (FMR) figures for San Juan County, and market rents based on a survey of Orcas property management firms.


Figure 43: Rent Gap between Maximum Restricted and Current Market Rents

Unit Type AMI Restricted Rent Max.

Market Rent Rent Gap Projected

Position

Studio 60% $648

$760 $112

Positive 40% $416 $344 30% $300 $460

1-Bedroom 60% $668

$850 $182

Positive 40% $420 $430 30% $295 $555

2-Bedroom 60% $805

$1,200 $395

Positive 40% $507 $693 30% $358 $842

3-Bedroom 60% $921

$1,600 $679

Positive 40% $577 $1,023 30% $405 $1,195

VI. Project Effect on Market Area

It would be difficult to envision any negative impacts of the OPAL project on the local market area. Given extremely low vacancy rates, a high-volume vacation market and dearth of year-round rental units, it is unlikely the addition of subsidized housing would compete with the private market supply. Similarly, there is currently zero and rarely at any time, any vacancy in existing rent-restricted supplies. OPAL manages the majority of existing rent-restricted units, and does not anticipate any impact to maintaining occupancy levels. On the other hand, the addition of 30 units of affordable housing could provide a positive solution for many families earning below the AMI. As confirmed through housing focus groups, and evident in the data, many of the core service providers (teachers, retail clerks, utility staff, etc.) are unable to afford local housing, if they can find it in the first place. It also provides a bridge opportunity for people saving up for a home, or simply trying to find the right place in a tight market while maintaining their employment. The larger challenge may be deciding who is able to occupy the units from among a wide range of qualified and interested parties. OPAL’s project would also, albeit modestly, increase the percentage of affordable multi-family housing available on Orcas. As noted earlier, the percentage of multi-family housing available to house residents on the islands is significantly lower than the proportions available in other communities statewide.


VII. Conclusion

A) Specific Questions (1) Is the project, as proposed, viable? OPAL has developed a through development program, including pro forma performance estimates. It has a proven track-record developing and operating other rent-restricted housing facilities. It has secured private investment to supplement tax credit funding. OPAL has also tested the market through stakeholder interviews, focus groups and outreach to market experts. The project is viable as proposed. (2) Does the project meet a current or projected market need? OPAL manages a request list that far exceeds the number of units that would be added through this single project. (3) Does the project supply units below market rate? The project will provide between 20 to 30 units of below market rate housing. (4) If not, does the project provide some other public benefit? The project will provide additional community walking trails, community meeting space and direct population growth to the urban core. It will also create secure housing for people in need, as well as essential service providers and families with few or no alternative options.

B) Summary (1) Recap of Project OPAL Community Land Trust, a 501c3 charitable corporation, intends to develop approximately 30 units of affordable rental housing on North Beach Road in the Eastsound village area of Orcas Island. OPAL believes subsidized rental housing may be needed to ensure more islanders are able to remain on the island, given persistently high and rising housing and rent prices. OPAL commissioned this Market Study in order to analyze the project’s market viability and satisfy Washington State Housing Trust Fund and Washington State Housing Finance Commission (WSHFC) requirements related to qualified use of federal Low-Income Housing Tax Credit Program.


OPAL’s vision is to develop the site in two phases. This market study focuses on the first phase, which OPAL hopes to initiate in 2016. A second phase, if executed, would not take place for a number of years. OPAL’s preliminary scheme for phase one includes 30 rental housing units as follows:


In addition, each unit would come with 48 sf of unheated storage space (1,440 sf total) and an additional 320 sf for covered bike storage. The development will also feature a 1,400 sf commons building including a gathering space and kitchen of sufficient size to accommodate up to 25 people, as well as two offices, restroom, laundry and small maintenance and storage spaces. Additional amenities and design goals include:

• Design Certifications: Evergreen Sustainable Design Standards/Enterprise Green Communities • Mix of distributed/centralized parking to facilitate access by seniors/people with disabilities • Remote parking for visitors and second vehicles • Pedestrian connection to main village • Integrated internal trail and landscaping features • Garden and workshop space • On-site property manager’s office

Other notable building design features include:

• Ground floor/accessible units • Internal stairs (no exterior stairs) • Unheated storage space for each unit • Porches and decks • Passive House design concept: 30% more energy efficient than current building code. • High degree of sound buffering between units • Durable materials to minimize maintenance and operating costs

OPAL intends to finance development through a combination of private equity, loans and federal low-income housing tax credits. The estimated 30 units will be priced so that:

• 10 are affordable for 30% AMI and less • 5 are affordable for 40% AMI and less • 5 are affordable for 60% of AMI or less • 10 are unrestricted by governmental agencies (but would likely serve up to 120% AMI)

In addition, six (20%) units will be reserved for larger families (e.g. 4-person households or larger) and six (20%) will be reserved for people with disabilities.


Data presented in this market analysis and verified through a pro forma development analysis and on-the-ground research indicate the project is financially viable and will likely supply only a small portion of a much larger rent-restricted housing demand. (2) Conclusion and Recommendations

The vast majority of Orcas Island housing is in the form of single-family detached units (just over 85% compared to a statewide average of 63%). There are an estimated 203 total units of multi-family housing on Orcas Island, and it is typically fully-occupied. Hundreds of households earning 50% of AMI or less are housing cost-burdened. Many others are transitory renters, faced with finding new housing each time the vacation season returns. Still others are homeless. Private sector developers report that multi-family housing construction does not pencil-out, a fact reinforced by data showing that multi-family housing accounts for a mere 1.35% of all housing permits filed in the past twenty years – and only a small portion of that housing was market-rate vs. rent-restricted. Data also show San Juan County as a whole is one of the least affordable places to purchase a home in Washington State, and the least affordable place for first-time buyers. Yet, many of these first-time home buyers are the median or below median-wage earners who provide the essential services other residents, and tourists, depend upon. More than one-third of Orcas Island is considered vacant. Yes, the largest class of vacant housing is used for seasonal, recreational or occasional use purposes. Data indicate that very little of this housing is available to rent (est. 57 of 1,861 units). Not only are many of Orcas Island homes unavailable to rent, most of those that are available, are only reliable for fall and winter months, reverting to vacation rentals (higher market value) in the spring and summer. While there was a modest increase in availability during the great recession, the persistent lack of affordable rental housing has resumed with improved market conditions and visitor activity. Demand greatly outpaces the proposed addition to supply. Waiting lists for existing rent-restricted properties surpass the supply OPAL proposes to build through this particular project and Washington State data indicate there are hundreds of cost-burdened rental households living on the Island. OPAL’s prior experience with rent-restricted housing finance, development and management provide a strong indicator of future success. Market demand, revealed through data as well as focus groups and interviews, suggest the project will lease quickly and remain sustainable for years to come.

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