Poulsbo OKs .1% sales tax to support affordable housing

The city of Poulsbo has approved a .1 percent increase in sales tax, the revenues of which would go toward affordable housing and related services.

The tax increase will go into effect Jan. 1 with anticipated annual revenue of $425,000 to put toward the development of affordable housing. Poulsbo’s sales tax is 9% so it would become 9.1%.

This ordinance came at the recommendation of Poulsbo’s Affordable Housing Task Force, which first presented the proposal in February of 2020.

“There was a realization from this task force that for the city to move forward with any of its affordable housing objectives there needed to be a steady revenue source in order to support those projects,” said Kim Hendrickson, director of Poulsbo’s Housing, Health and Human Services committee.

There is an increasing need for more affordable homes in Poulsbo due to declines in affordability keeping people with critical skills, such as teachers, police officers, firefighters, etc. from living in the communities that they serve. The city has seen an increase in homelessness or unsheltered as well as an increase in the need for housing for the growing elderly population as well as others on fixed incomes.

According to a number of real estate sites, the average home cost in Poulsbo is nearly $600,000 with the average rent at $1,615 per month. Most homes are only on the market for about 19 days.

“Affordable housing needs a subsidy,” Poulsbo Mayor Becky Erickson said. “When anyone says to you they want to build affordable housing or affordable housing is needed or we need more affordable housing, the only way you can provide affordable housing is by some level of subsidy. Effectively you are offering housing to people at way below market price and in order to make up that difference you’re going to need a subsidy.”

In 2015 the state legislature passed legislation (RCW 82.14.530) that would allow counties and cities to pass a .1 % sales and use tax for affordable housing projects.

House Bill 1590, which passed in late 2020, added to the legislation by allowing city/county governments to enact the law councilmatically (without a vote of the people) and with a simple majority vote. Then in 2021 Engrossed Substitute House Bill 1070 also expanded the use of the sales tax to include services related to affordable housing, such as construction, operation, maintenance and acquisition of land/property for affordable housing development.

“The intent of this legislation was to provide housing for certain identified populations. Particularly populations that are struggling with behavioral health issues, veterans groups, and other vulnerable populations and support services are essential with housing to make sure that people can succeed living independently,” Hendrickson said.

She also wanted to be clear that this tax increase is different from the Substitute House Bill 1406, which is a housing tax credit voted on in 2019 to encourage cities and counties to build affordable housing. Poulsbo receives about $20,000 a year from that tax credit for affordable housing.

“The question is how is the subsidy generated and who controls it and how is it effectively used?” Erickson said.

By approving this tax increase the city has ensured it will have control over how the revenue will be used to address affordable housing in Poulsbo. If Kitsap County commissioners vote to approve the tax, which it has indicated it will, it would have control of that revenue. It would be unlikely that Poulsbo would see much if any of it because they think Port Orchard and Bremerton need it more.

“I don’t want to turn the county into a punching bag, they’re trying to do the best they can as well. But there is a perception that we don’t have the greatest need for these kinds of services up here, and maybe we don’t have as much need, that very well could be true, but we should have a say, and this will allow us to have a say in it,” Erickson said.

While there is a lot of development happening in Poulsbo to meet the housing need, many of the homes in development run between $600,000- $800,000. Those prices are far out of reach for many, especially young families and young professionals, and those on fixed incomes.