The volatile Whatcom County housing market is leading the Kulshan Community Land Trust to scale up its operations in Blaine to build affordable housing for low-income residents.
The Bellingham-based nonprofit is in preliminary talks with Blaine city officials to acquire surplus land at two sites: the old city hall property at 344 H Street and in the Harbor Hills neighborhood east of downtown.
Kulshan officials want to build 30 condominiums and about a dozen affordable townhomes on the sites in the coming three to five years.
“We need people to understand that housing is just not attainable — there’s a record number of how few homes there are for sale,” said Dean Fearing, Kulshan’s executive director. “We need to find those sources to help so we can scale up the way that we plan to.”
Fearing presented the proposal to Blaine council members Feb. 14, and met with City Manager Michael Jones on Friday to discuss the plan.
If accepted, the Harbor Hills homes are expected to be completed in four years, assuming Kulshan gains critical infrastructure in east Blaine.
Kulshan purchases land to be held in a trust and keeps houses built there permanently affordable to lower-income families by using a process called shared equity.
Low-income families buy leases from Kulshan that last perpetually in order to remove the house from the speculative market. By removing it from the market, the price of the house doesn’t appreciate to the point that it becomes unaffordable. A resale restriction is placed on the house, limiting the value earned to a 1.5% rate of appreciation instead of the going market rate — which was about 13% in Whatcom County at the end of January.
“That equity doesn’t benefit any individual, it doesn’t benefit Kulshan, it stays in that home permanently,” Fearing said. “We cannot leverage it in any way, it stays there forever for the community.”
To qualify for a Kulshan home, families must earn between 30% and 80% of the area median income, which was $70,463 as of 2020. Updated numbers were not available.
Recently, Kulshan adjusted to selling to families that make up to 120% of area median income, allowing the pool to open up to more people. At least 42% of the Whatcom County population would qualify for the program, said John Moon, executive director of Habitat for Humanity in Whatcom.
At the start of February, there was less than a month of housing inventory left. The median price of a Whatcom County home in 2021 was more than $549,000, up 24.3% from the 2020 median.
One of the biggest problems for nonprofit housing developers is how tight the margins are, Fearing said. Material costs are becoming another barrier to building affordable homes as construction prices continue to increase.
“The National Homeowners Association at one point was saying that the additional material cost for the average starter home would add $30,000 to the cost of the home,” said John Miller, construction manager for Cascade Joinery. Cascade Joinery is a timber frame construction company that mainly works with Kulshan as community service.
Miller said material costs for commodity products such as timber and sheet goods are seeing unprecedented price increases because of supply chain issues involving lumber. Subfloor material that used to cost $35 a sheet was selling for $120 in 2021.
Funding for Kulshan primarily comes from public sources such as state and federal funding. In order to scale up, Kulshan is creating a model that will diversify its revenue streams so it’ll be able to build more houses for families making up to 120% of AMI — which will then lower the cost of houses for those in the 30% to 80% range.
One of the funding methods Kulshan is pursuing is a local investment fund similar to the Whatcom Community Foundation where it can borrow money at a lowered interest rate to be used for new construction.
Kulshan hopes that scaling up and focusing on new construction will be able to free up its housing waitlist, which has 60 to 70 people waiting for a house at any given time, Fearing said.
