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Table 1.

Household Income Type

Percent of County Median Income

2010 King Co. Income Range
(4-person HH)

Percent of County Population

Percent of Mercer Island Population

Very Low

Below 30%

Below $25,680

12%

5%

Low

30% to 50%

$25,680 to $42,800

12%

5%

Moderate

50% to 80%

$42,800 to $68,480

16%

8%

Middle

80% to 120%

$68,480 to $102,720

19%

7%

Above Middle

Above 120%

Above $102,720

41%

75%

Source: 2010 HUD Family Income Limits and 2010 American Community Survey 5-year Estimates

Mercer Island has the challenge of supplying housing affordable to all economic segments of the population. “Housing affordability” is relative to household income. It is an accepted standard that total housing costs should not exceed 30 percent of total gross household income. Typically, the lower the household income, the greater percentage of income paid to housing costs.

Average rents on the Island rose 53% since 2000, taking Mercer Island from one of the more affordable places to rent in EKC to one of the most expensive. Virtually none of the City’s multi-family housing built since 1994 was affordable to moderate-income households. Sixteen percent (16%) of the City’s rental housing is still affordable to low-income households—slightly higher than the EKC average—but 62% are too expensive for moderate-income households, compared to 41% in EKC.

While this pattern of low-income households overpaying for housing is typical throughout the region -- the problem is exacerbated in Mercer Island because of the limited number of multifamily units and the high values of owner occupied homes. Many owner occupied units are currently affordable to low and moderate income owners because mortgage payments are low or homes are owned outright. However, there are many homeowners in Mercer Island who would not be able to afford to buy their homes today with their current incomes.

Outside the Point Cities, only Sammamish had a higher median household income or proportion of incomes greater than 120% of median in 2011. Nevertheless, “housing cost-burden” is more common (40%) among Mercer Island renters than the rest of EKC (37%). The same holds true at the higher level of “severe cost burden”. Cost burden is lower among homeowners, but as in most cities, that rate increased significantly during the recent recession. As in other East King County cities, cost-burdened households are primarily lower-income and relatively young (under 25 years of age) or relatively old (65 or over).

In Mercer Island, as in most communities in East King County, the vast majority of housing affordable to low and moderate income families is rental housing.

Over the past decade price increases for both rental and ownership housing on Mercer Island have outpaced income increases. Between 2000 and 2010 average rents have increased over 53%, and average house values have increased 108%, while King County median income has increased only 30%. More notable is that over this period, average rents went from being toward the low end of rents in cities located in East King County, to one of the highest average rents.

Average prices of homes that sold in Mercer Island dropped more than 60% from 2008 to 2012, but had gained almost 40% in 2012 (compared to a 21% decline, and 9% recovery, across all East King County cities). Ninety-seven percent (97%) of owner-occupied housing had a value greater that what is affordable for a median-income family. This compares to 90% for East King County.

Mercer Island has made significant contributions toward its affordable housing targets by providing regulatory incentives to achieve moderate-income housing, e.g. Mercer Island’s Accessory Dwelling Unit (ADUs) program. The Mercer Island ADU program permitted 214 dwelling units between 1993 and 2012, considerable more than any other East King County city.

Including the affordable housing that the City has helped fund outside of Mercer Island, the City has met 23% of its 2012 low-income affordable housing target, and 120% of its moderate-income target. (A majority of the latter are accessory dwelling units (ADUs) in Mercer Island.) Overall, 5% of the City’s housing units are affordable for low-income families (compared to 7% across EKC and 15% countywide) and an additional 6% for moderate-income families (compared to 17% in EKC and 20% countywide). Future strategies for achieving affordability and more diverse housing types may include preservation and direct assistance of existing affordable housing, and the addition of new mixed-use and multifamily residential projects in the CO and PBZ zoning districts.

Mercer Island has adopted Town Center Development and Design Standards, which implement the Land Use and Housing vision of increased multifamily development in the Town Center. However, relatively high land costs and high construction costs in the Town Center make it more difficult to build housing affordable to households earning less than median income. Mercer Island may need to promote development of affordable housing by providing additional incentives or direct assistance.

The Town Center goals include a vision of new multifamily developments and mixed uses. Providing housing in commercial areas is essential to meet new housing unit goals. Mixed neighborhoods of residential/commercial will enhance the vitality of these areas and provide a pedestrian orientation and support for transit. The Town Center Development and Design standards seek to implement the policies established in the Land Use Element of this Comprehensive Plan.

A major challenge presented by the Growth Management Act and the Countywide Planning Policies is for Mercer Island to continue to provide housing for all economic segments of the population. Given the trend of land and housing values rising faster than income, some segments of the population are finding it harder to remain in the community. These include young adults, seniors, single parents, and people with special needs.

While it is not likely that density or zoning will change in the single family neighborhoods, housing opportunities can be established there through the addition of accessory dwelling units. Another way to create new housing opportunities is to enable development of innovative housing and smaller single family housing types on vacant or underutilized property, as a demonstration project. The City considered a cottage housing project on a City-owned surplus lot on First Hill in 2008 but decided to sell the property to a home developer instead, who built conventional single family homes on the site. Nevertheless, the possibility of a demonstration project should be considered as a way to create new housing opportunities serving smaller households on the Island.