Whitefish Council Approves 21-Unit Development at Iowa Avenue and Edgewood

The City of Whitefish could revisit a 2019 program intended to incentivize the development of affordable housing after members of the council at a recent meeting expressed confusion and dissatisfaction with how the program currently operates. The Legacy Homes Program dominated conversation during a May 6 hearing regarding a 21-unit development proposed for a .54-acre piece of land along Iowa Avenue and Edgewood Place, which the council ultimately voted to approve, with the requirement that the developer deed restrict two units for affordable housing.

That requirement for deed restriction of two units came after members of the council sought help from the city’s attorney to interpret how to administer the city’s Legacy Homes Program, due to confusion about the developer’s preference to use an alternative form of compensation to qualify for the program, in this case a fee in lieu of deed restricted units. Prior to the meeting, city planning staff and the Whitefish Community Development Board had recommended the council grant conditional approval of the project.

Application materials for the development project show designs for a single multi-story structure on the .54-acre lot, with a total of three one-bedroom 537-square-feet apartments, six two-bedroom 908-square-feet apartments and 12 studio apartments of 420 square feet. The undeveloped parcel where construction is proposed is currently zoned WR-4, which is a high density multifamily residential district in Whitefish.

The Legacy Homes Program, which has been in place since 2019, offers developers a selection of incentives – like increased density, increased building height, and decreased parking requirements – in exchange for deed restricting 10% of units on a project for affordability. In this case, the developer has asked for a 20% increase in allowable density, a 5-feet increase in allowable building height for a maximum of 40 feet, and a 20% reduction in required parking spaces for units with at least two bedrooms.

That program provides a less commonly used alternative for incentive eligibility, in which under certain circumstances the developer can pay a fee in lieu of deed restricting the units. In this case, the developer of the property – whose owners are listed as Lisa Gorian and Los Angeles-based JLA Whitefish LLC – had proposed paying a fee of about $618,000, instead of deed restricting the 2.1 units that would otherwise qualify the project for the incentives.

Asked by the mayor if the council could require the developer to deed restrict the units, Luke Sponable, a planner and housing coordinator for the city, emphasized that the way the program is written it’s not clear. Giving a further explanation, Sponable focused in on the voluntary nature of the program, and said staff did not think the council could require one option for compliance over another.

“There’s a little bit of language in the admin guidelines that does state a preference for the units, that certainly is to be expected. We would like to see the units. But it does not necessarily give us any reasoning or strong consideration to require participation one way or the other. So that is something we are learning with this project and do plan to make some modifications moving forward,” Sponable said.

At a Whitefish Community Development Board meeting last month, Sponable shared a similar interpretation of the program’s language, and also told the board he had some consultation on the cash in lieu agreement from City Manager Dana Smith, and noted that while the city has reserves in its affordable housing fund, it has allocated most of the rest of the funding for the next two years.

City Attorney Angela Jacobs told the council she interpreted the program as allowing the council to have the discretion to require affordable units as opposed to fee in lieu or in some cases land in lieu, something she explained by citing a portion of the program code that lays out the circumstances in which the city “will consider alternatives” in certain circumstances, including instances of high levels of property tax, high homeowner’s association dues, a predominance of short-term rentals, onside development consisting of condominiums, or a location far from schools, transit and shopping.

Jacobs said that if the council did want to allow for the fee in lieu, the last circumstance related to proximity to schools, transit and shopping, would probably have the most application.

“Generally we do prefer the units but there are certain exceptions I read off, in which we can require cash in lieu (or) land in lieu. I don’t think it does fit most of those,” Jacobs said later in the meeting.

At the development board meeting last month where this project was reviewed, Councilor Ben Davis sat on the board as an alternate in Councilor Steve Qunell’s absence. Davis advocated for requiring the units instead of the fee in lieu, with the remaining .1 unit required paid as cash in lieu, but ultimately could not find support from other members of the board, who went on to unanimously vote in favor of the development as proposed. At the time, Davis said that he believed the intent of the program was to provide affordable housing, and that he believed it was of greater community benefit to secure the housing than to get a payment in lieu.

Davis reiterated that belief at the May 6 council meeting, as he brought forward a similar amendment to the conditions of approval for the project, which would require two deed-restricted units, instead of the fee in lieu payment.

“We are not here to extract money out of the developer, we need units. Money can be turned into units but it takes a lot of years, it’s expensive, and quite frankly the government is just not as good at building housing units as the private sector is,” Davis said. “I think the entire purpose of this program is to have these units be provided throughout the community and each project that uses this, rather than trying to take a lot of money and build it all in one place at some time many years down the road.”

Councilor Giuseppe Caltabiano, who voted against the effort to require the affordable housing units, said that given the relatively small size of the units proposed, he could see some them winding up as relatively affordable anyways, or at least the kind of housing used by members of the Whitefish workforce, and he cited the Whitefish Workforce Assistance Program as an example of the impact money can have when managed wisely. He also interpreted the effort to require deed restricting the units as a knee jerk response, which he felt was not consistent with what he called the rules of engagement for developers.

Responding to Caltabian, Councilor Frank Sweeney argued that because the development does not fit the exceptions noted by the city attorney for considering accepting a fee in lieu payment, that the effort to require the affordable units was the opposite of inconsistent, and that it would amount to following the rules of the ordinance.

Ultimately, Sweeney, Qunell and Davis voted to approve the requirement that the developer provide deed-restricted units, with Caltabiano and Councilor Rebecca Norton voting against it. Before casting her vote, Norton had spoken favorably about the opportunity this presented to put money back into the city’s affordable housing fund. In a vote of approval for the developer’s requests and approval of the plans, all five councilors voted in favor.

Going forward, the council seems interested in taking further action on the Legacy Homes Program. In addition to Sponable suggesting city staff’s desire to modify the ordinance, Caltabiano went so far as to say he thinks a work session is needed to evaluate the criteria for eligibility, as well as how the program accounts for adjudicating the payment in lieu alternative.

The fact that the developer only has to provide 10 percent of deed-restricted units for participation and eligibility for all the incentives was something that Qunell expressed frustration with, saying that he was “appalled” at how much the city was giving up for just two affordable units.

Qunell also asked Jacobs, the city attorney, if there was anything limiting the council from requiring a higher percentage of affordable units to participate in the program, to which Jacobs told him the ordinance itself limited the council to asking for 10 percent.

“So all they have to do is give 10 percent and then they can take advantage of all four of the other …”

“Correct,” Jacobs said, adding that the ordinance as originally crafted as mandatory, which is why the threshold for eligibility wound up at 10 percent. “When it was being created we felt 10 percent of the development as being mandatory was appropriate. Now that it is discretionary, given that the legislature has taken away our right to do inclusionary housing, I think we can take a look at whether 10 percent is still appropriate.”

The idea of a work session came back up again at the end of the council’s meeting, with Davis saying the ordinance should be revisited and clarified. Mayor John Muhlfeld also said he believes how the cash in lieu amount is calculated should also be revisited. “It seems that folks are electing the cash in lieu route versus building the units for clear reasons.”

Sweeney said he agreed with both sentiments, and Caltabiano also said he would support a work session. Smith, the city manager, said that they can have a work session on the matter, but that it might not be possible until late July.