It feels different here. We're at the office, talking shop. Moving past the acoustic guitar and AC/DC record (yes, record), you get a sense that these guys and gals are doing something cool and modern—so modern, in fact, that the industry has yet to catch up. It makes sense that there's a guitar in the office because this team strums to the tune of their own chords, setting new standards in homebuilding and daring anyone to do the same. Welcome to Green Canopy Homes.

BEATRICE (THEY NAME THEIR HOMES)

We're on the roof of "Beatrice" now, overlooking Lake Washington and Bellevue on one side, with a clear shot of the Smith Tower in Seattle on the other. But enough about the view—we're standing on top of building science. The guts of this home will soon be filled with enough gadgetry to wow even the most ardent tech geek, delivering cleaner air, more efficient heating, and an overall sense of innovative superiority.

Driven by the Built Green® checklists, along with meticulous Quality Control Inspection Checklists (QCIC) of their own, every Green Canopy job site is synchronized via iPads that deliver real-time project management tracking and communication. This process ensures that critical updates are made and that any mistakes don't happen twice. It's all about getting better here, from process to parts. Better homes lead to a better brand, which in turn provides validation for that tree logo on the front of each Green Canopy-certified home.

"That tree logo," by the way, is there for much more than feng shui. Turning residential homebuilding innovation into an industry strength is made possible by Value, Innovation, Beauty, and Efficiency, or VIBE, the way Green Canopy sees it. Their brand is secured—not grounded—by these four "roots," seen literally on the face of each home, welcoming owners and guests into the future of home living. And if a home doesn't meet the rigorous checklists, then it doesn't receive the logo. In other words, this brand delivers.

THE GENESIS OF BETTER BUILDING

Let's take a step back to a sleep-deprived evening in 2008. Owners Aaron Fairchild and Sam Lai had both recently welcomed their newborns, and through their giddiness came the idea for Green Canopy Homes. After trademarking their moniker, they went to work on answering a simple question: Are we making a difference? Heady question, but these guys wouldn't have it any other way. They're looking to create history.

Of course, history is defined by change and nobody knows that better than this crew. They don't throw history out, however; in fact, they embrace it in all its past beauty. Case in point; each project they take on comes with the name of an iconic and typically historical female figure. "Beatrice" is named after Beatrice Simms, founder of Seattle's chapter of Colored Women's Clubs. Each project's story continues long after the team leaves, too, as Lai envisions his future homeowners living, laughing, and growing up healthier and happier inside their Green Canopy home.

After a familial chat with the project managers, in conversation outside of Beatrice, Lai finishes his point on home efficiency by comparing vehicle MPGs to home efficiency ratings. "Hopefully my kids will think about their home MPGs in the same way (as their vehicles')," he says, almost as an afterthought. "I guarantee you they will," quips Fairchild, never one to miss a beat. The attention to detail is strong.

Those who know Aaron Fairchild may know his father, who knew everyone. Aaron worked at his father's bank from 1995 to 2008, refining his financing skills and using his area residential homebuilding experience to put investors in a place where they could succeed and do so without sacrificing values. One day, at the height of the financial crisis, Fairchild decided it was time to enter the real estate industry. Why? Human reasoning can be a tricky thing to grasp, but a simple analogy sums up his thought process: this was his chance to build something beautiful from the crash.

CHANGE WAS COMING

Of course, cultivating said change means planting the right seeds in the right place. In this case, it means building sustainability in the cultural center of the Northwest, the greater Seattle and Portland areas. Green Canopy has sprouted roots in some of the most visible and dense areas of the Puget Sound region, spanning a diverse price range. Built Green-certified homes, like the ones Green Canopy specializes in, now make up 57 percent of all residential homes built in the soil-rich Seattle area. The roots of change are spreading—must be all the rain.

BACK TO THE FUTURE

At the Earth 6 property in Delridge, consisting of six detached single-family units, Fairchild fervently points out features, describing the living area as "Volkswagen luxury," inside the well-sealed envelope construction of the home. Green Canopy projects that go on the market in the low $400,000 range, such as the Earth 6 units, contain features not typically found at that price, and both Fairchild and Lai are quick to point out that they have had help in being able to spread the technology around. In steps the Washington State Housing Finance Commission (WSHFC), without whom, Green Canopy would not have been able to build the Earth 6 homes the way they wanted to. The WSHFC has helped builders like Green Canopy deliver deep energy efficiency to homes of all shapes and sizes, allowing lower-end residences to experience the joy of high efficiency ERVs, eco panels, and 230 percent more efficient heat pumps creating compressed energy with the intensity of "high schoolers on the dance floor" (another Fairchild classic), just like they do inside million-dollar homes. In WSHFC, Green Canopy sees a like-minded ally, not afraid to think outside the box and take measurable risks to achieve their mission. In their own words, green innovation within the building industry typically "hasn't been a strength," though Fairchild and friends are working on that.

It helps, too, that everyone on the team actually talks the talk when it comes to living green. Lai literally lives and breathes his product, living in a home he collaboratively designed and built himself. Hanging around the crew, especially Lai and Fairchild, it becomes immediately apparent that they really do mean it when they say they want to change the residential homebuilding industry—whether everyone likes it or not.

Cue the chatter of neighbors opposed to modern "monstrosities" being erected in their neck of the woods. Fairchild combats allied neighborhood fronts by simply sitting residents down and talking to them like the people they are, and giving them some say in what they have to look at every day. The loudest typically direct the majority at these gatherings, Fairchild points out, so Green Canopy gives individuals the option to go online and fill out a survey on features like exterior color and roofline shape, which will then influence the design direction Green Canopy takes. The home is then built according to plan—with slight alternations to paint and slope.

When asked whether or not this is enough to satisfy opposed residents, Fairchild counters the clash with reason: "We hold meetings for existing residents even before buying the property, to talk with them and see if building there (in a particular neighborhood) would be a good fit in the first place. If we think it is not right for us, we explain that another builder will eventually buy this land, and they probably won't engage the community at all."

Fairchild also discusses obstacles within the rebuilding process, explaining why he and Green Canopy have moved away from full-gut remodel projects: Persistent frustrations with an elongated plans review process of remodel permits have in the past delayed projects to the point where they "just aren't worth the trouble," he says. Ever the mender, however, he has recently taken a seat on the MBA board, where he hopes to further influence political decision-makers in our region. By engaging the public and manning the front lines of influential industry committees to squash issues before they become problematic, Green Canopy is winning before nail one is hammered.

Inevitably, when one tours a Green Canopy home, the question arises: "Can you do this for us?" With a few more of those questions answered, things won't feel so different anymore.

Cue the guitar.

MBAKS held its annual Housing Solution Breakfast on October 17, gathering elected officials, industry leaders, city staff and housing partners to elevate the importance of successful middle housing implementation. The event emphasized the partnership it will take to do it right. We used the program to strengthen our messaging on middle housing policy and acknowledge the hard work ahead for many cities.

This year we were joined by 140 guests with over 35 public officials in attendance. The program opened with a video featuring MBAKS homebuilder members and Redmond Mayor Angela Birney. The video highlights the importance of our shared work implementing House Bill 1110 at the local level.

Our Keynote speaker, Morgan Shook, Senior Policy Analyst and Partner at ECONorthwest, provided an overview of Oregon’s middle housing efforts, what’s working and what’s not. Key takeaways include:

• Graduated floor area ratio (FAR) limits encourage the development of more small units.
• Removing minimum parking requirements is another way to facilitate middle housing.
• Local governments should use caution when regulating frontage improvements or other infrastructure upgrades. These costs are substantial and impact financial feasibility, creating an unsurmountable barrier and resulting in fewer homes.
• View the full slide presentation here.

Attendees also had the opportunity to hear from Josh Brown, Executive Director at Puget Sound Regional Council and Cathy MacCaul, Advocacy Director at AARP of Washington. Each brought their unique perspective and emphasized why this work is so important for meeting our region’s housing needs.

To learn more about MBAKS’ efforts on Middle Housing implementation, please see MBAKS Middle Housing Implementation Plan.

And don’t forget to read about middle housing in the news! MBAKS and members partnered to publish three editorials this year in support of successful middle housing implementation. Read more here.

By MBAKS Content Strategist James Slone

What happens when inclusionary zoning works against affordability? Just ask Seattle.

Like many urban areas in the United States, the Puget Sound region has become unaffordable for many new and existing residents, especially in Seattle, where high land value, lack of supply, cumbersome permitting, and restrictive zoning have sent prices skyrocketing.

One approach some U.S. cities have pursued to address affordability issues is inclusionary zoning (IZ). IZ policies utilize municipal or county planning ordinances to mandate that a given portion of new construction be affordable for low- to moderate-income households.

These mandated units are generally paid for with subsidies. For example, the builder can subsidize affordable housing by eating the building cost, or the government can subsidize it by providing an incentive to the builder in the form of an offset or by setting up an affordable housing fund.

MBAKS does not advocate for IZ policies, having long argued that the additional costs to the builder will ultimately be passed on to the new homeowner or renter, driving up the cost of market-rate housing. Despite these concerns, inclusionary zoning has become a popular approach in cities across the West Coast—including Los Angeles, Portland, and Auburn, Washington.

In 2006, Washington state passed House Bill 2984, opening the door for jurisdictions to “enact affordable housing incentive programs… for the development of low-income housing units.” This cleared the way for Seattle to pass its own IZ program, Mandatory Housing Affordability (MHA), in spring 2019.

The MHA imposed affordable housing requirements in 27 urban villages—neighborhoods across the city designated to absorb the bulk of Seattle’s population and job growth—with the goal of creating 6,000 homes affordable to households making 60% of area median income (AMI). The MHA is just one part of Seattle’s Housing Affordability and Living Agenda (HALA), which aims to create 20,000 affordable homes by 2025.

Overpromising and Underdelivering

In a 2007 report on inclusionary zoning by the Housing Partnership, the authors point out that IZ is politically attractive because it offers a one-size-fits-all solution to affordability with little up-front cost to voters. But it’s only a partial solution. Subsidies alone are insufficient to build enough housing for everyone, especially in hot markets and space-constrained cities.

Supporters of IZ say these policies can play a useful supplemental role provided they strike the right balance. But when poorly designed, IZ leads to fewer affordable homes. Take Portland. After establishing an IZ program in 2017, housing permits plummeted. By exempting projects with 20 or fewer units, they perversely incentivized smaller projects.

The result was a mind-bending 43% drop-off in new home permitting in 2020, with just 2,000 new units coming online. With so few new homes in the pipeline, Portland is underproducing the housing they need to meet demand.

Portland’s woes are a cautionary tale of what happens when an IZ program is designed without carefully considering how different types of housing may be affected or what kinds of builder incentives can balance out the cost of including affordable units.

Seattle’s own MHA is a case study of both the potential and pitfalls of IZ. Zoning requirements were lifted in all 27 urban villages with the proviso that developers either include affordable units in their own projects or pay in-lieu fees. (It’s worth noting here that the MHA only affects 6% of single-family zones, which still comprise about 75% of residential land in Seattle.)

If developers choose to provide the affordable units onsite, 2% to 11% of their projects’ square footage must meet the AMI criteria. Those who choose not to provide the units must pay a fee—ranging between $5.00 and $32.75 per square foot—to the Seattle Office of Housing’s affordable housing fund.

Thus far, the Urbanist has reported, “developers have overwhelmingly chosen the in-lieu fee option,” netting the program $68 million that could fund 850 affordable units. While these are considerable sums, the MHA’s one-size-fits-all design has discouraged certain types of more affordable “missing middle” housing by constraining supply and driving up costs.

The Trouble With Townhomes

A relatively affordable, market-rate family housing option, townhomes fill a vital niche in healthy housing markets. But the MHA’s square footage requirements and in-lieu fees have added significant costs to townhomes, making them less attractive to homebuilders.

In April 2019, 60 townhome projects were fast-tracked to beat the MHA deadline, a record number of permits in a single month. After the rush, townhome permits dropped to 33 per month. In October 2021, townhomes hit their nadir with just one application for the entire 31-day period.

The problem is that the majority of townhome projects average just three to four units. Because builders can’t subdivide square footage in a single unit, they have to round up to one or two AMI-restricted units to avoid the in-lieu fee—potentially half or more of their total units. The result is an effective 25–66% affordability requirement imposed on townhomes even though the MHA calls for just 2.1–11%.

Faced with this, builders end up paying the fee. According to a member survey conducted by MBAKS in 2021, the average fee per four-unit project is now $130,972, essentially doubling predevelopment costs. And because the fees are due early in development, construction loans won’t cover the added expense.

The MHA does provide development incentives like increased floor area ratio (FAR), modified density limits, or an extra story intended to offset MHA fees, but they don’t pencil out in practice. Townhomes usually have three floors and adding a fourth is a liability for both buyers and builders. An extra floor means higher square footage fees, stricter codes, and a four-story home buyers don’t want.

Because of all this, it’s now simply too expensive to build townhomes, and many developers have pulled back from initiating such projects. In 2018, townhome permit applications were set to accommodate 4,647 residents; in 2021, townhome projects had dropped to accommodating just 1,437.

It’s difficult to make housing more affordable when mandates and fees make it more expensive. As Alan Durning of the Sightline Institute put it, “The very notion of imposing fees on homebuilding to pay for affordable housing is facepalmingly wrongheaded.”

Escaping the Twilight Zone

A poorly designed inclusionary zoning program that doesn’t take all types of housing options into full consideration will not only fail to deliver significant affordable housing but will actively discourage the construction of proven housing types that more families can afford.

While MBAKS would prefer to exempt townhomes from MHA altogether, the association and other housing advocates have proposed a few reforms that could make a significant difference. These include allowing MHA fees to be paid in installments and letting builders of small infill projects pay fees only on floor area that exceeds pre-MHA FAR limits.

For MHA housing in general, there are incentive carrots that would balance out the stick of fees, including multifamily tax exemptions for MHA projects, a 50% waiver in costly off-street parking requirements, and opening the door to micro units that offer naturally affordable market-rate rents.

Of course, the real solution to our housing shortage is building a lot more homes. Most of the city is still restricted to single-family zones.

We must open the door to more housing types, lower construction hurdles like onerous permit timelines, and let homebuilders build. With significant zoning changes, Seattle could encourage more missing middle housing—such as townhomes, rowhouses, duplexes, and fourplexes—across the entire city.

Without incentivizing these housing options, inclusionary zoning will simply become exclusionary zoning by another name. We need a lot less stick, and a lot more carrot.