As the result of rising home costs, the city of Whitefish will increase its voluntary cash-in-lieu fee for developers wishing to take advantage of an affordable housing bonus for new subdivisions.

City Council Sept. 19 approved an increase in the payment from $8,000 to $12,000 per housing unit.

The city’s code for planned unit developments includes a voluntary provision that allows for a 50 percent density bonus in exchange for providing affordable housing at a rate of at least 10 percent of the project. The developer can take advantage of that bonus by providing affordable housing units or instead by providing a cash-in-lieu payment amount per the total housing unit in the proposed development.

“Subdivision activity is increasing, and we anticipate that future developers may want to take advantage of the cash-in-lieu option to get additional density,” Planning Director Dave Taylor said. “It makes sense to have a cash-in-lieu fee that reflects current affordability standards.”

Whitefish Housing Authority director Lori Collins recommended the increase based on the authority’s assumption that the cash-in-lieu fee option should serve the same number of households as the option to include the affordable units in the development.

Based on an average subsidy of $82,6000 per home for participants in the city’s affordable housing program, $8,000 isn’t enough, Collins told Council.

Developers need to pay $12,000 per unit to match the alternative of donating 10 percent of the units, she said.

Using an example development with 20 homes, a developer choosing to include affordable homes in their development would expect to build two homes to be sold in the $117,000 to $133,000 range for affordable to low and moderate income households.

Collins said the market value of the homes would be in the $240,000 range, which would therefore be an average of $120,000 per home for the cash-in-lieu payment. In order to serve the same number of households at-large in the community means the payment needs to be $12,000 per unit.

The Whitefish Homeownership Program aids in low and moderate income households to finance the purchase of a home. Currently, the housing authority has determined that an affordable mortgage for a low to moderate income household of three earning $43,000 a year is in the $117,000 to $150,000 range.

“The homeownership program uses a subsidy to bridge the gap between what a low income household earns and the price of a qualifying, market rate home,” Collins said in her memo to Council.

In 2008, Council raised the per unit fee from $6,000 to $11,000. In 2012, it was reduced to $8,000 by Council because the option had not been used and development at the time was still stagnant.

City officials more recently have been focused on finding remedies to Whitefish’s housing shortage that by most accounts is approaching a “crisis.” An insufficient stock of rentals is coupled with a housing market that generally exceeds the average household income. The result is a deficit of workers for the thousands of service jobs that motor Whitefish’s tourist-based economy, while professionals are forced to commute from outside of the community where they work.

A housing needs assessment study for Whitefish, sponsored by the city and the Whitefish Chamber of Commerce, is currently underway and expected to be completed in November.