Leavenworth weighs limits on ADUs converting to B&Bs

LEAVENWORTH — An affordable housing incentive is being used to create more Bed & Breakfast facilities (B&Bs) in Leavenworth, members of the Housing Advisory Committee (HAC) have warned.

The incentive program offers preapproved accessory dwelling unit (ADU) building plans and reduced permitting costs to encourage construction of smaller, more affordable housing units. According to the HAC, five preapproved ADU permits have been issued since the program’s initiation, three of which have received final occupancy. All three of those units have already been converted into B&Bs through the conditional use process (CUP).

“The HAC is concerned that allowing these preapproved residences to convert into B&Bs is subsidizing development costs and allowing owners to benefit from the revenue generated by the B&B vs. a long-term rental,” the committee wrote in a memo to the council.

The city established the initiative to build more infill ADUs in 2020. The program sought to incentivize affordable, long-term housing by cutting construction costs and permitting time. To date, the City of Leavenworth has spent about $73,000 to develop and maintain these plans. Residents benefiting from the program are estimated to save between $15,000 and $18,000 in plan development costs, in addition to reduced fees.

In its memo, the HAC asked Leavenworth City Council to consider implementing restrictions, such as prohibiting the conversion of the residences into B&Bs for at least five years. Community Development Director Maggie Boles said the HAC’s five-year condition was suggested to balance the city’s reduced fees, while acknowledging that property owners still bear the cost of building the units. The time limit would also recognize that circumstances can change over time for property owners.

The request was brought to Leavenworth City for discussion during its March 10 meeting. Council members unanimously agreed that a restriction should be in place, but debated how it would be implemented.

Council member Clint Strand said he originally backed the plans because they were presented as a way to create long-term housing, not subsidize B&Bs. He added that allowing the units to eventually convert made him feel like “the goalposts have changed.” Other council members agreed, with some supporting a more permanent restriction.

“If the intent was to have better housing stock that's affordable in perpetuity, why would we undermine that?” said Council member Rob Eaton.

While in favor of time restrictions, Council member Anne Hessburg noted that future property owners shouldn’t be encumbered by permanent requirements.

“If they sell the property, then [the new owners] should be able to do whatever they want with the property. They would still have to do the permit for the B&B. It would have to be approved. But they shouldn't have to just only use it as an ADU,” said Hessburg.

According to Boles, the number of B&B permits was nearing the limit set by the city, which restricts them to four percent of the total housing units in residential zoning districts. As more housing units are added, B&B permits increase proportionately, Council member Zeke Reister noted. Council members agreed that the percentages should be revisited for accuracy and consideration.

Leavenworth resident Ron Duncan chimed in during the discussion, suggesting that the city hold the restriction in perpetuity. However, the property owner could repay the subsidy if they wanted to be released from it.

“Then, you're protecting what you're trying to accomplish while allowing somebody to later sell the house and make it whole,” said Duncan.

The Leavenworth City Council agreed to place the topic on a future agenda for further discussion and action.

Taylor Caldwell: 509-433-7276 or taylor@ward.media