“On it’s face, affordable housing on Bainbridge is an equation that simply won’t balance.There are only seven homes on the island now selling for $200,000 or less. Qualifying for a mortgage on a $200,000 house requires an income of roughly $50,000, after scraping together $20,000 for a down payment.And that’s more than lots of islanders make. Islanders like nurses, teachers, policemen, store clerks, carpenters, plumbers and firemen.It’s the numbers, said Bill Reddy, director of the island’s Housing Resources Board. Lots of people on this island make $12.50 an hour. But to afford a house here, you have to make $50 or $60 an hour.Trying to solve the equation is not simply a matter of charitable public policy. It’s required by law.Washington’s Growth Management Act requires the housing element of city comprehensive plans to make adequate provisions for existing and projected needs of all economic segments of the community.On paper, Bainbridge has complied. The official vision for Bainbridge Island says the city should foster the diversity of the residents of the island, its most precious resource, provide a variety of housing choices for all residents, and provide affordable housing.Saying it is easy. Doing it is another thing altogether.Public and private agencies are making a three-pronged attack on the affordable-housing problem. The first is to work within the market, but to require that builders address market segments other than the high end. The second is to supplement the market, and provide assistance to those whose housing needs are not addressed by the market.The final prong is to examine whether costs can be reduced by changing city policies.In a three-part series beginning today, the Review will take a closer look at those efforts, the people and the agencies involved, and the obstacles they face.Diversity by ordinanceThe supply of buildable land is finite, particularly on an island. And the zoning code sharply restricts the number of homes that can be built on any given acre.Working within those constraints, a builder guided only by market forces would logically build expensive homes.Builders have no incentive to build affordable homes. They can’t keep up with the demand for half-million dollar homes, long-time affordable housing advocate Garnie Quitslund said.To blunt those market forces, the city of Bainbridge Island adopted an ordinance in 1997 that requires builders to address more than the high-cost, high-profit segment of the market. In a nutshell, any development of eight units or more must contain at least 10 percent affordable units – affordable by and sold to buyers with incomes below defined levels.The ordinance has a carrot as well as a stick for developers, though, in the form of increased density for builders of affordable homes.They’re not really ‘out’ anything, city long-range planner Marti Stave said, because they can build as many market-rate homes with affordable housing as they would be allowed to build without affordable housing.And there is nothing to prevent the developer or builder from making a profit on the cheaper homes.It was never our thought that builders wouldn’t make a profit on the ‘affordable’ homes, Stave said. It was only our intent that they make less of a profit on some of the homes than they might otherwise make.As an example, she cites the new North Town Woods development on New Brooklyn Avenue. Under the zoning, the developer would have been allowed to put 54 homes on the 27-acre tract.The developer, Madison Avenue Development, was able to add 15 affordable homes without losing any market-rate units. In fact, because of the rounding-up provisions of the ordinance, the developer got one extra market-rate building site.Stave said North Town Woods is an example of the ordinance working as designed.Jim Laughlin (of Madison Avenue Development) had as many market-rate lots as he would have had without affordable housing, plus 15 lots for affordables. He could sell those 15 lots for less, which meant the homes could be built for less.And that’s what happened. At least in part because of lower lot costs, the smaller affordable homes at North Town sell for $280,000 or less, while the market-rate homes start at $340,000.Stave said demand for the North Town affordables has been strong, with six families already applying and qualifying for purchase.Because many subdivisions under construction were permitted prior to the effective date of the ordinance, its impact is only beginning to be felt. Other than North Town, a total of 25 affordable units will be included in developments that have been built or permitted to date.Affordable, but for how long?Although the city ordinance does not involve any direct dollar subsidies, creating what amounts to free building lots through the density bonus, and surrounding affordable homes with market-rate homes, does result in homes that are instantly worth more on the open market than they cost.The question of who owns that value premium has been a matter of some contention.The 1997 ordinance required that any affordable unit created under the ordinance remain affordable for 30 years. If the original buyers wanted to sell, they could sell only to persons whose income fell below the appropriate threshold.But, Stave said, that turned out to be a bad deal for the buyers. Over the last 10 years, she said, housing prices have risen 78 per cent on Bainbridge. But the metro income, which effectively limits the price of homes defined as affordable, has risen only 43 percent.A seller could still make money, Stave said, but it was so little that it was hardly worth their while. Why go through all the anxiety of trying to sell a house if you’re not going to make a profit? You’d just walk away.The problem became apparent with the affordable units at the Winslow Mews condominiums, the first project built under the ordinance. The city screened more than 40 applicants, but when the value-recapture provision was explained, they backed out.The city council is now considering a modification of that ordinance. Under the proposed amendment, a buyer of affordable housing would be free to resell to anyone, for market rates. The city would recapture the original value premium – the difference between actual cost and appraised market value at the time of purchase.Also, the city would recover a portion of the appreciated value of the house. That money would go into the housing trust fund.Our first plan was to create an inventory of affordable housing, Stave said. But that didn’t work. The current plan will at least get people into the housing market that wouldn’t be there otherwise. It’s the next best thing. “