“When you are not already in the multifamily game, which banks would probably call three, four, five and six units … this would be your first time doing that, so it sort of sets you at a slight disadvantage,” Olympia Planning Director Nicole Floyd told the Planning Commission on Monday, Nov. 2.
The JOLT News reported that the city allows four to six homes per lot in designated low-density residential zones, plus up to two accessory dwelling units, yet has received only one application for a property with two ADUs. That lone application captures the central tension: permissive zoning on paper, paralysis in practice.
Olympia’s comprehensive plan targets 14,295 housing units by 2045, or about 715 units annually. The city hit 555 units in 2018, the strongest year in the historical data Floyd presented, but recorded just 341 units as of September 2026. The gap between ambition and output isn’t a zoning problem alone. It’s the price of land, the complexity of financing, and the upfront cost of infrastructure that keep duplexes and triplexes from breaking ground.
Land Is Finite, and Banks Are Picky
Floyd was blunt about the economics. “The amount of land available that is developable is finite … and the (cost) of that land … is high, and then the financing that is available is complicated,” she told commissioners. Lenders, she explained, tend to favor developers with established portfolios and track records in multifamily construction. Newcomers face a steeper climb, often forced to finance projects themselves or stitch together funding from multiple sources.
The infrastructure bills compound the problem. Water and sewer connections add significant upfront costs, and city planners are weighing a requirement to separate those connections for each unit. That would raise initial expenses but avoid what Floyd called “incredibly cost prohibitive” retrofits later. Shared water meters create another vulnerability: if one owner fails to pay, multiple households can lose service.
Code Exemptions That Backfire
Some existing development rules allow smaller projects to skip frontage improvements like sidewalks and curbs. Floyd flagged these exemptions as a potential disincentive. Property owners building additional homes might trigger larger infrastructure requirements, making single-family construction the path of least resistance. She recommended reviewing those provisions because they may inadvertently favor single-family homes over middle housing.
Meanwhile, the Washington Legislature has moved aggressively on housing. Over the past seven years, lawmakers have adopted 76 housing-related bills covering middle housing, ADUs, co-living arrangements, and unit lot subdivisions. State law also caps impact fees for ADUs at no more than 50 percent of the fee charged for the principal unit. City staff are now coordinating across departments on a draft proposal that could amend the Olympia Municipal Code and engineering standards to address water and sewer connections, fire sprinklers, utility billing, and subdivisions.
Commissioners Propose Outreach to Identify Barriers
Those amendments could reach the Planning Commission in 2027, though staffers were still evaluating the issues and no finalized proposal had been presented as of Monday’s meeting. During the discussion, Commissioner Raphael Garcia suggested targeted outreach to homeowners, small developers, and builders to pinpoint exactly what is blocking more middle-housing projects.
Commissioner Raphael Garcia suggested targeted outreach to homeowners, small developers and builders to better understand what is preventing more middle-housing projects.
For renters and would-be homeowners in Thurston County, the stakes are concrete. Every year the city falls short of its 715-unit pace, the 2045 target drifts further out of reach. The code says Olympia is open for middle housing. The ledger says the money isn’t following.
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