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So when could development of old Aloha Motel site start? Well ... that depends.

Condemned Aloha Motel gets demolished

Workers demolish one of the buildings at the Aloha Motel on North Samish Way in Bellingham, Washington on Nov. 10, 2015. The city condemned the motel for being a hub of crime and then bought the property.
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Workers demolish one of the buildings at the Aloha Motel on North Samish Way in Bellingham, Washington on Nov. 10, 2015. The city condemned the motel for being a hub of crime and then bought the property.

A project to build affordable housing on the former Aloha Motel property is facing a “double whammy” at the state and federal level that is threatening its financing.

That’s what John Harmon, executive director for Bellingham Housing Authority, said of the housing authority’s project.

The City of Bellingham announced in April that it had sold the North Samish Way property to the housing authority for $1.83 million – using a loan from the city’s low-income housing fund. The property, once a magnet for crime, is set to be turned into a mix of affordable housing, offices and commercial space.

But financing for the project is facing uncertainty.

At the state level, an impasse over rural water rights because of the Hirst case has held up the Legislature’s approval of a capital budget. No capital budget means no Housing Trust Fund money and associated tax credits for the Aloha project, or other affordable housing projects in Washington state.

“It’s a hostage in the Legislature,” Harmon said. “Without the trust fund very few housing developments would be feasible and, therefore, the tax credits could not be used.”

Samya Lutz, housing and services program manager for the city, echoed Harmon’s concerns.

“That funding is absolutely crucial for us,” Lutz said, adding the city leveraged $16.46 for every $1 of levy funds it put in and the tax credits were the biggest part of making that possible.

“It’s very uncertain right now what’s going to happen,” she added.

Of greater concern was the tax bill before Congress.

Affordable housing advocates fear the proposal to cut private activity bonds, which provide tax-exempt financing for affordable housing and access to the 4 percent low-income housing tax credit.

That would mean up to 881,000 affordable homes wouldn’t be built during the next decade and Washington would be one of 10 states to lose the most affordable housing, according to an analysis by Novogradac & Company, a certified public accounting firm.

“This kind of puts a torpedo in it until we can get some certainty in the marketplace,” Harmon said, adding that he hoped cooler heads will prevail and that the final tax bill will include the bonds.

For now, the project the housing authority had hoped to start building next year will be delayed.

The authority planned to redevelop the triangular 66,000-square-foot Aloha Motel site into a complex with more than 150 apartments and townhouses for residents with a range of incomes, new office headquarters for itself, a parking garage for tenants, and commercial spaces along North Samish Way.

There will be a combination of housing – from studio to up to three-bedroom. It will serve the housing needs of different populations.

Kie Relyea: 360-715-2234, @kierelyea

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