Spokane City Council took emergency action on Dec. 14 to address concerns of appraisers regarding a new housing law set to take effect Jan. 1 that could have unintentionally forced single-family residential lots to be treated as commercial properties. 

Via an emergency ordinance, the Council reimplemented a cap of four units on lots that were formerly zoned for single-family homes, says Spencer Gardner, planning director for the city of Spokane, in a statement to the Journal.

The temporary reimplementation of the cap will allow time for the state Legislature and federal agencies to work on further guidance and adjustments to legislation to address federal lending and appraisal requirements, according to a review of the interim zoning ordinance provided by the city.

"We will be watching the Legislature and state agencies for more direction on how to proceed," Gardner says.

The Journal reported on Dec. 7 that a new state law being adopted by Spokane, which was intended to provide more housing, would increase density on what were previously zoned as single-family lots, likely rendering them ineligible for traditional mortgage loans or residential appraisals. Under that law, those lots would have required a commercial or multifamily loan for new purchases and refinancing, as well as commercial appraisals.

Federal lending statutes identify residential property as one to four units, Bob Mossuto, president of the Appraisers' Coalition of Washington, previously told the Journal. Five or more units is identified as multifamily property.

With the adoption of the state's House Bill 1110 before the recent emergency ordinance, Spokane would have been required to allow development of at least six units on all lots zoned predominantly for residential use.

The concern for residential appraisers, Mossuto says, is that lots considered as multifamily by federal law require appraisals to be done by commercial appraisers, even if only one unit is located on a parcel.

With residential appraisers unable to appraise lots formerly designated as single family, wait times for lending transactions and refinancing would increase by two or threefold, Mossuto previously told the Journal. The wait times also would increase due to the lack of commercial appraisers, he says.

Last week's decision by the Council to limit the number of units is a step in the right direction, says Jan Collins, owner of Spokane Valley-based Collins Appraisal Service LLC.

"The Appraisers' Coalition of Washington had a large part in explaining the effects of the zoning changes to the Spokane City Council, and (the Council) responded positively," says Collins in an email to the Journal. "It is incredibly difficult to balance government needs, neighborhood needs, and unhoused needs with Realtors, lenders, appraisers, and other professionals in the housing industry."

The cap of four units also alleviates, at least temporarily, concerns regarding borrowers. Richard Hagar, a residential appraiser and real estate compliance and regulation expert, previously told the Journal that there are more loans available for what are federally considered as residential mortgages—lots with one to four units—than there are for lots of five or more units.

The interim zoning ordinance will be in effect from Jan. 1 to June 1, unless extended or canceled by the Council, according to the review of the ordinance.