How "fee-in-lieu" plan makes PSH on Mercer Island possible

Since starting the petition last week (1,028 signatures and counting!), I have spoken with several City Council members and looked more deeply into the city’s new Comprehensive Plan and the new state laws that shaped it.

Below is a summary of what I learned. In short, these state-mandated changes have made it much more likely that a low-barrier, drug-tolerant Permanent Supportive Housing (PSH) facility will be built on Mercer Island, and our state legislators are responsible.

1. Why is Mercer Island changing its housing plan?
The state ruled Mercer Island’s plan non-compliant in August 2025 due to a lack of emergency shelters and Permanent Supportive Housing (PSH). To comply, we must plan for 178 PSH units and 237 emergency beds and must prove that they can be funded and built. The City Council votes on the final plan on July 21, before the state’s July 31 deadline.

2. What is Permanent Supportive Housing (PSH) and why is it controversial?
PSH is heavily subsidized low barrier housing. State mandates allow PSH residents to continue drug use without requiring addiction treatment and accept residents with criminal records or behavioral problems. As seen in neighboring cities this model introduces high-risk behaviors, including violence, arson, and property damage into the community.  

3. What is the "fee-in-lieu" funding mechanism?
The city’s plan requires that Town Center property developers either designate 10% of new units they build as affordable or pay a "fee-in-lieu" of roughly $25 per square foot into a city housing fund instead. This housing fund will be used to finance very low-income projects, including PSH. 

4. How does the fee affect the cost of housing for working people?
The fee increases construction costs, about $25,000 for a typical apartment unit, which developers pass on by raising prices for market-rate units. This makes standard housing less affordable for working families that don’t qualify for subsidized housing.

5. Does the fee-in-lieu scheme increase the likelihood of PSH being built?
Yes. The fee-in-lieu program will collect an estimated $31 million from private builders. Pooling this with ARCH and state/federal grants multiplies the funding to $102 million, enabling non-profit developers to build a PSH facility on Mercer Island.

6. Who created these laws, and what can we do to change them?
Mandates like HB 1220 and HB 2266 strip local control, forcing low barrier shelters into any residential zone. These laws were backed by our 41st District state legislators: Sen. Lisa Wellman, Rep. My-Linh Thai, and Rep. Janice Zahn. 

Want to make your voice heard? Here are some good ways:

• Lobby 41st District Lawmakers:
  Call and email them to demand changes to enable our city government to control where and how shelters are built and operated.
  
  • State Senator Lisa Wellman
    https://app.leg.wa.gov/pbc/memberEmail/41/0
  • Representative My-Linh Thai
    https://app.leg.wa.gov/pbc/memberEmail/41/2
  • Janice Zahn
    https://app.leg.wa.gov/pbc/memberEmail/41/1
• Share the Petition:
  https://www.change.org/KeepMercerSafe
• Urge City Council Action:
  Ask the City Council to lobby state lawmakers via the Association of Washington Cities (AWC).
• Protect our Schools:
  Ask PTA and MIPA leaders to inform parents and advocate at the state level.