A litany of changes to Centralia’s municipal code for housing developments were approved Tuesday night by the Centralia City Council following more than three hours of discussion during its meeting.
Most were routine updates to state law, suggestions by city staff or recommendations from the Centralia Housing Assessment and Action Plan. The better part of a three-hour-long discussion focused on an additional rezoning request made by the Sage Investment Group.
Based out of Kirkland, their zoning proposal change would have allowed for hotels within the district to be converted into multi-family dwellings, or apartments, with free-market rental prices by Sage, despite the groups original claim of wanting to create permanent supportive housing.
Sage’s request was denied by the council in a 6-1 vote. Councilor Max Vogt was its sole supporter.
Several residents spoke out in opposition to the zoning change, including Patty Howard of Gather Church, Centralia Planning Commission member Norm Chapman, Director of Lewis County Public Health & Social Services Meja Handlen, Centralia resident Kyle Markstrom and Salvation Army Captain Gin Pack.
The co-founders of Sage, Ross and Emily Hubbard, currently own both the former Motel 6 and former OYO Hotel within the district in question.
Ross Hubbard purchased the former OYO Hotel earlier this year with the stated intent of converting it to permanent supportive housing and originally told The Chronicle it was a business venture with an outside partner.
According to the Lewis County Parcels website, the former OYO had an assessed value of $2,214,200 and was purchased for $5,251,100.
Emily Hubbard purchased the former Motel 6 in 2022 and told The Chronicle at the time the intent was to convert the run-down motel into “nice, affordable” studio apartments.
According to the Lewis County Parcels website, the former Motel 6 had an assessed value of $3,923,200 and was purchased for $6,662,600.
Per state law, permanent supportive housing is defined as subsidized housing with no limit on lease-length that prioritizes helping people who need support services to remain housed, including people on low incomes or who have disabilities.
When asked what rent would be, Ross Hubbard — who was present at Tuesday’s meeting — said rent would fall between $900 and $975 per month, with a packaged utility charge of $150 per month.
He added this would fill a gap in a “massive shortage” of housing for the middle class, “working class, young professionals, students, people that are encumbered by roommates (and) family members.”
Centralia Mayor Kelly Smith Johnston took issue with this claim.
“The price that you are offering will not serve those individuals,” Smith Johnston said, later adding, “a thousand a month is already 100% of our (area median income).”
She also brought up statistics from Sage’s website, where portfolios are showcased for investors. Data on the website includes the Lake View Apartments in Centralia, which Sage purchased in 2019.
By the time it sold the apartments in 2022 for $2 million more than the purchasing price, rent had been raised by nearly 63%, from $586 per month to $953.
Another property in Arizona, Smith Johnston noted, saw rent increased by nearly 44% during the 19 months Sage owned it.
Ross Hubbard, answering why Sage is no longer interested in building permanent supportive housing, said he originally thought it was a compelling way to help solve the housing crisis.
“In fact, I was very naive in the facts and requirements of what it means to be permanent supportive housing, and the impact it could have on the community as a result of the requirements that are imposed upon us as operators,” Hubbard said.
At another point, he said permanent supportive housing is “not in my wheelhouse” and added he was concerned about not being able to traditionally vet potential residents.
Councilors and citizens also had concerns about potential loss of lodging tax revenue. Centralia has now lost three hotels since last October.
Within the district where Sage sought the zoning changes, the King Oscar Motel, Centralia Inn and Quality Inn are the only remaining hotels.
Earlier this year, Hubbard also expressed interest in also purchasing the King Oscar, as previously reported by The Chronicle. Some of the councilors expressed fear that if the request was approved, the three remaining hotels could be bought out to convert into free-market rental apartments as well.
“When these hotels were purchased, it was a hope in my department … that they would be converted to permanent supportive housing or transitional housing,” Handlen said.
During his comment period, Markstrom said properties purchased by Sage which have already been converted in larger cities like Tacoma and Olympia had much less of an impact on lodging tax revenue.
With Centralia being much smaller, he feared it would not be the case here. Markstrom also cast doubt on Hubbard’s naivety claim.
“The applicant talked about naivety in his purchase of those properties. I looked them up, it looks like they invested about $11 million in those two properties,” Markstrom said. “I think it would be naive for us to believe that is naivety, investing $11 million in property that was zoned very specifically and the applicant not understanding that zoning.”
Despite the arguments, Vogt still supported Sage’s request, arguing the change would help fill other housing gaps identified by the housing plan. Vogt, along with his fellow councilors Elizabeth Cameron and Adrianna Garibay, visited one of Sage’s other properties to see what the final conversion product looks like.
“It exceeded my expectations of what this community could be,” Vogt said.
He argued the former Motel 6 and OYO Hotel were not going to be converted back into hotels anyway, so there was already no chance of recovering lost lodging tax revenue.
Vogt also advocated for imposing a 1,500 foot buffer zone around each hotel converted into multi-family dwellings, preventing all hotels within the district from being converted.
Regardless, most of the council felt these sorts of significant zoning changes should be discussed while amending the city’s comprehensive plan.
Councilor Cameron McGee told Hubbard he is welcome to ask about this change again next year when the comprehensive plan is being reviewed.
Additionally, when questioned by the council, Hubbard explained if they did not approve his request he would abide by it and continue building permanent supportive housing.
In an email to The Chronicle from the Fearey Agency, a public relations firm representing Sage, Fearey account executive Amanda Armstrong said Sage is still committed to expanding Centralia’s long-term housing supply.
“Sage appreciates the opportunity to be part of the dialogue as the Centralia City Council comes to a decision regarding zoning for the C-2 highway commercial zoning district and looks forward to continuing to work with the Council, local government and greater Centralia community going forward,” Armstrong said.
Other changes made Tuesday included code on accessory dwelling units, townhouse development, residential zoning districts, land use in those zoning districts, core commercial districts, conditional uses as well as definition changes for a variety of different dwellings.
To read the full list of amendments made to the Centralia Municipal Code and for more information on Sage’s zoning request, view the Centralia City Council agenda report at https://bit.ly/3PRWl6p and scroll to page 56.
To view the CHAAP, visit https://bit.ly/48UT1A0.
For more information about Sage Investment Group, visit its website here, https://sageinvestment.com/.
