Multifamily tax exemptions floated as help for state’s affordable housing crisis

Amid a worsening housing crisis in Washington state, some experts are vouching for more tax exemptions to housing providers as a possible solution.

The Multifamily Property Tax Exemption Program provides a tax exemption on eligible multifamily housing in exchange for income- and rent-restricted units. The goal of the program is to provide affordable housing in every project all around the state.

The program essentially allows a developer to have a property tax exemption for a period of time ranging from eight to 20 years in exchange for 20% of a developer’s total number of housing units to be affordable at or below 80% of the area median income.

According to the Washington state Department of Commerce, 55 Washington communities have active multifamily tax exemption programs as of 2022, with 19 communities having issued final certificates in 2021. The exemptions issued in 2021 resulted in 67 new rental properties, 97 owner-occupied housing units, and 7,759 new housing units, including 1,058 rent-restricted units for low-income households.

Rental Housing Association of Washington lobbyist Chester Baldwin said he likes the Multifamily Property Tax Exemption Program because it spreads affordable housing units across every development, rather than keeping all low-income households in one building.

“Our goal should be to have affordable units everywhere so that somebody who is on a lower income isn’t limited to just going and living out in the projects, but they can live in their community near their schools and child’s childcare,” Baldwin told The Center Square via phone.

The City of Seattle is seeing a major drop in housing in recent years, most notably in single family and small rental properties. According to the Seattle Department of Construction and Inspections’ 2022 Rental Registration and Inspection Ordinance Annual Report, the number of registered single family units dropped approximately 21%, from 23,853 single family units in May 2020, to 18,740 in August 2022.

Seattle and King County are increasing the supply of affordable housing through purchases of old hotel buildings and constructing their own properties to specifically provide housing for low-income households. However, Baldwin notes that anytime a municipality constructs a building, it does not pay property taxes and is not helping to deprave the costs that come with the services these buildings provide.

“[Municipalities] buy hotels and other buildings and call that ‘affordable housing.’ while they are paying more than $500,000 per unit,” Baldwin said. “That’s not affordable housing. That’s expensive housing that they are choosing to subsidize.”

Earlier this year, the Washington State Department of Commerce released its final housing needs projections, stating that Washington needs to add 1.1 million homes over the next 20 years, with more than half of them needing to be affordable for low income residents.

The state would need over 50,000 new units annually to keep pace with expected population growth.

Baldwin mentioned that one reason the Multifamily Property Tax Exemption Program has been unpopular is the idea of giving developers a tax break. But Baldwin said the cities who are refusing to utilize the program are the ones failing to build affordable housing.