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June 26, 2008

Opinion: Should we change the Multifamily Tax Exemption?

The Multifamily Tax Exemption program started in 2004, giving developers a tax break for earmarking some units in new buildings for lower income tenants. The exemption now applies to projects with 20 percent of units at 60 percent, 25 percent of units at 65 percent or 30 percent of units at 70 percent of median income.

A new bill extends the exemption to higher-rent units. Developers would get the exemption when 20 percent of rental units target people making 80 percent of the King County Household Median income for studios and one bedrooms, and 90 percent for two-bedroom units.

The full council will consider the bill on Monday. We asked council members on both sides to weigh in.

PRO: Rising costs mean it's time to expand tax break

By RICHARD MCIVER, BRUCE HARRELL and JAN DRAGO
Special to the Journal

The Multi-Family Tax Exemption is an effective tool in creating housing that otherwise might not be created by the private sector, in areas experiencing rapid development, but also in areas that are not seeing development.

It provides a modest subsidy intended to capture a share of the development of housing in areas that are seeing robust development of market-rate housing but in which the city also wants to develop housing affordable to moderate income households earning 80 percent to 90 percent of median income. Without the MFTE program, obtaining moderate income housing in these areas is difficult.

In order to provide a range of housing choices for people of different income levels and to give people more choice of neighborhoods in which to live, we are proposing to expand the MFTE program to 22 new neighborhoods, including: 12th Avenue, Admiral, Aurora-Licton Springs, Ballard, Belltown, commercial core, Crown Hill, Dravus, Eastlake, Fremont, Green Lake, Greenwood-Phinney Ridge, Lake City, Madison-Miller, Morgan Junction, Pike/Pine, Ravenna, Roosevelt, Upper Queen Anne, Wallingford, West Seattle Junction and Uptown.

We believe the affordability requirement for rental projects for the MFTE program should be established at 80 percent of median income for studio/one-bedroom units and 90 percent of median income for two-bedrooms.

High construction costs and land prices make this level of affordability appropriate at this time. The City Council's Housing and Economic Development Committee will review the program and the affordability levels in one year to see if the real estate market has changed enough to allow for the affordability requirements to be modified.

The council has made modifications to the program in the past to respond to fluctuations in the real estate market and will do so, again, if the information warrants such. Overall, we believe this is the right proposal for this program at this point in time.

CON: Why subsidize housing so close to market-rate?

By NICK LICATA
Special to the Journal

The mayor wants council to make changes to a housing program and greatly undermine its effectiveness. With these changes, this program would 1) start subsidizing developers to build essentially market-rent apartments, 2) include neighborhoods that are growing too fast and 3) increase our taxes so the rest of us can pay for it.

Since 2004, the Multi-Family Tax Exemption program has helped produce 1,278 apartments. Developers were required to set aside 305 of those units at rents affordable to those making 60 percent of median income or less, yet they set aside 762 units at those rents. That's a good return on our investment.

Why change a program that produces housing the average renter can afford into a program that builds housing that fewer can afford? With these changes, a studio would rent for as much as $1,115. This is considered affordable to people earning 80 percent of median income, or $46,704 a year if you are single. What is the public getting for their tax dollar if the rents set by this program are so high?

Secondly, the program should focus on neighborhoods that aren't growing. I propose taking out neighborhoods like Ballard, that in less than four years have met 174 percent of their 2024 growth goal. Some on the council say Ballard can take more growth. I think neighborhoods like these need to be more livable with the services, open space and transit they deserve and that the Growth Management Act requires.

We can and should keep using the MFTE to build housing for the average renter and meet a real need in the rental market. The workforce sector most lacking affordable housing earns no more than 60 percent of median income or about $35,000 a year. These are Seattle's clerks, laborers, nursing assistants, cooks and childcare workers, among many other occupations.

They represent 44 percent of working people in Seattle; they are nearly all renters. Without housing they can afford, they will move out of the city. Their increased travel time to work in Seattle will contribute to greater traffic congestion and pollution.

There is no data to support the claim that significant numbers of higher-income renters are leaving the city because they can't find affordable rent. In fact, a 2006 King County report says “more than nine out of 10 rental units in King County were affordable to households earning 80 percent of median income.”

Let's build housing for the people that need it, so they can keep working and living in Seattle.


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