Multifamlity Tax Exemption (MFTE) Program

Background: The Multifamily Tax Exemption (MFTE) program provides an incentive to developers to invest in “residential targeted areas” and include a percentage of affordable housing units in their projects. Any such “residential targeted area” must be a mixed-use center designated by a city to receive a greater amount of multifamily development. They are typically areas that are walkable, transit-supportive, and mixed with commercial uses. 

In July 2016, the Edmonds City Council implemented an MFTE program in the Westgate Mixed-Use Zone, and in 2017 the MFTE program was added as an option in the Highway 99 Corridor.  The MFTE Program is currently applicable only in those two areas to projects containing at least 20 units, provided that at least 20% of the units are rented below ‘market rate’ and serve as affordable housing for low-and-moderate-income households (as defined by county data for the Area Median Income).

The MFTE program offers a 12-year property tax exemption for developments that meet the above program requirements. Only the residential improvement value is exempt during that time; land value and nonresidential value, such as commercial space, is not exempt. During the 12-year exemption period the project still pays:

  • Property taxes for the land and any commercial component 

  • Impact fees for transportation and parks 

  • Real estate sales tax

  • Sales, utility, gas taxes 

Policy Proposal: 

  • Revise the Multifamily Tax Exemption Program with the following changes: 

    • Create a third low income eligible category for tenants whose income is 60% of MFI or less*

    • Mandate that developers set aside 25% of all units in a project for MFTE (currently it is 20%) *

    • Construction incentives for additional units/floors, if builders reserve 25% of units for MFTE tenants*

    • Require MFTE eligible projects to include some two-bedroom and larger units*

    • Increase the number of ‘residential target/urban center areas’ for MFTE developments*

    • Create incentives for developers to renovate existing multi-family apartments to become MFTE eligible*

    • Ask the Legislature to extend the current MFTE limits beyond 12 years, to preserve affordable housing

Inclusionary Zoning

Policy Proposal: ​Require new developments (above a certain size) in Edmonds to provide a percentage of affordable housing units or require in lieu of fees that will go towards funding Affordable housing elsewhere in the city.