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 Idea: 

  • Revise the Multifamily Tax Exemption Program so that: 

(a) an additional 5-10% of the units are required to be for households earning no more than 65% of the county median income; 

(b) a portion of the units include 2 or more bedrooms; ​

(c) additional areas of the city become eligible for the program; ​

(d) existing multifamily buildings are incentivized to use the program when they are rehabilitated;

(e) the City lobbies the Legislature to extend the program beyond 12 years where affordable units are retained. ​

Zoning Concessions vs. Property Tax Exemptions 

There is not a video for this idea.

Background: When more housing is added to the supply AND certain other conditions apply, the cost of housing to owners and renters can be brought down. Some ways this can occur are:

  • A non-profit organization or governmental agency obtains grant funding and develops housing that will be rented or purchased at a reduced cost, reflecting the amount of grant funding and tax exemption that contributes to the project;

  • A financial incentive is offered, such as a property-tax exemption for housing units that meet affordability requirements;

  • A zoning incentive (or concession) is provided that allows the property to have more housing units, such as by allowing an additional floor of development.

Policy Idea: 

  • Limit property tax-exemption based incentive programs for future affordable housing developments and/or entities (such as Housing Authority of Snohomish County) that desire to operate/develop in Edmonds. Instead, craft new zoning incentives, such as allowing additional stories/floor, and require developers to make a percentage of the units created be affordable in a manner that exceeds current Multifamily Tax Exemption guidelines, which apply to the percentage (%) of units serving low-to-moderate income households and the amount of discount for the cost of each affordable unit.

Thank you!

Affordable Housing Incentives Survey

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