The days of a barista or hotel worker being able to rent a studio for $500 or $600 a month are quickly fading in Seattle. But Mayor Greg Nickels says he has a plan.
He wants to raise the lid on a tax break to developers so more of them will set aside “affordable” units in new buildings – raising the limit of what can be charged for a studio in an approved project from today’s cap of $954 to $1,090.
That’s the gist of proposed legislation the mayor sent to the City Council last week to expand Seattle’s Multifamily Tax Exemption, or MFTE, which some housing activists have long criticized as a giveaway to developers.
In a statement released July 25, Nickels said the change is necessary to accommodate professionals such as nurses and firefighters who increasingly find themselves squeezed out of the city as well. But John Fox of the Seattle Displacement Coalition calls the proposal a boondoggle that will only encourage new development and higher prices.
“It increases the pressures for development in areas where there are concentrations of truly affordable [older] housing,” says Fox. That, he says, only “accelerates the loss of these lower density structures.”
Originally passed in 1994, the MFTE currently allows apartment developers and condo buyers to pay no property tax on new construction if a certain percentage of the units in a building are affordable and located in one of 17 urban hubs from Columbia City to Northgate.
At the program’s top income tier, the tax is currently waived up to 10 years if a developer makes 30 percent of his or her new units affordable to individuals earning 70 percent of the area’s median income, or $38,150 a year. In that range, the city considers a studio of $954 affordable – that is, it costs no more than a third of the person’s income.
The mayor’s proposal, which the City Council will consider over the next few months, would waive the tax for 12 years, expand the program to all urban hubs in the city, and raise the income caps. Developers would get the exemption if they made at least 20 percent of their units affordable to people earning 80 to 100 percent of median income, or $49,000 for individuals and $62,300 for a two-person household.
Higher-income condo buyers would also benefit: Today’s MFTE excuses two-person households making up to $49,840 a year from having to pay the residential property tax to the state. Under the mayor’s proposal, the income cap would increase to $74,760 – or 120 percent of the area’s median income.
Fox says tax breaks for the higher-income categories are not warranted. Citing the latest King County Benchmarks report, which tracks trends in various economic sectors, Fox says the Seattleites most in need of affordable housing are those making less than 40 percent of median income, or roughly $25,000.
In that category, the county’s report says, there are 68,460 more households renting than there are units they can afford. With that kind of deficit, Fox says, it’s absurd for the mayor to expand a tax break for higher-income developments.
“What is the mayor doing wasting our time, our city resources, giving more subsidies to promote housing in this higher-income category when a tidal wave is breaking over the heads of [lower-income] households in the region?” Fox asks. “It’s disgusting.”
Rick Hooper, policy director at Seattle’s Office of Housing, disagrees, pointing out that the MFTE is a way to encourage development of workforce-priced housing that the city cannot fund directly. State law, he says, limits city funding or loans to housing projects that serve people at or below 80 percent of median income.
The problem, Hooper says, is that developers aren’t using the MFTE program right now because it doesn’t pencil out for them. “We’ve had to recalibrate and come up with income levels where the program is going to work,” he says.
“There’s no question there’s a need for housing at 50 percent of median and below,” Hooper says. But, “We have a number of city programs that have that income scale as their focus.”