Tomorrow might be a pivotal moment for Olympia’s housing policy that will have consequences for property taxpayers and renters and those who care about economic justice when the city council votes on expanding the Multi-Family Tax Exemption (MFTE). See the related explainer story.
The city’s proposed changes effectively guarantee that lower-income families will be segregated from living in buildings receiving taxpayer-paid property tax exemptions. It does so in two ways.
First, the most direct income segregation aspect comes from the city’s proposed 12-year program which will exclude anyone whose income is not at 80% or lower of the AMI. Unlike the existing program, where those buildings receiving the 12-year exemption can have a mix of incomes, the new proposal requires 100% of the units be below the 80% threshold.
Second, the 8-year program for market-rate housing, which has included tax exemptions for high-end $4,000+ a month water view housing, will not have any requirement for affordable housing. This will effectively price out lower-income families.
The result is taxpayer-funded economic segregation of housing. It is in effect “exclusionary” zoning by allowing developers to exclude lower-income households and furthering taxpayer-subsidized economic segregation. Further, it is widely documented that economic segregation in housing is correlated with de facto racial and other identities segregation.
This is why the Thurston County Democrats’ adopted on November 27 a resolution opposing the council’s direction and proposes using the Multi-Family Tax Exemption only if it contains inclusionary zoning requirements for all market rate housing.
Instead of providing an opportunity for lower-income people to live in the same tax-subsidized buildings as wealthy people, the city proposes some of the MFTE building owners pay a small fee. A small giveback of the tax break ranging, depending on the location in the city, from 0% to 25% of the tax break value. And this fee would be time limited.
The Housing Crisis Argument
The advocates for this expanding the MFTE argue that without the tax break, housing won’t happen. But they provide no real-world objective analysis. As the graphic below shows, building multi-family housing has been very lucrative to investors with or without the taxpayer paid subsidy to developers.
Today, there are over 2,000 multi-family units in the development pipeline for Olympia, most of which are not currently eligible for the MFTE. That is also true in Lacey, which has seldom used the MFTE. Therefore, when taxpayers are asked to shoulder the expense for these tax exemptions to developers, we need to make sure we are getting a public benefit that the market would otherwise not deliver.
Conclusion
Should the plan be fully realized, the typical homeowner in Olympia would be paying about $350 more per year in property taxes with anywhere between 0 to 25% of the money being used for affordable housing. It is hard to imagine designing a less efficient program.
The current plan before the council will make it more difficult for the city to achieve a vision of more economically diverse and inclusive neighborhoods. Doing so in the name of Olympians and at taxpayer expense is a mistake that should be avoided.
Editor's Note: The Olympia City Council is scheduled to vote on the MFTE at the meeting on Tuesday, December 12, 2023, which starts at 6 p.m. Check this page for the meeting items and agenda.
Larry Dzieza is a former budget director and budget analyst for multiple state agencies. For several years he also served as an adjunct professor teaching budget and finance and “digital government” at The Evergreen State College Master of Public Administration graduate program. He teaches budgeting and strategic planning at the University of Washington Tacoma’s Certified Public Manager Program.
The opinions expressed above are those of the writer and not necessarily those of The JOLT's staff or board of directors. You're free to post your response, below. Otherwise, if you have something to say about a topic of interest to Thurston County residents, send it to us and we’ll most likely publish it. See the Contribute your news button at the top of every page.
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wildnature
I'm for Larry's side of the argument. Please include address where people can send written opposition stance, when meeting place etc is posted.
Tuesday, December 12, 2023 Report this
BobJacobs
Larry's analysis is exactly right.
We don't need to subsidize wealthy developers for building housing, which they do anyhow. And we shouldn't be subsidizing economically segregated housing either.
Bob Jacobs
Tuesday, December 12, 2023 Report this
Larry Dzieza
Thank you for the suggestion "wildnature" about including contact information for the meeting.
Cut and paste this in your browser to sign-up for the meeting and you can also sign-up to speak for two minutes if you do so before 4:30 pm tonight.
https://us02web.zoom.us/webinar/register/WN_k1BlxtXqSeSzsaEaBUQDwg
Emails to the city council can be sent here: citycouncil@ci.olympia.wa.us
Tuesday, December 12, 2023 Report this
Yeti1981
Number one, all housing is needed. Utilizing the Department of Commerce's HAPT tool, it will reveal to you that housing over 80% AMI is as much a need as under 80% AMI. Real world example, myself. I would move up into my forever home, if the supply was available and I could afford current prices. A couple of years ago, at my current level of income, this could have been possible. However, because of varying factors including lack of supply, inflation, and increasing rates I am stuck in a starter home that someone could occupy. Second, the argument of the author assumes projects would get built regardless of incentives. Simply untrue. The revenue to the jurisdiction isn't a guarantee and no argument based in reality would assume that to be true. Simply look at the Multi-Family boom down the road in Portland to get your examples of how the MFTE attracts builders. And one more thing, the MFTE does attract builders, specifically local builders who couldn't make the project pencil otherwise. It eases the up front expense for these small local builders and allows them to compete in their own community with the multi-national conglomerates that are eating up housing in many areas. Pricing out the competition isn't how you build community. Ensuring local businesses and contractors have a chance to do these projects puts the local residents in the driver seat. And spreading the tax burden among as many people as possible eases that burden. It's ethical and sustainable, because everyone benefits from new development.
Tuesday, December 12, 2023 Report this
Larry Dzieza
Dear Yeti,
You say all housing is needed. But that is simply a slogan that belies sound public policy and the wishes of the people whose pockets are being picked to pay for the taxes the developer won’t be paying.
Under your logic, all the other taxpayers and renters should be happy to pay the taxes on behalf of a new Trump Tower if built in Olympia. What an unfair and inefficient way of spending public dollars!
Support for your claim that without the incentives market rate housing won’t be built is manifestly not in evidence.
The multi-family housing market in Olympia, Tumwater and Lacey and nationwide is a booming. Currently, there are over 1,700 market rate multifamily houses in the pipeline for Olympia, most of which are currently ineligible for the MFTE.
In Olympia, 82% of the housing is multi-family. Lacey is growing even faster than Olympia and has only used the MFTE program one time compared to Olympia’s 11. Tumwater has been building projects as well and as of 2023, never given a market rate MFTE.
“Spreading the tax burden among as many people as possible eases that burden” is bad policy when we know the benefit is going directly to wealthy developers who are already profiting wildly without the need for the exemption (see example in the article). Meanwhile, their tax bill is being paid by all others who include those barely able to afford their homes and renters in non-MFTE buildings. Not a well-crafted example of fair and equitable program design.
We can do better than that. Inclusionary zoning can be the well targeted tool to get the housing that lower income people who can’t afford market rate housing need.
Thought exercise: If this policy was brought to a vote of the people, by what margin do you think it would pass or fail?
Tuesday, December 12, 2023 Report this
Yeti1981
Larry, but you see what you're doing here. There's no nuance in your description of who actually builds housing. True, many market rate multi-family housing projects are happening across the country, and it is also true than a good number of those are because of incentives offered by local jurisdictions. The problem I see with your analysis and solution is that you only see "wealthy developers," and use that logic to be anti-growth. When, in reality, there are tons of local builders who aren't just sitting on piles of money or making an absolute killing off of taxpayers. They often have to float a loan to start a project and are faced with an unreasonable amount of upfront costs. Those people are being priced out of the industry because the strictest regulation always seems to be aimed at the little guy first. While the ones who fit the description you give will just pay whatever it costs and charge the buyer in the end. Development costs in nearly every jurisdiction in Thurston County land somewhere between $60k to $130k per unit, depending on the scope of the project, the price of land, the regulatory obstacles, and the delays in the permitting processes, etc. If you want truly "affordable housing, you have to make more projects pencil. MFTE programs in many cities across the country are doing this. And, yes, we need all types of housing. You don't have to like it, but the statistics (even from the Department of Commerce) say it is the truth. In the end, forcing democratic control over someone else's property just doesn't sit right with me. If you want to control what gets built on a property, buy that preparty and build it. Yet, then you might be one of those developers you are so adamant about portraying as evil and greedy. Let's remember builders build houses, government doesn't. Someone has to get paid for the hard work they put in.
Wednesday, December 13, 2023 Report this