Olympia residents ask city officials to scrap the Multi-family Tax Exemption program


Olympia residents called for an end to the Multi-family Tax Exemption (MFTE), describing the program as "bad public policy."

Olympia resident and Council for Neighborhood Associations (CNA) President Larry Dzieza was the first to criticize the program when Land Use and Environment Committee Chair Dani Madrone opened the public comment segment at Thursday's meeting.

According to his calculations, Dzieza claimed that he pays $102 yearly as part of his property tax while wealthy developers and investors get away without paying their share of taxes.

Dzieza further claimed that the average homeowner in Olympia pays $80 a year to subsidize millionaires for high market-rate rentals. He also alleged that almost $2 million in 2023 will be shifted from these investors to the home and business property owners.

"Unless it provides a social benefit to the community, it should be ended," Dzieza commented.

Dzieza pointed out that the Thurston County property valuations for the MFTE downtown from 2020 to 2023 grew by $106 million valuation increased.

"The idea that investors need to have everyone else in the city subsidize their gains by almost $2 million is scandalous,” Dzieza said. “The idea that investors will refuse to invest the downtown real estate when it sees 129% profit in less than four years is absurd.”

Dzieza cited that one building worth about $14.5 million pays less than the median-priced home in Olympia in terms of property taxes. Instead of paying $142,000 in property taxes, they pay only $4,290 because of the MFTE program.

"The other taxpayers have to chip in to pay the difference," Dzieza added.

Dzieza asked the city to consider income inequality and racial equity lens when implementing the program. He believes that BIPOC and Hispanic Americans are disproportionately affected by these practices.

He concluded by saying that people did not vote for this.

‘Bad public policy’

Former Olympia Mayor Bob Jacobs agreed with Dzieza that the program, which he described as "bad public policy," should be terminated.

Jacobs was the mayor when Olympia adopted the program. He admitted previously supporting the 12-year MFTE that supported low-income housing.

Jacobs said the 12-year program has a time limit for supporting subsidizing housing for low-income people, who may be evicted after 12 years. "I am now convinced that we should support only permanently affordable housing, like Home Funds and several other city programs."

Jacobs said it is not justifiable to spend public resources on market-rate housing for the eight-year program. He said there is no public benefit in subsidizing the same.

Resident Judy Bardin expressed concerns about the recommendations of extending the eight-year MFTE program to the east side with only a 5% in lieu of fee is "a regressive idea that supports inequity."

"[A] 5% is a very minimal fee. Why are we supporting expensive housing when over 18% of Olympia residents are below the federal poverty level?" Bardin said. "The idea that newly constructed market-rate apartments will somehow impact affordability is not realistic."

Bardin said she favors the 20-year tax exemption program, which requires 25% of units sold or rented to those at the 80% or below AMI level. "The 99-year requirement means this would be permanent, affordable housing."

Another community member, Walter Jorgensen, criticized the city government for continuing to bet on the housing supply side by giving property tax breaks, hoping that developers would provide affordable housing to those who needed it.

"It is not working," Jorgensen commented. "Building something new and affordable makes no sense. Taking that money and helping people rent or buys an older home or apartment makes far more sense."


At the recent committee meeting, Housing and Homeless Response Director Darian Lightfoot presented the city's recommendations for the MFTE program:

  • Expand the MFTE boundary to the east and west sides, piloting six neighborhood centers outside the main corridors.
  • Change the 12-year program to require 100% of the units to be at or below 80% AMI. This would be applicable in all three geographic areas.
  • Require a five-year extended contract past the 12-year exemption limiting rent increase to no more than 7% a year to address displacement concerns.
  • Include a 5% fee in lieu of the eight-year program downtown. The fee revenue would be dedicated to affordable housing.
  • Extend the existing eight-year program to the west side and include a 25% fee. The fee revenue would be dedicated to affordable housing.
  • Explore Tenant Opportunities to Purchase requirements for all eight-year projects.
  • Include a 20-year program in all geographic areas, including pilot neighborhood centers. Exemptions apply if 25% of the units are sold as "permanently affordable" to households earning 80% AMI or less. The development must be sponsored by a non-profit or governmental entity and is subject to a 99-year resale restriction to ensure permanent affordability.
  • Increase application fee from $100 to $1,000 plus a $75 per unit up to $5,000.
  • Re-evaluate the program in five years.

Editors' Note: This story has been corrected as of May 30, 7:20 a.m.


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  • Larry Dzieza

    Quick corrections.

    1. Larry Dzieza was not speaking as the President of the Council of Neighborhoods Associations. I was speaking as a member of the community who cares about good public policy and fair taxation.

    2. I don't pay $102 in property taxes. I pay almost $7,000 a year of which I object to paying $102 so that the rich investors don't have to pay it.

    That is the main point: It is a Tax Shift.

    Because of the way property tax levys are set, every single penny of the 8-year, market rate tax exemption is paid for by the other non-exempt tax payers.

    The city and schools and libraries lose nothing. The investor class makes millions. The only losers are the general public who pick-up the tax tab for the investors.

    When do the regular people get a break?

    The city should end the 8-year market rate tax exemption and require developers to set aside units IN THEIR BUILDINGS for low and moderate income residents. They should not be able to kick-back a small percentage of their tax gift (5% really?) in order to create income segregated complexes for high earners and the wealthy.

    Monday, May 29, 2023 Report this

  • BobJacobs

    Correction: The article above says I "admitted previously supporting the MFTE". Wrong. I never supported the 8-year MFTE for market-rate housing which constitutes nearly all MFTE projects. I did previously support the 12-year MFTE for low-income housing, but now believe we should focus on permanently affordable housing, not temporarily affordable housing like the 12-year program.

    Bob Jacobs

    Monday, May 29, 2023 Report this

  • AugieH

    Again, this is an example of inadequate reporting. For someone new to the area, or someone already here for some time but who needs to get out more, what exactly are the elements, succinctly and briefly stated, of the MFTE as it currently exists? It shouldn't inconvenience the story's author too much to include background information.

    Monday, May 29, 2023 Report this

  • KarenM

    More taxes to all the rest of us (who are property owners) while investors in new housing get their profits and increased property values.

    Meanwhile the creation of this housing is somehow magically going to 'tinkle down' to create affordable housing.

    Collecting a 5% fee to be applied to affordable housing won't make a dent in the need.

    These new ideas to reinvent the program make it more complicated. A citizen examined this program a couple years ago and found that there was no City oversight or enforcement of the rules on the properties that has used it. How can we trust that these details will be enforced in the coming years?

    If this program is expanded, we can expect everyone's property taxes to continue to rise to fill in for these exemptions. Will some homeowner lose their home because they can no longer pay the ever increasing taxes? That would be sad and ironic.

    Monday, May 29, 2023 Report this

  • Deanima


    Tuesday, May 30, 2023 Report this

  • Annaschlecht

    Lots to unpack here.

    First: All taxes are tough, especially on lower income people. No arguments there. And ... taxes are the price we pay for a civilized society.

    Second: Given Larry Dzieza's credentials as a former State budget analyst, I would hope he also recognizes the high cost of other property tax exemptions, often called "tax expenditures" in govt speak. These include property tax exemptions for faith communities and qualified non-profit organizations. If we put all of these up to a vote, I wonder how anti--tax voters would pick & choose: yes to churches, no to LGBTQ youth organizations? Public schools are exempt, so should home-schoolers be able to pro-rate their property taxes to opt out of subsidizing them? Can proponents of more housing (i.e. the MFTE) swap that property tax for church exemptions associated with faith communities that demonize the LGBTQ community?

    Third: Subsidized housing, while near & dear to my heart is not the only "public goods" that we buy with the MFTE. By concentrating new construction in the urban hub, we slow down the explosive growth that gobbles up our surrounding rural areas. Suburban sprawl has HUGE negative impacts on the environment. And an indirect public good is the fact that more neighbors mean more sales tax they join us in paying - sales tax being one of the pillars of Olympia's tax base.

    Fourth: News flash: we are still in the midst of a housing shortage. According to State Commerce, we need to build another 12,000 homes in the next 20 years, housing at all price points. Our rental vacancy rate is the lowest of the metropolitan area of King, Pierce & Thurston Counties at 2.5% according to Thurston Regional Planning Council. We need more housing, lots of it. The MFTE is one of the best tools to increase the number of homes. Another effective tool is zoning - opening up single family neighborhoods to allow multi-family housing, or at least what is called, "middle housing" of duplexes and triplexes. In recent years, some of the critics quoted who are against the MFTE have also been opponents of Olympia's Missing Middle. It's fair to ask - how should we get the housing we need? Or is opposition to more housing the real issue here?

    Nobody likes to pay taxes but most folks like what you get: roads, schools, parks. public safety, clean water and other standards of living that we have come to depend on. Tax-funded support for more housing is another need. Our region is growing and we've to figure out where all our new neighbors are going to live.

    Disclosure: I spent nearly 40 years at the City of Olympia working on housing, social service and homeless issues & funding

    Tuesday, May 30, 2023 Report this

  • TheVirtualOne

    Support for those who legitimately need help, i.e., low income people, doesn’t seem to be the issue here, but rather fairness to the taxpayer and community by allowing voters to decide when and how to be taxed, then holding government accountable in properly administering the program. This sounds like an “other people’s money” situation which government is notorious for mismanaging and mishandling. I support pulling the current tax instead of expanding it, put a proposal together that is well thought out, then present it to the voters for approval.

    Tuesday, May 30, 2023 Report this

  • Larry Dzieza

    Thanks Anna for your comments on my comment.

    I very deeply recognize the cost of other tax exemptions and believe that they should have to be reauthorized on the same basis as budgetary expenditures instead of being permanent.

    But to be very clear, this has nothing to do with the strawman you posit of being anti-tax. It has to do with fair taxation and transparency. It has to do with social benefits vs. benefits to privileged investors. Let me quote the Commerce Department’s brief on the MFTE that hits the nail on the head:

    “Communities may be less likely to support incentives for market-rate development that use property tax increases, especially for high-end projects that do not seem to provide public benefits.

    Shifted tax obligations are not usually calculated, meaning that the full impacts of this program may not be transparent, especially to affected property owners.

    Depending on the popularity of the program, the total increases in property taxes could be equivalent in magnitude to affordable housing levies that would require voter approval and have tighter requirements (RCW 84.55.150).”

    In other words, the public is less likely to support an MFTE that provides no public benefits but don’t worry City Council because it is not transparent, most of the public will never know. News Flash: We are trying to change that by making the public aware of it.

    Finally, the Commerce Dept. points out that the alternative, if the public was made fully aware of this MFTE for market-rate housing would be to spend the publics’ tax dollars on an affordable housing levy (like the Home Fund) which has "TIGHTER REQUIREMENTS" (i.e., it directly guarantees the money is used for a social benefit).

    You raise provocative but unhelpful questions about church exemptions and home schoolers. The church exemptions that you posit as a comparison to the MFTE are not something the City can choose not to do. You may not like churches or certain church practices, but this is a statewide law without a local government option while the MFTE is a purely city decided gift to investors. See RCW84.36.020, RCW84.36.800 WAC 458-16-110 and WAC 458-16-180 through 200.

    Your rhetorical questions about swapping imaginary reductions in property taxes for those home schooling and public votes to revoke church exemptions and use the money for building more rental units points to a failure to address to the issue that is before the Council.

    What do you say we have a referendum specifically on this issue? Let’s have the City Council put before the voters whether the City's current 8-year tax policy that guarantees millions for investors that the the rest of the public has to pay for but with no commensurate guarantee for affordable housing is how we want to tax ourselves? In a fair fight, I wager that the voters would reject it and, like the Commerce Department suggests, prefer to fund real affordable housing.

    Fun fact: Only two cities in Thurston County have 8-year MFTEs. And that second one was Lacey which just recently enacted one for 2023. This is a choice of the city of Olympia to inflict higher taxes on the public for projects that “…do not seem to provide public benefits and that conclusion is buttressed by the state Joint Legislative Audit & Review Committee (JLARC).

    P.S. In regards to the specter of suburban sprawl: There is no shortage of buildable lands within Olympia's Urban Growth Boundary according to the Thurston Regional Planning Council.

    Wednesday, May 31, 2023 Report this

  • Larry Dzieza

    Dear Deanima,

    Thank you for posting that Forbes article which confirms the points I and others who oppose the 8-year tax exemption being proposed for expansion by Olympia.

    The article says, "One program, the Multifamily Tax Exemption Program (MFTE) is a real incentive program, eliminating property taxes in exchange for including rent restricted housing in apartment developments.".

    The Seattle MFTE program being extolled by the author requires "rent restricted housing" while the Olympia 8-year program does not. That is the problem.

    Yes, there are 12 and 20 year MFTE programs that do provide a social benefit. That is what Tumwater uses (no 8-year market rates for them).

    Thanks again Deanima. It is important for this discussion to proceed in an informed manner that it distinguishes between the 8, 12 and 20 year programs. It is the 8-year program that should be stopped, not expanded.

    Wednesday, May 31, 2023 Report this

  • Yeti1981

    What bugs me with many of the comments here is the fact that economic theory is often selectively applied when it is convenient for one's argument. However, the reality of the situation is far more complex. First, let's get off this high horse about builders being the enemy. The majority of builders here are local. They're your neighbors. They build homes for this community. They're not some national, or even multi-national, corporation. So, when you eliminate incentives, the first one's to be priced out of the industry are our local builders. Which de-facto eliminates competition for those who can afford it. That's when the big corporations come in and buy up property and gentrify an area. Our so-called protections are actively working against our own best interests. The truth is that the MFTE should be expanded and a caveat added that local builders get priority for bids.

    Wednesday, May 31, 2023 Report this

  • BevBassett

    I would like to know details about exactly who got MTFEs in the past, how much they got, on which buildings? And I'd also like to know how the City Council members voted individually on these MTFEs? Then, I'd like to know if any of the recipients of these MFTEs gave campaign contribution monies to any of the members of Olympia City Council who voted to give said developers tax breaks on new market rate construction?

    Thursday, June 1, 2023 Report this

  • bobesan

    Yeti1981 (nice name), once again you're missing (or skirting) the real issue. I.e., people like me aren't criticizing the developers (in general), but rather the neoliberal (alias necon) City Council & those few bad-actor developers who love the public trough. E.g., the developer next to me told me that he is being forced to build mostly market-rate housing by the Council, else he wouldn't make any profit. He also told me that the City took 9 mo. (AFTER the public hearings & land clearing) to approve his project, thus delaying construction to build the new homes that we're so in need of. But what we really need are more projects like the Habitat for Humanity project on Blvd. Rd., which will lock in permanent housing for the non-rich.

    Sunday, June 11, 2023 Report this