Public challenges council about tax breaks for housing developers

Four residents expressed opposition to giving tax exemptions to multifamily housing developers.

Public commenters asked the councilmembers to remove from the calendar consent two items: approval of a multifamily housing limited property tax exemption for Madrone Apartments and Market Flats.

In response, Mayor Pro Tem Clark Gilman said the Land Use and Environment Committee would revisit Multi-Family Tax Exemption (MFTE) program and send its recommendations to the city council by fall.

The residents participated in the public comment segment during the city council meeting held Tuesday, June 21. 

Public commenter Janine L. called it an "unfair policy" to give tax exemption to developers, who "have flooded the market with very expensive housing, burdening all renters with higher rates."

"Our city staff and council's failure to negotiate affordable housing in exchange for these millions and exemptions is the worst kind of corporate welfare,” said Janine L. online during the public comment section.. “Like other cities across the nation, we could be requiring these tax breaks to have stipulations for minimum affordable or low-income housing included," she added.

Jim Lazar said the city council has no obligation to approve tax exemption applications from the developers. "Are you aware that these tax exemptions have denied the city, the school district, the Public Utility District, and Timberland Regional Library millions of dollars?"

"I am not fine with increasing my taxes that provide subsidy to a millionaire developer. I urge you to pull [these two] items from the consent calendar and set them for a public hearing in the future," Lazar added.

"Please postpone the votes on these proposals until you have the chance to see the results of the study undertaken by the city staff. This will allow you to assess whether that tax exemption is playing the role that you wish in incentivizing new development," said Charlotte Persons, who made her request online.

“The state's JLARC (Joint Legislative Audit and Review Committee) review has already shown that this exemption has had questionable results. And it's quite possible the housing units would have been constructed without the exemption," Persons added.

Jimmy Madison agreed with Persons. "It seems like we are always told these units won't get built without the tax exemption…build affordable housing instead, which you can maybe aggressively subsidize and incentivize that action, rather than incentivizing the building of unaffordable units."

MFTE program

Council member Gilman explained that MFTE is a property tax exemption program that allows eligible cities to target specific areas for multifamily housing development.

He said the program exempts new or rehabilitated multifamily properties from paying property tax on the value of new construction for eight or 12 years.

"The State Legislature created this in 1997. Olympia adopted this in 1999, and we have had it running since then," Gilman said.

The program, according to Gilman, was created to stimulate residential construction to meet urban density, transit, and other goals.

He said the city staff is currently reviewing the MFTE program. The Land Use and Environment committee will receive recommendations on the issue. "Then the council will have an opportunity for the sort of public vote people have been calling when the recommendations come to council."

He is expecting the recommendations will be submitted to the council this fall.

Gilman said the committee is going to address three questions:

• The Olympia has done 500 new units downtown. Is it time to declare victory in the effort to spur multifamily downtown and turn the efforts to incentivizing  other community development?
• Should Olympia modify the rules to put more stipulations about creating long-term affordable housing?
• Should the program be geographically expanded?

He said the program has been used to incentivize development in downtown and on Martin Way.

Citing the Sustainable Thurston Plan, council member Dani Madrone, said that by 2035, “, 72 percent of all (new and existing) households in our cities, towns, and unincorporated growth areas will be within a half-mile (comparable to a 20-minute walk) of an urban center, corridor, or neighborhood center with access to goods and services to meet some of their daily needs.

"We are really not on track to meet that goal. I am hoping that we are doing better now. What is on my mind is the protection of rural areas, access to transit, people being able to live near where they work. These are all very complex things to balance," she said.

Madrone is also the Land Use and Environment Committee chair.

JLARC review

It stated in the JLARC review that the program was intended to stimulate the development of new and rehabilitated multifamily housing – including affordable housing – in cities that plan under the Growth Management Act.

In its 2019 review, JLARC identified:

• 424 developments received tax exemption
• 34,885 new housing units have been created
• 82% of these units are located in Seattle, Tacoma, Spokane, or Renton.
• 21% of those units are designated as affordable.

The review offered inconclusive reports on how the tax preference impacts the low-income housing supply and whether the program increases the development.