As Tumwater received its first three applications for its 12-year multifamily tax exemption, some city councilmembers expressed their concerns on the possible loopholes in the program.
What is a 12-year multifamily tax exemption?
In a presentation, Tumwater Planning Manager Brad Medrud introduced the first three applications for the city’s multifamily tax exemption. The Planning Manager explained that the 12-year multifamily tax exemption “gives financial incentives for developers to create multi-family structures in target areas and setting aside a percentage of the units as low-income housing.”
The program was first adopted in 2017 as a way to encourage housing development in key areas of the city such as the Capitol Boulevard Corridor and the Brewery District. In 2019, the city council expanded its coverage to include the Littlerock Road subarea, where the current site applications are located.
Rockwell Place Buildings
Based on their review, Medrud recommended the city council to approve of the applications for the three Rockwell Place Buildings. Once completed, the project is expected to provide 141 multifamily housing units, with 29 units dedicated for affordable housing.
The project details are as follows:
Councilmembers concerned about the tax exemption
During the public hearing, Tumwater resident Paula Henderson asked whether the units covered by the multi-family tax exemption is really affordable. The resident claimed that based on the proposal, the regular rent for a studio apartment for the Rockwell buildings is at $1,250. This means that a resident needs to make at least $21.63 per hour or earn a $45,000 annual income to afford the rent.
Councilmember Joan Cathey agreed. “It gives me the shivers when you say 141 units and only 29 of them are for low-income people.” She continued, “I don’t exactly know what it is we are doing here but it doesn't seem like it's really what we committed to.. for really truly affordable housing, which isn't $1,250 or whatever for a studio unit.”
Councilmember Charlie Schneider said that there might be a possible loophole in the tax exemption. “We give them this 12-year leeway… and after 12 years and one day they can raise that rent as high as they want and those affordable units would no longer be affordable to those individuals.”
“It’s essentially we are renting affordable units for 12 years. Then when that phases out, we return to the status quo,” Councilmember Michael Althauser added. He clarified, “This does not create permanently affordable units but we’re essentially using the deference of tax obligations we would be otherwise receiving in order to incentivize lower than market rents.”
Is it worth the consideration?
On the other hand, Tumwater Mayor Pete Kmet believed that the proposed construction of the three buildings would provide a good opportunity for the city. He shared that the tax exemption could accommodate “working folks who have a hard time paying market rent. So I think from that perspective, it provides a bridge for our community.”
Councilmember Leatta Dalhoff also believed that while it might not be the best option, the application is still worth the try. “Is this something we should try and have that continuous conversation and continuous feedback and continue making improvement, I say yes. So, is it the best option? I don’t know but it's what we have now, and if someone’s willing to do that in Tumwater, I wanna support that,” Dalhoff said.
Councilmember Angela Jefferson shared a similar sentiment, saying, “I think we kinda got what we wanted.”
The city council unanimously approved the 12-year multifamily tax exemption applications for Rockwell Place Buildings One, Two, and Three. As a next step, the developers are given time to finalize their plan with the county before the proposal is sent back to the city for the final agreement.
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