Lacey council members expresses concern on Affordable Housing Tax

Members of the Lacey City Council expressed their concern following a proposal made to Thurston County by the Regional Housing Council for the adoption of the affordable housing tax, a policy that would require cities to levy 0.1 percent of their sales tax to affordable housing.

During the city council work session on Thurs., Sept. 9, Lacey Assistant City Manager Shannon Kelley-Fong discussed the possible outcome once the county decides to adopt the affordable housing tax, a proposal that was previously endorsed by the Regional Housing Council. The city staff explained that the state legislature added a provision to enable cities to add an affordable housing tax by passing through HB 1590.

County might impose the tax on cities

Generally, HB 1590 allows cities or counties to impose taxes for the benefit of affordable housing or mental and behavioral services. The provision also allows a city or county to use up to 50 percent of their revenue from the affordable housing tax in the construction of a housing facility.

A city may adopt its own affordable housing tax either through voter approval or through a “Councilmanic” vote – a vote of the city council.

The tax can be imposed on cities by a vote of the county commission; in this case, at least two county council members. Notably, the timing of approval is important, since cities that adopted the affordable housing tax prior to the county’s approval would be entitled to receive credit.

Olympia adopted the affordable housing sales tax in 2018 through voter approval. According to the provisions of HB 1590 the city would receive a credit to use the funds it collects within the city if Thurston County imposes the new housing tax.

On the other hand, cities that did not adopt the policy prior to the county’s approval might find themselves at the losing end. The policy specifically provides that the county is not required to allocate or spend any revenue they received from the city within that same area.

Councilmember Michael Steadman said, “In my opinion, Olympia is looking pretty good in their future with this because no matter what, they’re gonna get their funds. My concern is if the county does enact this, our fund goes to their control. And we just give what’s leftover.” This is especially crucial since once approved, Lacey is expected to contribute around $1.4 million of its sales tax to Thurston County.

While the city has no control over where the funding will be spent, they are entitled to some benefits. The policy provides that once the county is able to acquire a housing facility, the city is entitled to have 15 percent of the housing units. These housing units will be given to eligible residents.

Residents who identify as any of the following population groups are eligible to apply such as; persons with behavioral or health disabilities, veterans, senior citizens, persons who are homeless or at-risk of being homeless, unaccompanied youth, and domestic abuse survivors and low-income residents. Kelley-Fong noted that low-income residents are those that make 60 percent or less of the median income or an individual earning below $40,612.

In addition, Councilmember Carolyn Cox, who is also a member of the Regional Housing Council shared that an interlocal agreement will be likely set in place before the county adopts the affordable housing tax. Cox also guaranteed that “The county isn’t going to force it down our throats. I think there is an interest in having it.”

Mayor Andy Ryder added that for now, there is a high probability that the county would refuse to adopt an affordable housing tax, given that the county commissioners expressed their concerns regarding the policy.

Currently, neither Lacey nor Tumwater has not taken any action regarding the adoption of HB 1590.