Thursday, October 1, 2026
About 16 months after the City of Olympia declared an affordable housing emergency, more than 500 housing units have entered the development pipeline.
At a Land Use and Environment Committee meeting on Thursday, April 23, Olympia Housing Manager Jacinda Steltjes presented an update on the declaration, which was adopted in December 2024 under Ordinance 7414. It aims to address the city’s shortage of affordable housing.
Olympia is projected to need about 14,000 additional housing units, with more than half of them needed for low-income households. Steltjes said about 7,600 households are considered cost-burdened, meaning they spend more than 30 percent of their income on housing.
The declaration established six strategies to encourage affordable housing development:
Since early 2025, five projects — representing about 538 units — have been prioritized through the permitting process. That includes both rental and homeownership developments.
Four projects received specialized staff assistance, and one project benefited from waived city requirements.
Among the projects are a Habitat for Humanity project at 3900 Boulevard Road SE, which aims to create about 112 affordable housing units, and the Gibson project, an adaptive reuse of a commercial building at 505 Union St.
The Gibson project will convert the site into 65 residential units. It received priority permitting and combines multiple incentives, including those under the emergency declaration, the Multi-Family Tax Exemption program, impact fee reductions, and utility assistance through LOTT Clean Water Alliance.
City Manager Jay Burney said the declaration provided flexibility through its waiver authority, allowing the city to remove a long-term affordability requirement for the Habitat for Humanity project and avoid repayment risks tied to sale. He added that the flexibility has been key in speeding up permitting.
“Time in the development queue is money,” Burney said. “Getting projects through faster reduces costs and helps them move forward.”
He said faster review allowed projects to break ground sooner and avoid delays that could have jeopardized construction timelines.
The emergency declaration is set to expire on June 30, with the Olympia City Council expected to consider renewal in early June.
Steltjes is recommending an extension, with plans to expand outreach, improve processes and attract more developers.
The committee voted to recommend a two-year extension.
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RondaLarsonKramer
It’s encouraging to see these affordable housing projects in Olympia. I especially appreciate the Gibson project. Adding housing within already developed areas—particularly on sites like surface parking lots or aging commercial properties—is an important way to increase the supply of affordable units.
At the same time, it’s worth taking a closer look at which tools are actually producing additional housing—and which may not be.
The Multi-Family Tax Exemption (MFTE), particularly the 8-year version used for market-rate housing, is often assumed to increase supply. (The Gibson project uses a different form of MFTE tied to affordability.) However, the available data suggests that 8-year MFTEs for market-rate projects frequently do not increase housing production. The Legislature’s Joint Legislative Audit & Review Committee found that the exemption typically increases returns by only about 1–3 percentage points—generally not enough to make an infeasible project feasible.
When that’s the case, the exemption doesn’t lead to new housing. Instead, it reduces taxes on projects that likely would have been built anyway. Research also indicates that these benefits can be capitalized into land values, meaning much of the financial gain is captured by landowners rather than translating into more units or lower rents.
That doesn’t mean all MFTE programs are ineffective. Longer-term exemptions tied to real affordability requirements—and paired with meaningful incentives like density bonuses or regulatory flexibility—are much more likely to produce a true public benefit. The Gibson project illustrates this point.
As Olympia continues refining its housing strategy, the key question isn’t just how much we build, but whether the policies we’re using are actually delivering additional housing and affordability—rather than simply subsidizing market-rate development that would occur regardless.
Monday, April 27 Report this
RitaRose
I support many of the efforts for increase affordable housing. However, as the regulations are continually being cut, I think some thought needs to be given to what the development is going to look like when it's done for livability. Are there going to be any trees left in the 3900 Boulevard housing project being developed by South Puget Sound Habitat for Humanity? While the concept of compact urban development under the Growth Management Act is important to protect rural areas, people living in the new denser developments need some green spaces, too.
Tuesday, April 28 Report this
Snevets
Thank you.
Tuesday, April 28 Report this
CommonSenseSenior
The Gibson Project. Supposed to be studios and 1 bedroom apts for seniors and low income. WHAT DOES YOUR LOW INCOME requirement allow for low income rental prices? Any sliding scale? That area has high rents. I continue to wonder what people working on the various low income housing projects think someone getting a $1500 social security check can pay in monthly rent and utilities? What will the rent end up being at the Gibson Project??? Even $800/mo is more than half my monthly income. That never seems to come up in the info on low income housing developments.
Tuesday, April 28 Report this
Yeti1981
@ RondaLarsonKramer - A couple of important nuances on MFTE that are worth adding to the conversation:
The JLARC finding you referenced is accurate in a narrow sense. On its own, the 8-year MFTE often improves returns by a relatively modest margin. But housing development decisions are almost never binary, meaning feasible versus infeasible. They’re made on the margin. In today’s environment with high interest rates, elevated construction costs, and tighter lending, even a 1 to 3 percent improvement can be the difference between a project moving forward now versus being delayed or shelved.
That timing piece matters. Delayed housing is still a supply problem.
It’s also important to look at how MFTE is actually being used locally. Projects like Gibson aren’t relying on a single tool. They’re stacking MFTE with fee reductions, infrastructure support, and faster permitting. That combination is what helps projects pencil and move through the pipeline. Evaluating MFTE in isolation can miss how these policies function in practice.
And importantly, MFTE isn’t just the 8-year program. The 12-year and newer 20-year versions are tied to affordability requirements and tend to deliver a much clearer public benefit. Those longer-term programs, especially when paired with regulatory flexibility, are where we see the strongest alignment between incentive and outcome.
At the end of the day, the question isn’t whether MFTE alone creates housing. It’s whether it helps get more projects built, faster, in a very constrained cost environment. From what we’re seeing on the ground, it’s one of several tools that, when used together, are helping move real units into the pipeline.
Tuesday, April 28 Report this
Yeti1981
@ RondaLarsonKramer - I would also like to provide some real numbers on MFTE projects in Olympia.
Since 2014, there have been 15 MFTE projects completed. That has accounted for 704 total units. Though it isn't really plausible to suggest the MFTE programs were the driving factor behind every project, one could conclude that it is still true that MFTE is contributing to a meaningful share of Olympia’s multifamily production.
Also, let's be clear that the most recent numbers are from 2024, housing data always lags behind of course, so that's around 70 units per year of the nearly 350 units the city produced per year. Not a small impact by any means.
Tuesday, April 28 Report this
36098501
Yeti1981 hits on the most important impacts of the MFTE. I would add one additional benefit.
While the MFTE may improve returns by roughly 1% to 2%, meaningful in development decisions, it also reduces operating cash expenses during the early years when projects are typically cash-flow negative as they work toward stabilization. This matters because one of the primary risks in the first few years is maintaining enough cash flow to meet financial obligations. The MFTE benefit is a critical component that makes that math work and enables projects to be financially feasible.
It is fair to debate whether Olympia benefits from the City’s use of the MFTE. It remains one of the few tools available to the City to encourage development, which brings broader economic and community benefits.
That said, I am not a fan of how the City has implemented the MFTE through what is called “tax switching.”
Rather than forgoing property tax revenue it was not receiving prior to the development, the City effectively redistributes that tax burden across all other property owners in the City. In practice, other taxpayers absorb the full cost of the exemption during its term. The City does not lose any property tax revenue whatsoever and may realize a modest increase through a 5% fee charged to developers that receive the MFTE. This fee is intended to support affordable housing initiatives.
Beyond property taxes and this fee, new development generates additional City revenue.
The City collects permit and impact fees that support schools, transportation, parks, and infrastructure. Developers must also complete off-site improvements such as street upgrades, lighting, utilities, and sidewalks to meet current City codes. Even the smaller downtown multifamily projects incur costs in excess of $500,000, effectively resulting in some privately funded infrastructure improvements.
Construction activity also generates tax revenue. A $20 million project may produce roughly $1.25 million in combined sales tax and B&O tax, a portion of which flows to the City and County. It also creates jobs and drives spending on materials and services.
Perhaps most importantly, increased downtown residency supports local businesses, contributing to broader economic activity and enhancing Olympia’s livability into the future. It also helps reduce sprawl.
From the City’s fiscal perspective, development of underutilized parcels strengthens its long-term position while advancing policy goals such as increased housing density and compliance with Washington’s Growth Management Act.
The MFTE was not originally designed to create affordable housing. Its purpose was to incentivize multifamily development in under-invested areas such as downtown. Around 2019, Olympia modified the program to allow extended exemptions for projects that include designated affordable units. The modification has not yet produced a significant number of new units. TBD.
In 2015, the downtown housing mix was roughly 70% (~925 units) low-income/subsidized and 30% (~415 units) market-rate. Essentially the inverse of many other downtowns. The area had struggled to attract new investment for decades, but there was a clear increase in development beginning around 2015.
An uncomfortable truth is that many of these new market-rate units may be very close to qualifying as “low-income affordable units" under HUD guidelines due to Thurston County’s high median family income of $117,000. For a two-person household, qualifying rent is roughly $1,700 per month. This is in line with the rents for newer market rate studio and one-bedroom units downtown. This may help explain why there is low vacancy (2-5% typical turnover) and rent-ups of new units downtown continues to be strong. The commercial space is a definite problem that deserves its own discussion.
For this reason, when the community calls for more “affordable housing,” it is often referring to subsidized housing which is a fundamentally different product and entirely unrelated to the MFTE.
For those in the know, please add, correct or clarify as needed. I didn't intend to create more confusion. This is a complicated and nuanced topic that I am not an expert in. It also requires access to data that is not easily available. The HUD website is helpful.
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Wednesday, April 29 Report this
RondaLarsonKramer
@Yeti1981, I appreciate the additional detail—it’s helpful to have a more complete picture of how these projects are being financed.
I agree with one important point you’re making: projects are often decided “on the margin,” and multiple tools are typically layered together. But that’s also why it’s important to isolate whether each tool is actually doing work—or whether it’s simply along for the ride.
The JLARC finding is still significant in that regard. If the 8-year MFTE for market rate housing is only shifting returns by 1–3%, that suggests it is not generally moving projects from infeasible to feasible. In a stacked financing scenario, it may contribute at the margins, but that’s different from being a determining factor in whether housing gets built.
The question then becomes: if a project already pencils with the other tools you mentioned—fee reductions, infrastructure support, permitting—what is the MFTE for market rate housing adding? If removing it wouldn’t stop the project, then it’s not really functioning as an incentive.
On the production numbers, I think it’s important to be careful about attribution. The fact that units were built with an MFTE for market rate housing doesn’t mean they were built because of the MFTE. Those are two very different conclusions, and the “but for” question is critical when evaluating any tax expenditure.
You also raise the point about early-year cash flow, which is fair. But again, the key issue is whether that benefit is large enough to change behavior, or whether it simply improves the financial position of projects that would proceed regardless.
I think where there may be agreement is this:
--MFTEs can be one tool in a broader package
--But not all versions of MFTE perform the same
--And the 8-year, market-rate version appears to deliver limited if any public benefit *relative to its cost*
That’s why some of us are suggesting a shift in focus—toward longer-term exemptions tied to actual affordability, and toward incentives developers clearly value, like density and flexibility. Those approaches are more likely to produce additional housing and measurable public benefit, rather than relying on a tool that may not be changing outcomes in practice.
This is a nuanced issue, and I appreciate the discussion.
Wednesday, April 29 Report this