Olympia has a long history of providing incentives to facilitate different types of housing throughout the city.
Its goals may include encouraging higher density to manage growth, support public transportation, provide affordable housing and consolidate services in the urban area. The city has also worked steadily to support the downtown, providing funding for things like the Walking Patrol, or Downtown Ambassador program. We are fortunate to have a bona fide downtown; it is made up and dependent upon small businesses, a willing public and constant efforts to respond to different economic and social changes.
The Multifamily Tax Exemption (MFTE) is one of those incentives. It was instituted in the 1990s to get developers to build housing downtown. The concept was to support the downtown, particularly the businesses there and make it feel safer – because that’s what happens when more people are around. We needed to get more housing built downtown. This program is now being reviewed; there are two hearings scheduled, including one this coming Tuesday at the regular city council meeting. It’s time for residents to let the council know what they think of the program. Here is a link to the proposal and policies: MFTE Proposal Plan and Policies
The MFTE was never solely an “affordable housing” program; it had different level incentives for both market rate and affordable housing. As it turned out, most of the projects using the program were market rate. Developers didn’t find enough incentive in the lower income portion of the program to use it.
The reasons to continue and expand the program come from the belief that we lack enough housing to keep housing prices reasonable and affordable, especially for renters. The city has an Olympia Housing Action Plan that details its intent with respect to housing. The plan makes the case that we need more housing to keep prices lower, and that we need to focus on efforts to “increase the supply of permanently affordable housing for low-income households (those making 80 percent or less of the area median family income)
There are a number of financing scenarios in the staff recommendation, but I can’t tell if any of them are viable. I don’t see in any information on-line if the city involved stakeholders, people who might actually use the program. So while there are a number of ideas in the plan, one can’t tell if any of them would actually work.
Independent of the area or housing type, when the financing for the current plan was explained to me I was left with the impression that the tax was foregone during the 8- or 12-year period. That seemed reasonable to me, my assumption being that if the program was indeed working, and the recent housing projects using the program wouldn't have been built without the program, then the city wasn’t really giving up revenue; it wouldn’t have gotten any money if the projects weren’t built. Plus the city would get the revenue from commercial parts of the projects. So, fine, there is a financial deal to get something the city leaders want, which is what cities do. Seemed reasonable.
Come to find out that’s not the case; the tax is “shifted” to the other taxpayers in the city. Thus rather than forego the tax, the tax is collected from the other city taxpayers. This is in essence raising the property tax to pay for part of these projects over the life of the incentive agreement.
I believe this tax policy is inappropriate, an indirect yet clear subsidy, and absolutely should be changed if the program is kept. I don’t find this funding choice mentioned in any of the documents or in the proposal and policies. This is a significant policy decision and one that ought to be openly and publicly discussed. This program choice should be prominent and made clear on the city’s website, and an item for the public hearing.
There is a hearing scheduled for the MFTE, on next Tuesday, the 14th, to talk about the proposed program border. But there is also a staff presentation on December 12th to provide a longer presentation on the MFTE policy changes, the new fee in lieu proposal, and the tax shift. As significant as these items are, the hearing should be after that presentation and discussion to inform the community adequately. What happens to the deferred tax concerns everyone and is of primary importance. It is disingenuous to have a hearing without all the information available.
If the city decides to keep the program, it should find a way to make it work for affordable housing; that is the priority. Numerous discussions, meetings, and policy documents have made that clear. The city has done an admirable job so far providing funds for housing. The MFTE, if implemented carefully and mindfully, is an opportunity to continue that good work without directly costing the taxpayers.
Editor's Note: To register to attend the city council meeting next Tuesday, November 14 at 6 p.m., click here.
Pat Cole - pcbiglife@gmail.com - is a former Olympia city council member. As a private citizen, he seeks to set a positive tone and lead informed discussion about local civic issues.
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AmVANDEMAN
Thank you Pat for shedding light on this issue. This is exactly what my neighbor Dan Leahy, may he rest in peace, argued for years. Why should the rest of us pay higher property taxes so that developers like Walker John can make more profits on market rate housing? The city council has based decisions to use this exemption on the simplistic, and factually incorrect, assumption that increasing the supply of market rate housing will somehow magically trickle down to increase the supply of more affordable housing. The lack of affordable housing can be traced back to policy choices to abandon public involvement in housing and financial markets in the 1980s, and it won't be fixed without a commitment to reel in the greed of the real estate industry. How about houses not bombs? This is a national issue requiring a national response, but Olympia could at least take a positive step in the right direction by rejecting further use of this tax subsidy to developers.
Saturday, November 11, 2023 Report this
KarenM
Would the developers who used this subsidy have built the projects anyway? We won't know that since they are happy to take the help. This tax shift hurts low income people who own their homes by increasing their taxes. A landlord who has an increase in taxes will pass that along as a rent increase. If this incentive was targeted at assuring an increase in low income housing units, it might have some merit. But it is not doing that. The Council should adjust this program to require the housing units be low income, or some portion of them be low income, for the life of the project.
Saturday, November 11, 2023 Report this
BobJacobs
It has never been shown whether the multi-family tax exemption program (MFTE) leads to more housing being constructed than would have been constructed without it. The state (JLARC) attempted to answer this question a few years ago, but could not, as I understand it because the participating cities and the responsible state agency have not enforced the reporting requirements in the law. Hmmm. So our state and local officials, hell-bent on shoveling out benefits to wealthy developers, have made sure that we can't uncover the scam -- no data.
There is good reason to believe that the MFTE program does NOT produce more housing. It lies in the valuation of land in the development process. I have never seen any public officials examine that phenomenon, though it is central to this issue.
Meantime, state and local officials are engaging in the Big Lie -- stating over and over that the MFTE program is effective.
What we do know is that ordinary taxpayers are subsidizing wealthy developers and their wealthy investors.
And we should certainly be skeptical at the assertion that developers won't develop without government bribes.
Bob Jacobs
Sunday, November 12, 2023 Report this
Yeti1981
MFTE programs allow for the several hundred smaller and local developers to have the opportunity to participate in their local market. Construction projects have carrying costs. Most local developers must carry a loan to get a project off the ground. Programs like the MFTE make that a plausible scenario and allows more projects to "pencil." If less projects are able to pencil, less housing will get built. That means less options for folks at every level. Meaning there's less upward mobility in the market. For example, my exact scenario is that I am sitting in a starter home that I can currently afford, but would c3ertainly consider moving up and into my forever home if it were more affordable. Unfortunately, the limited supply is contributing to the rising cost of housing (among other market forces) and I find it more plausible to sit in my home and not make it available to someone else just getting started. Also, forcing less projects to pencil, means that only the big corporate entities and those who can actually afford to float the cost will remain in the game. And, on the concerns about the taxes being passed on, that is how it works. Every added cost to a project is passed on to the public, regardless of the feel good narrative around "growth paying for growth." And every $1k in added cost translates to around $4k Washington families not being able to afford a home. In Thurston County, that means about 23% of the general public can actually afford a median priced home.
Monday, November 13, 2023 Report this
Southsoundguy
Abolish zoning, end democratic control of land
Monday, November 13, 2023 Report this