Mayor proposes expansion of affordable housing tax exemption program

Today Mayor Ed Murray introduced legislation that renews and expands the existing Multifamily Tax Exemption (MFTE). The proposal encourages family-sized units in new buildings and requires more affordable housing to be built. It also expands the MFTE to more areas of Seattle.

“We must ensure that there are affordable homes for people looking to raise families in walkable, mixed-income neighborhoods near transit and job centers,” said Mayor Murray. “Renewing and expanding the MFTE program will construct more affordable housing for working families. This is a smart program that saves families hundreds of dollars each month and brings us closer to creating 20,000 more affordable units in Seattle over the next decade.”

The proposal would increase the supply of affordable units through two specific changes to the current MFTE program. The first would require all new multifamily buildings to designate 25 percent (up from 20 percent) of their units as affordable. The second change would encourage the construction of family-sized units by allowing developers to instead designate 20 percent of their building affordable if they construct four or more two-bedroom units.

The program has achieved significant savings for renters over the years. A tenant, on average, renting a MFTE unit saves $400 a month for a studio, $500 a month for a one-bedroom, and $600 on a two-bedroom unit. For example, a two-bedroom unit costs $2,133 per month at the market rate, while a MFTE unit of the same size costs $1,539 per month.

The proposal would keep income restrictions measured by Area Median Income (AMI) in place. The restriction for residents applying for the MFTE eligible units is 40 percent AMI for a SEDUs, 65 percent AMI for studios, 75 percent for one-bedrooms, 85 percent AMI for two-bedrooms, and 90 percent AMI for a three-bedroom units. Income and rent limits can be found here.

The recommendation comes from the Mayor and City Council’s 28-member Housing Affordability and Livability Agenda (HALA) advisory committee. The MFTE’s goal is to create affordable rents for families in buildings that otherwise would be unaffordable and market-rate only.

“By expanding the MFTE program, the City is positioned to partner effectively with developers to create affordable homes for the low and modest-wage workers our community relies on,” said Steve Walker, Director of the Seattle Office of Housing. “It is a critical tool that complements the Office of Housing’s other investments in building affordable homes for our lowest-income residents.”

The MFTE program currently in place is set to expire in 2016. The proposal removes the sunset expiration provision, allowing the MFTE to become a permanent program.

“I work at least 60 hours a week in order to provide a great home for my young daughter,” said Clarissa Jarem, a teacher who rents in the University District. “My building participates in this program, giving me the peace of mind to know that my rent isn’t going to go up. I can raise my daughter knowing that I can budget for rent and keep our home for years to come.”

“The existing MFTE program has been an effective tool for creating high-quality affordable housing in some of Seattle’s most desirable neighborhoods,” said Security Properties President Tim Overland. “We’re encouraged by the Mayor’s support of MFTE as a proven program that successfully helps address our city’s affordable housing challenges.”

Currently, the MFTE is available in specific areas in the city. The proposal would expand the MFTE to all zones where multifamily buildings can be built, creating a tool to develop affordable housing where growth is already occurring.

About 40 percent of eligible projects participate in the MFTE today. Many of the households currently living in the MFTE units today earn under $45,000 per year. Currently there are 1,981 affordable units in market-rate buildings in the program, with 1,918 affordable units coming online in the near future.

In July, the HALA advisory committee delivered to the mayor a series of recommendations after 10 months of work. The consensus-driven proposal was crafted by affordable housing advocates, community stakeholders, developers and housing experts appointed by the mayor and Seattle City Council in September of 2014. The text of today’s legislation can be found here.