Proposed legislation that would allow cities to give tax breaks to landlords for capping rents on some apartments at existing buildings has stalled in the state House due to opposition from Speaker Frank Chopp, a Seattle Democrat.
Back in January, Seattle Mayor Ed Murray stood with the mayors of Tukwila and Auburn outside a suburban apartment building to announce bipartisan support for state legislation intended to help solve the region’s housing-affordability woes.
The bill, which would allow cities to give tax breaks to landlords for capping rents on some apartments at their existing buildings, was sponsored by a Democrat from Seattle and a Republican from Auburn. It looked primed to sail through the Legislature.
That hasn’t happened. Though it passed the Senate last month, a crucial deadline came and went Friday with the legislation still stuck in the House Rules Committee.
Why? Because House Speaker Frank Chopp, D-Seattle, is against the proposal. Seattle and other cities shouldn’t be allowed to give tax breaks to for-profit property owners, according to the speaker, who says only nonprofit landlords should benefit.
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“Essentially, this bill would raise taxes on everybody to help for-profit property owners, who would only need to keep some units with lower rents for 15 years,” Chopp said in an interview this week. “It should be focused on nonprofit property owners, who would reduce rents and then keep them affordable permanently.”
The legislation cleared the House Finance Committee last month with an amendment backed by Chopp reserving the tax breaks exclusively for nonprofits.
Rep. Noel Frame, D-Seattle, who co-sponsored the proposal, voted for the amended bill only in order to keep the legislation alive, she said. Frame and allies such as Murray say for-profit landlords must be involved if the legislation is going to make a large impact.
The tax breaks were one of 65 strategies recommended last year by Murray’s Housing Affordability and Livability Advisory (HALA) Committee for helping Seattle add or preserve 20,000 units of affordable housing. The mayor has said the bill could result in 2,000 to 3,000 such units and its passage would be a major step toward his goal.
“We need as many tools in our toolbox as we can get,” Frame said this week. “When you’re talking about as many as 3,000 units in Seattle, this would be a great tool.”
The legislation’s proponents say the tax breaks would give landlords an alternative to selling or tearing down their older apartment buildings for redevelopment.
They could apply for a 15-year exemption from local property taxes by agreeing to reserve 25 percent of the apartments in their building for low-income households.
The rents would be kept affordable for families earning no more than 50 percent of the area median income in low-cost neighborhoods or 60 percent in high-cost neighborhoods — $36,000 or $43,000 for a two-person household in King County.
“Housing costs are rising rapidly,” said a letter last month to Chopp from The Seattle For Everyone Coalition, a group including nonprofit and for-profit housing developers, Service Employees International Union Local 775, the Sightline Institute and the Seattle Metropolitan Chamber of Commerce. “The (tax-breaks) legislation as passed by the Senate is an important, nimble and cost-effective tool for local governments to quickly address housing affordability and prevent displacement.”
The letter says limiting the bill to nonprofit landlords would make no sense because they already use other public money that requires them to keep rents low.
Jon Grant, a former head of the Tenants Union of Washington State and the only member of the HALA Committee who didn’t sign off on its recommendations, agrees with Chopp. He believes the legislation would produce fewer affordable units than Murray has claimed and wonders why a landlord would apply for a tax break rather than raising rents high enough to bring in the value of the exemption plus more.
“It’s not hard to get political support in Olympia for tax breaks, so the support for this bill doesn’t impress me,” Grant said, arguing that state lawmakers should instead devote their time and energy to directing more money into Washington’s Housing Trust Fund.
Sen. Joe Fain, R-Auburn, who co-sponsored the legislation in the Senate, said there’s a chance the original bill could be revived as part of a last-minute budget pact.
“I don’t know of any policy concerns holding up this bill,” he said. “The only person in the House with heartache about this legislation is the speaker, as far as I can tell.”