The Seattle City Council voted to expand a program that gives developers tax breaks for controlling the rents in about one-quarter of a building’s apartments.
There is an obscure form of rent control in Seattle that developers like, and the City Council voted Monday to expand it.
No, it’s not the citywide kind of cap on rents usually associated with the term, the kind that’s been banned by the state.
The council’s unanimous decision Monday was to expand a program that gives developers tax breaks in exchange for controlling rents in about one-quarter of a building so they’re affordable to people making roughly $20 per hour.
Called the Multifamily Tax Exemption (MFTE), the program is considered a valuable tool in trying to keep some Seattle housing affordable. Mayor Ed Murray’s Housing and Livability Agenda (HALA) committee endorsed the program earlier this year.
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“It’s a very good and solid piece to moving forward with the HALA recommendations,” Councilmember John Okamoto said.
MFTE gives developers 12-year property-tax breaks on new and rehabbed apartment buildings. In exchange, they agree to keep 25 percent of a building affordable to people who make about 75 percent of Seattle’s median income.
For a studio apartment, that translates to rent of $1,020 for a tenant making $41,000.
Scheduled to sunset this year, MFTE operated in 39 areas of Seattle, mostly urban centers and villages. Murray proposed expanding it to all multifamily zones and increasing the share of rent-controlled units from 20 to 25 percent of a building.
To encourage more family-sized units, Murray would leave the 20 percent requirement in place for developers who include four or more two-bedroom apartments in a building.
MFTE now “buys down” or saves about $400 a month for a studio and $500 a month for a one-bedroom, according to the mayor.
The City Auditor reported in 2012 that program oversight was lax and some developers skirted rules.
Office of Housing officials say standards are now stricter, compliance has been strengthened, and they’ve implemented most of the audit recommendations.
“I see a number of elements that have improved this program,” said Councilmember Nick Licata, a frequent critic of MFTE who asked for the audit.
Since its inception in 1998, city officials have said MFTE doesn’t tap the city’s budget because exempted taxes were shifted onto all other property owners in King County.
But when new Office of Housing officials started investigating the tax breaks in 2012 they found that the city did absorb the cost of some exemptions.
For 2015, the Office of Housing reports that program will cost $12 million in shifted and foregone taxes, with Seattle taking a $1.9 million hit in lost tax revenues. It will return about $10.5 million in rent discounts.
The owner of a $500,000 home in King County will pay an extra $8 in property taxes this year for MFTE, according to city officials.
“So we’re getting about 90 cents on the dollar back,” said Mike O’Brien, the council’s land-use chair. “That gets into the ‘well enough’ category for me.”
Murray proposed making the program permanent so it wouldn’t have to be periodically renewed by the council. But the council approved Licata’s amendment to require council approval again in four years. The council also approved another Licata amendment requiring an analysis of MFTE rents compared with market-rate apartments, aimed at assessing the program’s effectiveness.