The Seattle City Council may set a $618 a month cap on rents for some tiny apartments built under a tax-exemption program.
These days, most Seattle apartments rent for at least $1,000 a month. Some are much pricier. But a bill under consideration by the City Council would establish a cap of about $600 a month for some of the city’s smallest rental homes.
The new cap would apply only to micro-apartments — which officials have rebranded as “small efficiency dwelling units” — priced to satisfy the terms of Seattle’s Multifamily Property Tax Exemption Program.
The program awards 12-year tax breaks to real-estate developers who reserve a percentage of units in a given project for lower-income households.
Developers now qualify for the program by setting aside 20 percent of the units in a project. When the units are studios, they must carry rents considered affordable for tenants earning no more than 65 percent of the area median income, or $40,170 a year.
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That pencils out to $1,004 a month for a single-person household. The cap is higher for larger apartments.
But micro-apartments are smaller and cheaper than studios. When the council passed a suite of new regulations on micro-apartment construction this past year, it defined them as homes with 220 to 400 square feet.
The pending council bill, sponsored by Councilmember Sally Clark, would require developers claiming multifamily tax exemptions to rent their set-aside units at rates affordable for tenants earning no more than just 40 percent of the median, or $24,720 a year.
That would result in a cap of $618 a month for a single-person household.
The bill also would, thanks to an amendment by Councilmember Nick Licata, require developers to reserve 25 percent of the units in a project, rather than 20 percent.
Clark, Licata and Councilmember Kshama Sawant voted the bill out of the council’s housing committee Thursday, and the full council will take it up Monday.
Developers have built dozens of micro-apartment projects in Seattle in the past few years and in many cases have claimed multifamily tax exemptions.
But because the tiny homes are now treated the same as studios, developers can snare tax breaks while renting the units for no less than $1,004 a month.
“They’ve been claiming the tax breaks, but the results haven’t benefitted enough people,” Licata said.
Roger Valdez, whose Smart Growth Seattle organization lobbies on behalf of builders for denser development, says the council members have it backward.
“What they’re trying to do is create more affordable housing at the lower levels of income, but what they’re actually going to do is make it economically unfeasible for developers to participate in the program, and they’ll get zero affordable units,” he said.
“The idea is that the builder gets an exemption greater than the deferred rent. If the rent deferred is more than the exemption, why would a builder do it?” Valdez added.
The council is working from a model, provided by the Seattle Office of Housing, that estimates the average rent for a small efficiency dwelling unit as $850 a month.
In a letter earlier this month asking Mayor Ed Murray to intervene in the debate, Valdez used as an example a project renting units for $1,400 a month. He says rents for the units are increasing because of the restrictions that the council approved last year.
The bill would not change how developers now use studios and one- and two-bedroom apartments to qualify for multifamily tax exemptions.
The council is planning to re-evaluate the entire multifamily tax-exemption program later this year, and a Murray task force on housing affordability is looking at it as well.