Seattle Mayor Ed Murray wants to expand the city’s Multifamily Tax Exemption (MFTE) that gives developers an incentive to designate units in residential buildings for low- and moderate-income renters. Currently, to qualify for the program’s tax credits, developers must set aside one-fifth of available units, and the MFTE itself requires periodic review and renewal. Murray wants to increase the proportion of set-aside housing to one-quarter of all apartments in a building, and make the program permanent.
According to the Seattle Times:
MFTE gives developers a 12-year break on property taxes — for new or rehabbed buildings, not the underlying land. In exchange they agree to set aside 20 percent of their apartments for tenants who make about 75 percent of Seattle-area median income. For a single person that’s about $45,000 a year; for a two-person household about $50,000.
Rents are controlled so eligible tenants don’t pay more than one-third of their gross income for housing and utilities. That translates to studio-apartment rents of $1,004 and one-bedroom rents of $1,323.
“This is a 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,” Murray said in a statement Thursday.
MFTE has its critics. According to the Times, “the City Auditor reported in 2012 that program oversight was lax and some developers skirted rules. The auditor recommended 19 improvements to address findings that some developers weren’t setting aside the required number of rent-restricted apartments, some rents were too high, and some tenants in subsidized apartments earned more than they should to qualify.”
Since that report, a new team was put in place to run the program, according to housing officials who say that the city has implemented 14 of the 19 audit recommendations. A more recent MFTE problem was revealed when an investigation found evidence that some buildings were discriminating against minorities during the rental application process. (Some building owners agreed to settlements but didn’t admit guilt.)
When the MFTE program started in 1998, it was mostly used by nonprofit developers, but with increased demand for housing in Seattle, for-profit developers jumped on the bandwagon.
“I’d rather see the for-profit housing developers contribute through inclusionary zoning and linkage fees than MFTE because those alternatives result in more permanent housing,” Nick Licata, a council member skeptical of MFTE, told the Times.
This summer, Murray’s administration announced affordable housing plans that it later amended after there was an uproar over suggested zoning changes around single-family housing.
The current MFTE sunsets in 2016, and a council committee is set to review the program at a meeting later this month.
Jenn Stanley is a freelance journalist, essayist and independent producer living in Chicago. She has an M.S. from the Medill School of Journalism at Northwestern University.