By Erica C. Barnett
The city is getting ready to overhaul a program that provides tax breaks to developers who agree to keep 25 percent of their apartments affordable for 12 years (or 20 percent if 8 percent of the units are two-bedroom), known as the Multifamily Tax Exemption program (MFTE). It’s the city’s main program for providing housing affordable to moderate-income people; as of November 2024, according to a University of Washington evaluation of the program, there were nearly 7,000 income-restricted units in Seattle as a direct result of MFTE tax breaks
The MFTE program has been overhauled several times in its 27-year existence; the current program, known as “Program 6,” has been in place since 2019. In that update, the City Council imposed a cap on rent increases of 4.5 percent a year and reduced the maximum income for eligibility, opening up the program for lower-income renters.
While those changes made more people eligible for MFTE units, they also made developers less likely to participate in the voluntary program. As construction costs ballooned starting in 2019, market rents in Seattle softened, making MFTE units less competitive with the market–and the program less appealing to developers who might otherwise participate in it.
According to the UW study, “The City of Seattle has a difficult responsibility to calibrate the relationship between the costs of the program (benefit to developers) and the public benefits it delivers (more affordable housing). As the City pushes for greater public benefits, the program becomes less attractive to developers. This is the central tension.”
The proposed update, known as “Revised Program 7” to distinguish it from an earlier proposal that came out of the city’s Office of Housing, would set new (generally higher) rent and income limits for most of the affordable units created under the MFTE program, adjusting eligibility standards so that the program would be geared toward people earning between 40 percent of Seattle’s median income for the smallest units to 90 percent—about $113,000 for a two-person household—for two-bedrooms.
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Updating the tax-break program has been fairly uncontroversial so far—somewhat surprisingly so, given some council members’ recent opposition to other proposals that would encourage new housing, such as density increases in the comprehensive plan, on the grounds that they aren’t tailored to very low-income people.
It may help that the council’s most vocal opponent of such measures, Cathy Moore, is off the council and no longer chairs the Housing and Human Services Committee, which discussed the legislation last week. During public comment at last week’s housing and human services committee, just one speaker vociferously opposed the proposed changes to the program: Longtime Phinney Ridge neighborhood activist Irene Wall, who argued that MFTE was “a failed program” that served too few people for the amount it costs homeowners like herself in additional taxes.
“The Office of Housing spent months trying to figure out what to do with this program,” Wall said. “They asked tenants if they like their rent reductions in their new buildings, but there was no outreach to any of the taxpayers who are funding this graft. Why are the taxpayers not considered equal stakeholders in this scheme?”
Overall, a median homeowner in Seattle spends $145 a year in property taxes to offset the taxes developers who participate in the program don’t pay in exchange for providing affordable housing.
Council President Sara Nelson, who has frequently beat the drum for more “workforce” housing, called MFTE “a program that’s extremely important because it it makes it easier to build housing across the board.”
The proposal would also replace a 4.5 percent annual cap on rent increases with the statewide rent cap (which doesn’t currently apply to MFTE buildings) of 7 percent plus inflation or 10 percent, whichever is smaller. Separate from the legislation, Office of Housing director Maiko Winkler-Chin told the council that OH is simplifying the income verification process for renters, which can require prospective tenants to fill out a lengthy, complex application for each MFTE unit they apply to rent.
“The city doesn’t have any program that supports workforce housing besides MFTE, really, for rental units,” Nelson said. “And that, I would say, is the greatest need because of the sheer numbers of people that fall within the category.”
The council, which is currently on its annual two-week summer recess, has until September 3 to propose amendments—for example, adjusting the maximum income levels so that higher-income renters are ineligible for the program—in advance of the next meeting to discuss the program on September 10.
The fortunate homeowners (in all likelihood) in the comments are opposed to a program that both promotes development and keeps some, albeit not enough, housing units relatively affordable. Unsurprisingly. These masquerading centrists oppose anything that’s a threat their bottom line and the inexorable rise of their property values, to which they greedily feel they’re entitled.
According to the UW Report on the MFTE program “The vast majority (85%) of tenants in income-restricted MFTE units with income documentation are housing cost burdened, defined as spending 30% or more of annual income on housing. Nearly a quarter are severely housing cost burdened, defined as spending 50% or more of annual income on housing.”
The P7 reauthorization will make the situation worse. Also note that today Zillow lists 10,933 Rentals Available in Seattle of which 2,935 are under $1600/month. Some of these may be MFTE units, but the private market can produce affordable housing. Ask the developers to show you what return they are promising their private equity investors. There’s a clue as to why housing is expensive. It has nothing to do with “greedy” homeowners who pay for this secret housing levy without a chance to vote for it.
We do not need to subsidize apartments for people making this kind of money. If my tax hours are going to subsidize rents, I want them to be for people making $30,000-$50,000 a year or far less. This is a perversely corrupt idea for what we should be doing to create real “workforce” housing.
That’s Seattle Housing Authority territory. I strongly suspect we don’t invest enough to meet the need there, but that’s the better vehicle for helping those folks rather than this type of program.
This revision is a gift to developers from the Mayor’s office!
It will raise rents, eliminate the requirements to provide the same size and quality of units, reduce funding for compliance monitoring. Let’s see what the Office of Housing proposed.
If it is so burdensome why did so many developers sign up ? Why are they trying to starve the Office of Housing.
These people do not maintain their buildings. They squeeze every drop of money at residents expense. File a grievance and they are mute. You can’t get a simple answer like “Who’s taking care of this and how far along are you?” “Can I get copies of the deposition you took?(from me) My own deposition. It’s too damning is why. Bad faith is the only way they deal with residents. I have documented it for 4 years and it’s really bad, system wide abuse of employees and tenants alike. They are retaliation happy and hope to make people go away and it’s works! Not me…I am going to make them famous and they are terrified of that.
What Irene Said! Irene understands exactly what is going on and calls the city on it. I’m not interested in paying taxes so developers can make bank on non-workforce housing. Also, ERICA – did you leave the word FEW out of Irene’s statement? “Longtime Phinney Ridge neighborhood activist Irene Wall, who argued that MFTE was “a failed program” that served too people for the amount it costs homeowners like herself in additional taxes.”
Wall speakers to householders and increased taxes. Property taxes are increased for all non-MFTE parcels; they include low income renters whose rents will probably be increased by their landlords.
I’m with Ms. Wall. The graft and corruption are breathtaking. We are not getting what we need and pay for and now the idea is to increase costs to folks already comparatively economically disadvantaged? Wrong!