Multifamily Housing Tax Exemption [MFTE] Update

The City Council adoped the ordinance on 3/15/04:

• Seattle Times article (3/16/04)
  
  
• Seattle Times Guest column "A modest incentive for modest housing" ,3/15/04

Council Housing Committee adopted a modified version of the Multifamily Tax Exemption Program that includes the Madison corridor.

• City Council Press release
  
  
• Seattle PI article (3/3/04):"Committee lays out affordable-housing proposal"
  
  
• Seattle Times article (3/3/04): "Council panel OKs tax breaks for developers "
  
  
• Details, from Councilmember Rasmussen, of the revised proposal
  
  
• Map of the Central Area MFTE , now including the Madison-Miller area

Please note:

1. the Council Committee produced a "divided report": Councilmembers Licata and McIver were opposed to the plan, mainly because of the inclusion of South Lake Union
   
   
2. At the last minute the commercial area along Madison was included, as we had wished (thank you for your letters).
   
   
   
3. Councilmember Rasmussen changed the income level thresholds for the plan.
   
   
   
   
4. Please drop Councilmembers a note in favor of the program (contact details).

COUNCIL TO HOLD HEARING ON MULTIFAMILY HOUSING TAX EXEMPTION (MFTE) PROPOSAL

March 1 public hearing will allow comment on scope of program and affected neighborhoods

WHEN: Monday, March 1, 5:30 p.m.

WHERE: City Council Chambers, 2nd Floor, City Hall, 600 Fourth Avenue (entrance on Fifth Avenue)

Meetings in Council Chambers are cablecast live on Seattle Channel 21/28 and Webcast live at www.cityofseattle.net/council.

We have petitioned strongly in the past [see below] to get the Madison Corridor included in the Property Tax Exemption Program for Multifamily Housing. It's not one of the areas that City Council is proposing: please write to the Committee members and urge them to include our area (or come and testify on March 1st):

Committee Members:
Tom Rasmussen, Chair
Jan Drago, Vice Chair
Richard J. McIver, Member
Peter Steinbrueck, Alternate

Andrew's concerns, in brief:

• In the prpoosed ordinace City Council only seems to want to fund affordable housing in areas where the investment will also stimulate development (i.e. get two benefits for the investment).
  
  
• Such plans fail to allow for rapidly developing neighborhoods like ours. The redevelopment of our area will displace many people on limited incomes and will make rents unaffordable for many others.
  
  
• One could argue that in areas where development needs to be stimulated, market rate rents are probably still affordable. It is redeveloping areas like ours, with much new expensive market rate housing, where affordable housing is really needed.
  
  
• Our neighborhood is on many transit lines with easy access to U-Dub and downtown and passable access to Lake Union, and hence is an ideal place for lower income people in many service industries to live.
  
  
• I therefore urge City Council to include us in the MFTE. I appreciate the desire to link development incentives with the MFTE, but see nothing in the proposed ordinance REQUIRING such linkage.
  
  
• It is critical to act now, before complete market rate development of the area removes the possibility of preserving our jewel of a mixed income community

Text of the proposed ordinance

Letter sent to Housing Committee by Andrew

Correspondence between Andrew, Office of Housing and Councilmember Rasmussen

Capitol Hill Housing Improvement Program's testimony

Ann Donovan (Capitol Hill Community Council) <ann@elephantsandants.com> notes:

FYI - The multi-family tax exemption is up for renewal, this program provides an incentive to developers to build lower-income housing units in exchange for a tax break for 10 years. After the 10 years are up the units may convert to market-rate. No developers took advantage of the program last time around due to it not being a profitable arrangement, the percentages didn't make financial sense for the developer. There is a meeting this Friday, Feb 20 to look at renewing the program and I understand that Council is looking at all aspect of the program for changes. The proposal so far from the Office of Housing is to expand the number of neighborhoods included in the program and to change the percentages as well.

Affordable Housing in Miller Park?

The multi-family part of our neighborhood (zoned L3, and now L4) bounded by John/Thomas, Olive and 23rd) is experiencing tremendous growth, principally upper-income condominiums, townhouses and zero-lot houses.

CHHIP (the Capitol Hill Housing Improvement Program) owns several mid-sized low-income apartment buildings in our neighborhood, and is our major landowner. Their properties are extremely well managed, are never a problem, and will be here essentially for ever.

Fast-forward 20 years in your mind and what will you see? A multi-family neighborhood that is extremely polarized: low-income housing, high-end condominiums and nothing in between. Doesn't sound like a recipe for peace and harmony, does it?

So, what should we do? Clearly we should try and find ways to keep "low to middle" income people/families in our neighborhood. CHHIP normally houses those with 0-50% of median income (see http://www.cityofseattle.net/planning/PDA/PDA-CHHIP.htm).

(It seems to me that) We need to work on filling in the gap between 50% and 80% of median!

The Property Tax Exemption program for Multifamily Housing: a good match for our neighborhood?

Details of the program

Here's how we lobbied in 2001 for the Tax Exempt Program to be extended to our neighborhood.

(Summer 2001) Office of Housing recommends waiting till the New Year

BUT (March 2002) they decide that the Tax Exempt Program won't work in our neighborhood:

Andrew writes to City Council to ask for help.

December 2003: City Council proposes to extend the Property Tax Exemption Program to several neighborhoods, but NOT to Miller Park:

A public hearing on the proposed legislation and designation of residential target areas is scheduled before the City Council's Housing, Human Services and Community Development Committee on Tuesday, December 16, 2003 at 10:00AM in the City Council Chamber. For those unable to attend the public hearing, comments will be accepted through Monday, December 19, 2003 by 5:00 pm. Please send comments to
eric.parsons@seattle.gov or:

Councilmember Richard J. McIver
Seattle City Council
City Hall
600 Fourth Avenue
Seattle, WA 98104-1860

Here are Details of the proposed bill. (and of the corresponding bill passed in 2000) and of next week's Housing Committee meeting, during which the Public Hearing will be held.

Andrew wrote to Rick Hooper Office of Housing, asking why Miller Park was not included (considering the strong case we had made in 2001) and received this reply:

o Madison Miller was not included because we could not fit it into our criteria, which were behind in growth targets, showing signs of economic distress, or area likely to attract siginificant numbers of new jobs where jobs/housing balance is a key strategy---Capitol Hill is behind in
meeting growth targets (20% of target so far) and Madison Miller is well ahead (60% of target so far).

o Hard to say how Council would react to adding Madison Miller---when we talked to Councilmembers several months ago about the program we got the sense that we had stretched our list about as far as we could go---we are proposing 17 target areas compared to the 11 under the previous program. You would need to indicate how you think Madison Miller would fit the criteria.

SO, why should Madison-Miller be part of the program?

The ordinance has two goals:

a) to stimulate growth where there is none

b) to provide affordable housing.

City Council seeks, I believe, to implement the progam in areas which meet both of those goals.

The flaw in their thinking is that in rapidly developing areas, such as ours, new market-rate developments are both producing housing too expensive for many residents and displacing long-term, moderate income, residents from their homes.

Given the rapid (and accelerating) redevelopment of the East Madison Street area, I believe it is essential to convince City Council that it is essential to fund more affordable housing in our neighborhood now, before the whole neighborhood is redeveloped with upper-income apartments and condos.

From the proposed ordinance: (italics by Andrew)

Section 5.73.010 Purpose

A. The purposes of this chapter are:

1. To encourage more multifamily housing opportunities within the City;

2. To stimulate the construction of new multifamily housing and the rehabilitation of existing vacant and underutilized buildings for multifamily housing;

3. To increase the supply of multifamily housing opportunities within the City for low and moderate income households;

Our area is producing lots of new housing on Madison, but it's almost all market-rate, not affordable housing.

Section 5.73.030 Residential Targeted Areas -- Criteria -- Designation

A. Following notice and public hearing as prescribed in RCW 84.14.040, the Council may designate one or more residential targeted areas upon
a finding by the Council in its sole discretion that the residential targeted area meets the following criteria:

1. The residential targeted area is within an urban village;

2. The residential targeted area lacks sufficient available, desirable and convenient residential housing to meet the needs of the
public who would be likely to live in the urban village if desirable, attractive and livable residences were available; and

3. Providing additional housing opportunity in the residential targeted area will assist in achieving one or more of the following purposes:

(b) stimulate the construction of new affordable multifamily housing; or

(we're getting market-rate housing, NOT affordable housing)

Miller Park endorsed the housing levy!

The Housing Levy that was approved by the September 17 2002 ballot (here are the $$ figures) included a section which can provide housing in the 50 - 80% median income range that we need in our neighborhood. It's the:

Neighborhood Housing Opportunity Program

* Projects with mixed-income, mixed-use emphasis.
* Target funding for projects that are key to achieving a neighborhood's larger community development objectives.
* At least 25% of program funding for units serving people with income at or below 30% of area median income.
* Remaining affordable to 80% of median.

This section of the levy targets $7,200,000 (of the $86,000,000) and promises to provide 196 housing units (of the ~2,000 promised by the levy).

Here's an article from supporters of the levy and the City Council's page about the levy.

A letter from Chuck Weinstock (director of CHHIP) asked for endorsement of the levy. I (and several other Capitol Hill activists) have personally endorsed the levy.. E-mail Chck Weinstock with any questions about the levy.

I polled the Miller neighborhood by E-mail and received only positive responses.

The Miller Park Neighborhood Association "officially" endorsed the housing levy.

Here are some notes of support from Miller Park neighbors, and a reply/clarification from Chuck Weinstock

Chuck also sent these further thoughts and details on the proposed levy. Seattle Times columnist Jerry Large ruminates about why Seattle supports housing levies.

Mayor's Affordable Housing Levy to provide housing for up to 80% of median income.

City Council seems not to be supporting the Property Tax Exemption Program. Councilmember Conlin writes:

I agree with you that this is a priority. The core problem with the tax exemption is that if you design it loosely (as it was first proposed), it is not necessarily effective in producing new units, while if you draw it tightly (as it is in its second incarnation), no one uses it. Whether we can design something in between is uncertain.

I will recommend to Councilmember Nicastro that we look at other tools that might be helpful to Madison-Miller, and very much appreciate your continued dedication and commitment on this issue.

Chuck Weinstock ( CHHIP's director) wrote to point out that some aspects of the Mayor's proposed Housing Levy do offer the possibility of funding the mid-income housing that we need, and urges us to support the levy. The Neighborhood Housing Opportunity Program (see this chart) seems purpose built to preserve a range of housing options, as we need to do in our area.

The Housing Development Consortium (a Seattle-King County trade association for the diversity of nonprofit housing developers) has these views of the proposed levy.

Several City Councilmembers have proposed variations on the Housing levy (Seattle Times: [May 3rd, 2002]: Drago proposes trimmer, 8-year levy for housing; council to debate Monday.). This City Council webpage has links to all the information and numbers. This chart compares the various plans. See the Housing Levy home page for more details.

Assorted affordable housing links and details

Feb 2002 Updates from the Office of Housing

What's "affordable" in Seattle?

Here's what "median income" is in Seattle (from a HUD site)

What others think about the Seattle housing policy

An update from the Office of Housing(May 2001)

Let's postpone our efforts till the New Year (Andrew meets with Office of Housing, July 2002)

An interesting idea: Inclusionary Zoning

Housing in crisis mode for millions (Seattle Times, June 17, 2001)

You don't have to look far for a 'housing crisis' (Seattle Times, July 29, 2001)

A solution we hoped might work for us (and still might):

The City's "Property Tax Exemption program for Multifamily Housing"

Here, from the Department of Housing website, are details of the Property tax exemption program.

In brief:

(Note that the program is entirely voluntary: no developer will be forced to use it!)

The property developer agrees to make a certain fraction of the rental units in his/her development affordable to low-income renters. In exchange he/she pays no property taxes on the entire residential part of the development. The agreement runs for 10 years.

The program at present does not apply to condominiums: the City is hoping to change the State law this year to let it do so.

The program has been in operation for a couple of years: it was extended last year to include the Capitol Hill and Pike-Pine neighborhoods.

Typically the program requires that the developer make 25% of the units affordable to people earning 80% of median income. The Pike-Pine plan mandated 40% of the units for people earning 60% of median income: there are concerns that developers have been scared away. I suggest that in our area we ask that 20% of the units be affordable to those earning 60% of median income.

Here's a Daily Journal of Commerce article about the expansion of the program to Capitol Hill and Rainier Beach
 

How's the program done so far?

Here's the City's report on the first year of the program (1999) together with Attachment  A, Attachment B and Attachment C to the report.

What we did to lobby for the program:

• Here's the letter I submitted to the Office of Housing (and presented to Mayor Schell during his April 24 2001 visit to Madison), requesting that the Tax Exemption Program be applied to the Madison-Miller Urban Village.
  
  
• The City Council decides whether to grant our request. Here's my letter to them, in support of the program.
  
  
• Councilmember Conlin's reply. Please consider writing to the council.
  
  
• A letter of support from the Central Area District Council (who are responsible for the implementation of the Central Area Neighborhood Plan), and one from the East District Council.
  
  
• Letter of support from the Hutchinson Cancer Center, a major local employer (and where Andrew works)
  
  
• Back to details of the Property Tax Exemption Program for Multifamily Housing.
  
  
• An worrisome interim report on our application: the problem is that they make decisions based on the present state of the neighborhood. Redevelopment will raise rents: we could reapply then but the building boom will be over.
  
• Andrew meets with the Office of Housing: we decide to postpone our presentation to City Council till the New Year.
  
• Discouraged by the Office of Housing's report on the performance of the Tax Exemption Program, we write to City Council for guidance.

Up-to date documents from the Office of Housing

(recent E-mail from Office of Housing)

I'm attaching the updated program description for the MF Property Tax Exemption Program, and tables with income limits and illustrative rent levels for 2001. I'll have some brochures at the meeting.

I'm expecting Dahe Good to attend the meeting, and she will be able to answer questions about programs for housing bonuses and transfer of development rights.

Janeen Smith
Program Manager
Seattle Office of Housing
618 Second Avenue, 8th Floor
Seattle, WA 98104

July 31st 2001 meeting with Office of Housing

The Office of Housing invited me (Andrew) to meet with them to discuss our proposal to join the Property Tax Exemption program. I met with Janeen Smith , Program Manager, Seattle Office of Housing, Dahe Good and
Rick Hooper (both from the Office of Housing) and Traci Ratzliff (Mayor's Office).

They presented a summary of their research and concerns, together with reports on how rents have been increasing in various neighborhoods, and on rent levels in nearby neighborhoods in 2001.

(Source of information in the spreadsheets is Dupre + Scott. Market areas surveyed by Dupre + Scott are larger than the City's designated urban villages, and boundaries have some inconsistencies. Madison-Miller lies half in the Central Area market, and half in the Capitol Hill market.)

They also presented data on income levels that would qualify for assistance at the 60 or 80% of median levels.

They were very skeptical that the City Council would favor our proposal at present:

• we don't need the program to stimulate growth, only for affordability
• present rents in the neighborhood are (just) affordable at 60 - 80% of median
• City Council is probably too busy with budget matters to hear our request at present.

They suggested that we wait until the New Year, when the Office of Housing will be able to present requests from several neighborhoods to join the program. I agreed to do so.

The flaw in the argument (as I see it) is that we are ineligible for the program because present rents are (just) affordable for our target group ( 60 - 80% of median income). It's clear that much new housing is coming to Madison: rents will go up, we'll become eligible for the program, but the building boom will be over, so the program will do us no good.

 A Seattle Times article by David Brewster on Seattle's missed affordable housing opportunities led to this (3/30/00) letter to the editor from the Director of the City Department of Housing:

Affordable housing

I want to compliment David Brewster's column urging more action to promote housing in Seattle ("Housing crisis demands politicians with courage," March 17).

We wish Brewster had contacted the Office of Housing to learn more about city initiatives undertaken under Mayor Paul Schell to develop solutions.

Last year, the city expanded funding and doubled production of affordable rental housing to 595 units, including 100 apartments for homeless persons and 248 units for families with children.

Surplus city properties have been approved for 423 housing units, including artists' living/work spaces, assisted living, home ownership and a co-housing complex.

Seattle's Home Town Home Loan program provides loans with reduced fees and interest rates. Mayor Schell and Councilman Peter Steinbrueck have formed an Affordable Housing Alliance of interested housing experts to build consensus on new initiatives.

We concur with Brewster that now is the time for bold moves, and we will work with political and community leaders to take Seattle's housing efforts to a higher level.
Cynthia Parker, Director, Office of Housing, Seattle
 

Inclusionary Zoning

It's a form of zoning that requires, in any large building project (typically 50 units or more), the provision of a certain fraction (typically 15%) of affordable housing. As a result the developers are allowed to build to a higher density than the building code would allow. So we all pay for the affordable housing by accepting denser housing but nobody shells out $$ for the housing. Invented in suburban Maryland.

Here's a Seattle Times article on Affordable Housing and "inclusionary zoning".
Details of the original Maryland ordinance is here and more details are here.  And here's a study showing that Inclusionary Zoning does not affect the values of neighboring houses.
 

Interested in getting this working in Seattle? E-mail me, or contact Councilmember Nicastro (note that several City officials have told me that it's forbidden by our State constitution.)