Safeguarding Washington’s Housing Affordability: The Critical Need to Renew the Multi-Family Tax Exemption Program
As an industry veteran with a decade immersed in the complexities of urban development and housing policy, I’ve witnessed firsthand the escalating challenges of ensuring accessible and affordable living spaces across our nation. Today, a critical juncture looms for Washington State, one that demands immediate attention and proactive intervention. The looming expiration of the Multi-Family Tax Exemption (MFTE) program presents a significant threat, potentially unraveling years of progress in providing stable housing for thousands of low and moderate-income families. This isn’t just about numbers; it’s about preserving communities, fostering economic stability, and preventing a cascading crisis that could ripple through our cities for years to come.
The core of the issue lies in a vital tax incentive designed to encourage the development of mixed-income housing. The MFTE program, lauded by the Obama White House as a national benchmark, offers multifamily housing developers a crucial tax abatement in exchange for setting aside a percentage of units for renters earning below a certain income threshold. This mechanism has been instrumental in creating vibrant, diverse neighborhoods where individuals and families from various socioeconomic backgrounds can coexist and thrive. However, as this program’s eligibility window closes for a substantial number of existing projects in the coming years, we face a stark reality: over 2,000 units, many of which currently serve as affordable housing pillars, risk becoming market-rate.
This potential shift is not a hypothetical concern; it’s a tangible threat that could see rents surge by as much as 100% in affected areas. For the thousands of families currently benefiting from the MFTE, this means not just increased financial strain, but a very real risk of displacement. Imagine a single parent working tirelessly to provide for their children, suddenly facing a doubling of their rent. The ripple effects of such a shock are profound, impacting their ability to afford childcare, groceries, transportation, and ultimately, their very sense of security.
The geographical impact of this program’s expiration is also noteworthy. While Seattle is projected to lose over 400 MFTE-supported units, communities like Spokane, Moses Lake, Vancouver, Tacoma, and Olympia will also bear the brunt of this policy void. This isn’t solely a metropolitan issue; it’s a statewide challenge that demands a united response. The loss of these affordable units in smaller cities, where housing costs may already be a significant burden, could be even more devastating, exacerbating existing disparities.
Fortunately, there is a legislative lifeline. A bill, SB 5363, sponsored by State Senator Guy Palumbo, is currently making its way through the Washington State Legislature. This crucial piece of legislation aims to empower cities to extend the MFTE exemption for an additional 12 years for existing, qualifying properties. This extension is not merely a bureaucratic tweak; it’s a strategic move to preserve vital affordable housing stock and provide much-needed certainty for residents. The broad coalition of support for SB 5363, which includes influential entities like Microsoft, the Association of Washington Cities, Washington REALTORS, the Seattle Metro Chamber of Commerce, and Tech 4 Housing, underscores the widespread recognition of this program’s importance. The bill’s passage through the Senate Housing Committee with minimal opposition is a positive indicator, and its momentum towards the Senate Ways & Means Committee suggests a growing consensus on the urgency of this matter.
While 2,000 units might not sound like a monumental figure in the grand scheme of a state’s housing inventory, the concentrated impact on vulnerable populations is immense. Consider the economic fallout if these units were all concentrated in a single city like Seattle. A sudden shift from units serving households at 80% of the Area Median Income (AMI) to prevailing market rates could translate into a monthly rent increase of approximately $325 per household. Projecting this across all 2,000 potentially affected units reveals a staggering annual reduction of $7.8 million in potential discretionary spending within the regional economy. This lost income isn’t just disappearing into the ether; it represents reduced spending at local businesses, diminished savings for education or emergencies, and a general dampening of economic vitality.
The link between housing instability and homelessness is well-documented. A recent eviction report from Seattle highlighted that forced relocation due to significant rent increases is a leading contributor to homelessness. The escalating housing costs in King County, where one-bedroom apartment rents climbed 53% between 2012 and 2017 to an average of $1,580 per month, paint a grim picture. Research from Zillow suggests a direct correlation: for every 5% increase in rent, approximately 258 individuals in Seattle face homelessness. If 2,000 families were to be displaced by rising rents and require even a brief stint in emergency homeless shelters, the cost to the region could soar to an estimated $46,000 per night, according to Lewin Group estimates. This illustrates that preventing displacement through affordable housing preservation is not only a social imperative but also a fiscally responsible approach.
Washington State is grappling with a severe housing crisis, characterized by an estimated deficit of 225,000 housing units, according to Up for Growth’s comprehensive report on housing underproduction. This systemic shortage fuels a cascade of negative consequences: severe cost-burdening for households, a decline in homeownership rates, increased traffic congestion due to longer commutes, detrimental environmental impacts, heightened gentrification and displacement, and a disturbing rise in housing instability and homelessness. The data is stark: in every county across Washington, at least 25% of households struggle with housing cost burdening, meaning they spend more than 30% of their income on housing. In the majority of counties, this figure exceeds 30%. These burdens disproportionately affect those with the lowest incomes. Even households earning between 51% and 80% of AMI in Washington State experience cost burdening at a rate of 44%. Addressing this crisis requires a multi-pronged approach that not only focuses on increasing overall housing supply but also on strategically preserving and expanding our existing affordable housing tools.
The MFTE program represents one of the most effective and cost-efficient instruments available to cities for supporting the production and preservation of affordable housing. Its success lies in its ability to incentivize private development while ensuring that a portion of the housing remains accessible to a broader range of income levels. Without the renewal of the MFTE, Washington State risks a significant step backward in its efforts to combat the housing affordability crisis. This isn’t about propping up a failing program; it’s about safeguarding a proven mechanism that underpins the stability of countless families and contributes to the economic health of our communities.
The economic implications of housing affordability extend far beyond individual households. When families are forced to dedicate an excessive portion of their income to rent, discretionary spending is curtailed. This directly impacts local businesses, reduces tax revenues, and stifles economic growth. Furthermore, housing instability can lead to decreased productivity, poorer health outcomes, and increased demand for social services, all of which place a greater strain on public resources. Investing in affordable housing preservation, through programs like the MFTE, is therefore a sound economic strategy that yields long-term benefits for the entire state.
The concept of “housing underproduction” is a critical lens through which to view this crisis. For years, we have not built enough housing to keep pace with population growth and demand, particularly at the entry-level and affordable segments of the market. This imbalance inevitably drives up prices for everyone, making it increasingly difficult for essential workers, young families, and vulnerable populations to find stable housing. The MFTE program, by encouraging the development of mixed-income communities, helps to alleviate some of this pressure. It fosters diverse neighborhoods, reduces segregation, and ensures that individuals who contribute to our communities can also afford to live in them.
The debate surrounding housing policy often gets polarized, with debates centering on issues like zoning reform, density bonuses, and construction costs. While these are all important components of a comprehensive housing strategy, it is equally crucial to focus on preserving the affordable housing we already have. The MFTE program is a prime example of an existing solution that is at risk. Its expiration would represent a loss of valuable affordable units that would be incredibly expensive, if not impossible, to replace through new construction alone. The cost-effectiveness of preserving existing affordable housing through tax incentives like the MFTE cannot be overstated.
Looking ahead, the long-term vision for Washington State’s housing landscape must include a commitment to sustained affordability. This involves not only addressing the supply side of the equation but also implementing policies that protect existing affordable units and ensure their continued availability. The proposed extension of the MFTE program is a critical step in this direction. It signals a commitment to a balanced approach that recognizes the importance of both new development and the preservation of current housing resources.
Up for Growth Action, an organization dedicated to advancing housing solutions, is proud to be at the forefront of advocating for policies that promote housing affordability and availability. We believe that ensuring Washington’s working families have access to secure and affordable housing is not just a matter of policy, but a fundamental necessity for a thriving society. The renewal of the MFTE program is a tangible and achievable solution that will have an immediate and positive impact on the lives of thousands of residents across the state.
The success of SB 5363 hinges on continued engagement and advocacy. As we look to the future, the path forward is clear: we must act decisively to preserve the affordable housing opportunities that the MFTE program provides. This is an opportunity to demonstrate our collective commitment to creating a more equitable and sustainable housing market in Washington State.
If you are a resident of Washington State, a business owner, or a concerned citizen, your voice matters. Reach out to your state legislators and express your support for SB 5363. Advocate for the preservation of the Multi-Family Tax Exemption program and help ensure that thousands of families can continue to call Washington home.
