Tax cuts for developers have spurred multifamily housing in Tacoma during the past 10 years, but the number of affordable units is lacking.
About 4 percent of the units created through the city’s Multifamily Tax Exemption (MFTE) program between 2008-2018 were required to be affordable, leading the city to study what more can be done to bring affordable housing to Tacoma.
A report shared by the city in May shows that of all projects participating in the program, 234 units were designated to be affordable out of 5,934 total units between 2008 and 2018.
Of those affordable units, 51 have been built. The rest are in permitting or construction.
A majority of the affordable housing units were built or are expected to be built in the Central and South Tacoma areas.
The city defines “affordable” to be at or below 80 percent of the area’s average median income — roughly $60,000 for a family of four. That equates to roughly $1,600 per month, according to calculations by The News Tribune using data from the National Low Income Housing Coalition.
Some city leaders view any new affordable housing units as a positive but agree that more needs to be done. The city declared an affordable housing crisis in 2018.
“We’re still at such a low vacancy rate in our apartments that we need more,” said Debbie Bingham, program manager with the city’s Community and Economic Development Department.
The MFTE program is one way to create affordable housing, but it’s going to take more to make a difference, said Tacoma Housing Authority executive director Michael Mirra.
“The MFTE program is only one tool that the city needs to address the fact that too many city residents cannot afford their housing or do not have housing,” Mirra said in an email to The News Tribune. “The MFTE 12 year program, for example, will not address households lower down the wage or income scale, where most of the need is.”
The city is taking a look at how it can further incentivize its 12-year program, which is less favored among developers, who don’t want to provide the 20 percent affordability or who are wary of annual audits.
It’s been 10 years since the city of Tacoma started offering tax cuts that require affordable housing units.
Between 2008 and 2018, the city exempted $2.5 million in taxes, equating to about $1,036 per unit. All of the projects brought about $1 billion to the area in private investments.
The city of Tacoma first launched a MFTE program in 1995, offering developers a 10-year tax cut if they built in one of the city’s mixed-use centers, no affordable housing required. There are currently about 17 mixed-use centers.
The goal was to boost multifamily development in the city, rehabilitate vacant buildings and direct growth for mass transit.
Between 1995 and 2006, the program processed applications for tax exemptions for 139 projects totaling 5,802 units.
In 2007, the city changed the program in accordance to state law, removing the 10-year option and offering the 8-year and 12-year options instead.
The 12-year tax exemption requires at least 20 percent of the new units be affordable to renters with household incomes no greater than 80 percent of the area median income.
A majority of developers participating in the program between 2008 and 2018 took the 8-year tax exemption, which does not require affordable units (includes 34 projects built under 10-year exemption):
▪ 72 total projects (50 built)
▪ 4,845 total units (2,272 built)
A third of developers chose 12-year exemptions:
▪ 33 total projects (12 built)
▪ 1,119 total units (223 built)
In total, 105 projects used the MFTE program, totaling 5,934 units. Only 2,495 units are currently built.
Downtown had the most development at 43 projects, while the Tacoma Mall mixed-use center was close behind at 36 projects.
That number can change in the years ahead. Developers have three years following City Council approval to complete the new housing with the tax exemption. Sometimes projects fall through or stall.
Every year, the city audits 12-year exempt projects to ensure building managers are complying with renting to income-eligible tenants.
“There have been no cases that are out of compliance to this point,” Bingham said.
Changes are coming
The city is looking at further incentives for developers to take the 12-year tax cuts. Bingham said a team is researching methods, such as ways to help developers find renters who qualify, but there’s been no officials changes yet. The city is expected to bring some possibilities to a study session on July 30.
The city’s Affordable Housing Action Strategy expands on potential changes to the MFTE program. It directs staff to offer the 12-year option in areas where the City of Tacoma plans to also implement mandatory inclusionary housing.
That could include requiring 10 percent of units be affordable for households earning 50 percent of area median income or below, providing a 10-foot height increase, a 10 percent floor-area-ratio increase and 25 percent reduction in current parking requirements (in multifamily zones) in exchange for income-restricted units.
The city also is looking to target the changes at specific areas such as West End, New Tacoma and North Tacoma for units that support households earning at or below 50 percent of area median income (about $37,000 for a family of four).
If changes are made, it could produce as many as 3,100 income-restricted units over the next 10 years, according to the action strategy.