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New Audit on MFTE Program Released Today

Next Monday, at the City Council’s regular 9:30 am Briefing Meeting, the Council will hear from the City Auditor about its audit on the Multifamily Tax Exemption (MFTE) Program.  When available, the agenda will be posted here.  The following Monday, October 1, again at our regular 9:30 am Briefing Meeting, we’ll get a report from the Office of Housing, who administers the MFTE, about program activity since their last report on the program in March of this year.

Last year, I requested an Audit on MFTE Rental Program activity.  My primary objective for requesting the audit was to determine whether the rental portion of the MFTE program, when used by private developers, was successful in implementing the program’s goals.  Today the Audit was released including 19 recommendations to improve the program.  Recommendations range from creating new performance measures for program goals to improving program compliance, administration and oversight.

In 1998 the City Council created the MFTE Program to incentivize development and rehabilitation of rental properties and home ownership projects.  The MFTE program grants to the property owner a property tax exemption on the part of the property that is used for housing.  The taxes aren’t lost, instead that exemption is then redistributed to other residential property tax payers in Washington State.  In exchange, the owners are required to maintain the affordability of some of the housing for the length of the period of the tax exemption.   Since 1998, I have been skeptical of using property tax dollars to provide what is essentially market rate housing, believing that, given limited funding, providing housing for those least able to afford housing should be our highest priority.  The 1998 – 2002 program resulted in 6 projects receiving a $5,240,395 tax exemption over a 10 year period.  (*76 of 298 total units are required to be “affordable.”)

Over the years, the program requirements have changed.  The goals and objectives have changed as well.  In 2004, changes expanded the program to 8 new areas, bringing the total to 17 areas.  The 2004 changes also required lower rents than were required in the original 1998 program.  Under the 2004 program, 20% of the units were required to be affordable to people making 65% of median income OR 30% of the units be available to households making 70% median income in order for developers to get the subsidy.  The 2004-2008 program resulted in 9 projects receiving a $14,300,831 exemption over a 10 year period.  (*242 of 1036 total units are required to be “affordable.”)

In 2008, the Council decided to allow a total of 39 neighborhoods to be included in the rental MFTE program and allowed higher rents again (80-90% of median income, depending on unit size), and changed the length of both the exemption and the required affordability from 10 to 12 years.  The 2008-2010 program resulted in 37 projects receiving a $113,325,447 tax exemption over a 12 year period.  (*1171 of 5780 total units are required to be “affordable.”)

Finally, in February 2011 there were additional changes to the program including: a. lowering the affordability requirements that had been increased in 2008, b. increasing the frequency of and expanding the requirements of reporting, and c. eliminating the requirement that each application come to the Council for review (since the Council doesn’t approve the applications, the Director of the Office of Housing does).  Further, the program was reauthorized until 2015.  As of January this year, the 2011 program has resulted in 20 projects receiving a $37,317,677 over a 12 year period (403 of 1813 total units are required to be “affordable”).

An important reference to understand the issue of affordability is what rent is affordable (see this chart for affordable rent rates) to those making 70%, 80%, and 90% median income.  The Housing Needs Assessment of the 2008-2012 Consolidated Plan tells us a lot about where the real need for affordable housing lies.  More than half of the City’s renters have incomes that are less than 80% of median income.  About 1 in 5 renters spend more than half of their income on rent and more than half of this group have incomes less than 30% median income.  On the other hand, of the renter households paying more than half of their income of rent, only 6% are making more than 80% median income housing.

* The total number of actual affordable units exceeds the number required to be affordable by the MFTE program because some projects either have a deed restriction or another source of public funding requiring additional affordability.

 

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