MFTE Changes to Increase Affordability and Number of Rent Controlled Units in Some SEDUs

Home » MFTE Changes to Increase Affordability and Number of Rent Controlled Units in Some SEDUs

On Monday, the Full City Council approved a change to the Multifamily Housing Property Tax Exemption Program (MFTE) for developments of Small Efficiency Dwelling Unit (SEDUs), sometimes called Apodments or microhousing.

The MFTE program exempts property owners from paying a portion of their property tax when they agree to provide income-restricted units (what I call “setaside units”) below a particular Area Median Income (AMI), depending upon bedroom number, for a period of 12-years.

The primary purpose of the bill, proposed by Councilmember Clark, was to lower the rents that could be charged for the “setaside units.” The legislation set a maximum rental for the setaside units at $618/month, about $400 less a month in rent than what is currently required, and affordable to a 40% AMI renter.

I successfully included another important amendment to increase the number of setaside units. The MFTE program currently requires that 1 in 5 units be income-restricted. Over the years of the MFTE program’s existence, I have strived to make the MFTE program to include greater benefit to the public, see here, here, here, here, and here. The portion of the tax bill that the owner of an MFTE development gets to forgo is redistributed in each of our own tax bills. The tax still gets collected, but the regular taxpayer picks up the value of the exemption. The bill passed unanimously, including my amendment to increase the number of income-restricted units in SEDU developments using MFTE to 1 in 4 units.

City Council will be reviewing additional program-wide changes to the MFTE later this year after receiving the Housing Affordability and Livability Agenda (HALA) committee recommendations. There are a number of other issues related to the MFTE program that I identified in Resolution 31494, sponsored by Chair Clark and I, and currently referred to CHAHSER. That resolution was spurred by a 2012 Audit that found:

  1. Most of the [MFTE Program’s] goals do not have associated performance measures and because there are no performance measures it is difficult to determine whether or when certain goals are being achieved; and
  2. It is not clear that the MFTE Program stimulates development and that as of 2010, more than 40% of the RTAs with 2024 residential growth targets had exceeded 50 percent of their growth targets with 14 years left to achieve the balance; and
  3. The City should consider whether stimulating construction is an appropriate MFTE program goal, which can be measured and assessed for compliance and whether it wants to limit the number of Residential Targeted Areas where MFTE housing can be built to areas that have made little progress in meeting their residential growth targets and could benefit from housing, economic development and revitalization.

I understand that these broader issues will be discussed at a later date after the Mayor and Council’s HALA Committee makes its recommendations in May. I look forward to that discussion.