Title
Multi-Family Tax Exemption Market Analysis Update
Recommended Action
Committee Recommendation:
Not referred to a Committee.
City Manager Recommendation:
Provide feedback on the analysis and next steps in the consultant’s study. Move to recommend the final consultant report to City Council be reviewed at a City Council Study Session in September.
Report
Issue:
Whether to receive a briefing from the consultant, ECONorthwest, on its current market analysis related to the City’s Multi-Family Tax Exemption program and provide feedback on the analysis and next steps in the consultant’s study.
Staff Contact:
Darian Lightfoot, Housing Programs Manager, 360.280.8951
Presenter(s):
Michelle Anderson, EcoNorthwest
Jennifer Cannon, EcoNorthwest
Background and Analysis:
In January, the City of Olympia sought proposals from qualified consultant teams for research and recommendations to forward objectives of Olympia’s Housing Action Plan. The plan recognizes an urgent need for more housing supply in the city, including increasing the number of units affordable to low-income households. The City wants to structure its zoning, regulations and incentives in a way that encourages needed housing development.
This request for proposals was for the first phase of this work effort. This request was for a study to help the City determine how best to structure the City’s Multi Family Tax Exemption (MFTE)(see Olympia Municipal Code 5.86) and understand its effect on the likelihood of encouraging private sector development, including both market rate and low-income affordable units, within specific areas. The Phase 2 study would aim to support partners and housing projects that involve land trusts, cooperatives, or other models that boost homeownership or stabilize the long-term affordability of the property for low to moderate income households.
ECONorthwest was the selected consultant for this study and began their work in March to examine the following questions:
• How should Olympia’s multifamily tax exemption (MFTE) be tailored (% of units, AMI threshold, other eligibility criteria, etc.) in each geographic area to maximize outcomes?
• Specifically, the current maximum income threshold for using Olympia’s 12-YR MFTE is 115% of the area median income. The city wants to lower that threshold. What is the lowest income threshold we can establish in each geographic area and maintain a viable program?
• In each area, how well could [the current or a newly tailored MFTE program] work alone or in combination with other existing incentives such as a density bonus, 80% impact fee exemption, or parking exemption (where applicable) to encourage the inclusion of low-income affordable units?
• Does Olympia still need the 8-year MFTE in downtown in order to encourage mixed-use, market-rate housing development?
• Could the 8-year program be structured to include an affordability element?
• Does Olympia need the 8-year MFTE in the other geographic areas in order to encourage mixed-use, market-rate housing development?
• Is our market-ready to require affordable units through inclusionary zoning linkage fees or other means?
Over the past several months, ECONorthwest has researched the history of the MFTE program in Olympia, conducted stakeholder interviews, and reviewed data pertaining to housing stock, median-income, and local zoning code.
The State of Washington is conducting a similar yet much more extensive MFTE market study to better evaluate the exemption and support jurisdictions in leveraging the program. This study will offer clear policy recommendations and a much-needed updated program manual with administrative processes to support efficiency and ensure compliance.
Neighborhood/Community Interests (if known):
Potential changes to Olympia Municipal Code’s Housing Code (OMC 5.86) are a topic of significant interest to residents and contractors within the city. Any work on this topic will draw a great deal of local and regional attention and public engagement, as previous MFTE projects have already shown to do.
Options:
1. Provide staff and consultants with guidance and feedback regarding the market analysis and the MFTE study. Recommend the final MFTE report be scheduled for a City Council study session.
2. Provide staff and consultants with guidance and feedback regarding the market analysis and MFTE study. Direct that the final report be scheduled for an additional LUEC meeting.
Financial Impact:
The contract with ECONorthwest was executed in March and not to exceed $50,000 for services. These funds were a direct appropriation from the City Council out of discretionary funds for the market study.
Attachments:
None