Across the Puget Sound region, as real estate values and rents rise, cities large and small are struggling to preserve existing lower-cost, market-rate housing. A bipartisan plan to enact a local-option property tax exemption for existing rental homes aims to preserve lower rents and prevent the displacement of long-time tenants, even as landlords seek to make building improvements.
The Preservation Tax Exemption proposal sponsored by Sen. Joe Fain (R-Auburn) and Sen. David Frockt (D-Seattle) has earned the support of property owners, tenants, affordable housing advocates and a dozen urban and suburban mayors across the region. The legislation to grant cities the ability to offer the tax exemption will be introduced in Olympia on Monday.
“Housing costs for working families have skyrocketed in our region,” said Sen. Fain, who serves as Majority Floor Leader in the Washington State Senate. “Sometimes the tools policymakers use to maintain affordable housing can reduce supply over time, leading to shortages and higher prices. Giving cities the discretion to create incentives for landlords to upgrade and maintain their properties at prices families can afford is one tool for addressing this growing problem.”
“The Preservation Tax Exemption will be a critical tool for Washington municipalities to curb the effects of housing displacement, poverty and homelessness,” said Sen. Frockt. “This is a measure that will promote economic stability and opportunity in our communities.”
Under the bill, owners of rental properties could apply for a 15-year exemption to local property taxes, and in exchange, reserve 25 percent of the building’s apartments for low-income families earning less than 50 to 60 percent of the Area Median Income (AMI).
In King County, 50 percent of AMI is $36,000 for two-person household and 60 percent of AMI is $43,000.
Affordable rent in for a one bedroom apartment in King County at 50 percent AMI is $840 and at 60 percent AMI is $1,008. The average market rate for one bedrooms in new buildings in Ballard is $1,656, while a one bedroom in Renton averages $1,275.
And for larger families, affordable rent for a two bedroom apartment in Ballard at 60 percent AMI is $1,210, while the average market rate for a similar apartment in a new building is $2,072.
The bill gives cities the option to enact the tax exemption and each jurisdiction would determine how many homes to enroll.
The City of Seattle estimates that it could preserve 3,000 affordable apartments over 10 years at the cost of $12 a year to the average property taxpayer.
“We will never solve the housing affordability crisis if we only focus on construction of new apartments,” said Seattle Mayor Ed Murray. “We must work to preserve existing affordable homes, including affordable market-rate homes. This is a cost-effective solution to prevent the displacement of thousands of families in our city.”
“This will give us another tool to ensure that our residents can live in decent conditions,”
said Auburn Mayor Nancy Backus. “It is proven that a housing first strategy allows for more positive outcomes.”
Under the plan, each jurisdiction would have the option to target additional specific local priorities, including rent stabilization, energy and water conservation, or improvement of substandard housing conditions. In higher-cost areas, cities would have the ability to raise the income restriction from 50 percent to 60 percent of AMI. All apartments enrolled in the exemption would be inspected and required to meet minimum standards for physical condition.
State property taxes collected on enrolled properties would not be reduced under this proposal.
“This legislation represents a great opportunity for a public-private partnership to solve our region’s housing affordability issues,” said Sean Martin of the Rental Housing Association of Washington. “Solutions that provide owners with the tools to gain financial flexibility and invest in affordable housing are the quickest and most effective ways to preserve and enhance existing housing affordability.”
“When I was looking for a new home, it took me months to find a place my family could afford,” said Darryl Johnson, a tenant from Auburn. “Families always worry about rising rents and finding an affordable place is tough all over King County. We need more solutions that help families like mine.”