The MFTE changes approved in Tacoma will not begin until March 7


Inside the Tacoma apartment boom

Thousands of units are under construction across the city, but will it help reduce sky-high rents. This series explores the factors at play.

The long-sought changes in Tacoma’s apartment tax exemption program for developers are on track, only perhaps not as fast as some would like.

The changes, approved in December, aimed at easing Tacoma’s rental rates, are due to take effect 90 days after their adoption on March 7.

The MFTE program has long been the target of critics. A The state audit of 2019 was ineffective as to whether the MFTEs used in cities across the state are actually working properly.

Tacoma’s MFTE program received a major overhaul last year from Tacoma City Council after the criticism the incentives essentially turned into tax breaks for the creation of luxury housing, with much more development of market rates pushing rents higher and higher.

The program offers two versions. The eight-year version covers the creation of units strictly at the market rate, while the 12-year version allocates at least 20 percent of the units in each project at a limited rent, or “affordable” rate.

Changes to the program approved last year also involve the use of a 20-year version, similar to the 12-year version, that involves permanently available projects, with at least a quarter of those blocks built or sold to qualified nonprofits or local government organizations providing permanent affordable housing. .

The 12-year “affordable” model means a limited rental rate set for tenants with household incomes of no more than 80 percent of the area’s average income, based on data from the Federal Department of Housing and Urban Development.

MFTE is changing approved by Tacoma City Council last year now apply 70 percent of the average family income adjusted for family size for Pier County, according to HUD for affordable housing units. This percentage is planned to be reviewed annually.

Participants touted the change as a significant victory for those seeking MFTE reform, but projects that have already been submitted or previously approved will retain the previous 80 percent threshold, and the new formula will be in effect March 7 for projects received after that date.

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A table provided by the city of Tacoma, indicating the qualified income under the new and previous 12-year MFTE limited rent programs. The city of Tacoma

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Maximum rental rates compared to the new and previous principles of the 12-year MFTE program. The new tariffs will apply to projects submitted on March 7 and later. The city of Tacoma

Debbie Bingham, project manager from the city’s Department of Economic Development, told city council members Feb. 1 that the use of the 12-year term has increased compared to previous years: “More than half of ongoing projects are 12-year projects.”

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A screenshot of a slide presented at a recent City Council session showing the number of rooms with limited rents approved under 12-year MFTE projects. The city of Tacoma

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A screenshot of the slide presented at a recent City Council session showing approved 12-year MFTE projects. The city of Tacoma

Other changes approved in December in the MFTE program are also facing delays, some after the March 7 start date.

The extension of the 12-year and 20-year MFTEs to areas transferred to the “medium” as part of the Home in Tacoma process will begin after the resonance is completed.

In addition, “the 12-year-old and 20-year-old MFTE … will not be available in neighboring commercial sites until a comprehensive review and update of design standards for projects involving housing in these commercial areas is completed,” the ruling said.

This is the number of MFTE projects that made their way to the city council before the changes and lower rates, which are now increasing, fixing a rate of 80 percent instead of 70 percent for available units.

So far in 2022, the city council has approved seven projects for the MFTE under the current formula: six have received approval for the 12-year version and one has moved from the already approved 8-year version to the 12-year version.

These projects will create 71 new available units and 271 market rates under the MFTE program based on a review of documents submitted to the board’s agenda this year.

According to the city, as of February 16, there are 10 projects to be submitted, probably by March 7. Seven are 8-year projects, and three are requesting a 12-year version with 87 units available.

All projects together will produce 587 units at market rates.

Asked by Mayor Victoria Woodards at a city council meeting on Jan. 4 why the start date isn’t until March 7, Bingham said giving developers time to implement any changes is standard practice.

“I don’t think we’re necessarily… mandatory, but it’s just standard practice of what we do,” she said.

“I just wanted to ask that question so everyone could hear the answer,” Woodards replied.

Bingham noted at the January 4 session: “We will continue to accept applications until March 7, which will be subject to the old rules. So you could see quite a few that will be at 80 percent before the changes take effect. ”

Board member John Hines, who helped implement the MFTE changes, admitted at the meeting that in talks with the developers: “Many of these projects take a long time to be implemented … a two- or three-year period under development,” and that the delay provided “some space” for project timelines.

This year, at least one project was approved, which is already mostly built and requested a 12-year version with an 80 percent rate.

New apartments at 1624 E. 32nd St. were almost built when the project was presented to the board to get its 12-year release. Bingham at a council session on Jan. 25 accused COVID of a late request and documents lost during the reshuffle.

“It is an unusual circumstance that this project is mostly completed,” she told council members. “Construction began in 2020 … They believe that the architect applied for release for this project, but in fact it was not. All their proformas and financial assumptions were based on the use of exceptions. Only when the project was nearing completion did they look for a lender for permanent funding, and realized the mistake. ”

She added: “We had a kind of unwritten domestic policy because it should be an incentive for people to apply before they start building, but … we’ve made exceptions in the past and it really seemed to be just something that got lost in the middle of COVID … ”.

The board allowed the project to get a 12-year version for 65 market rates and 17 available units.

Megan Snow, a spokeswoman for the city’s media, told The News Tribune that throughout the life of the MFTE program “there have been other instances where approval came after construction began”.

And one last note: what is “available” on paper, given the city’s formula, can sometimes look compared to the market rate when the base rental rate is limited, sometimes available more expensive than the market rate.

The available rent provided to the council on the 32nd Street project for a one-bedroom apartment with a bathroom area of ​​650 square feet was $ 1,454, compared to $ 1,450 for the same apartment at the market rate.

The difference? Utilities are included in the available option.

Debbie Cockrell has been with The News Tribune since 2009. She talks about business and development, local and regional issues.

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