The Multi-Family Housing Property Tax Exemption (MFTE) program began in Washington State in 1995, codified as RCW 84.14, to incentivize multi-family residential development in “residential targeted areas,” for Washington’s cities. All cities in Snohomish County may offer an MFTE. The MFTE is an optional tool; developers are not required to request it.
The state program authorizes 8-, 12- and 20-year property tax exemptions to encourage the development of multi-family housing. Staff’s recommendation will be to amend the code so that to qualify for the 8-year exemption at least 10% of the units must be affordable to low-income households (households that earn 50-80% of the Area Median Income). Staff will also be recommending amending the code so that to qualify for the 12-year exemption at least 10% of the units must be affordable to low-income households and 10% of the units must be affordable to very-low-income households (households that earn 30-50% of the Area Median Income). Staff are not recommending a 20-year exemption.
The MFTE only exempts the value of the new multi-family portion of construction from being taxed during the term of the exemption. The value of the land (which will increase with the new development) and the value of the commercial construction are still taxed at the regular rate. The MFTE is temporary and when the exemption expires, the property and improvements are taxed at their fully assessed valuation.