SENATE BILL REPORT

SSB 5366

This analysis was prepared by non-partisan legislative staff for the use of legislative members in their deliberations. This analysis is not a part of the legislation nor does it constitute a statement of legislative intent.

As Passed Senate, March 12, 2019

Title: An act relating to expanding the property tax exemption for new and rehabilitated multiple-unit dwellings in urban centers.

Brief Description: Expanding the property tax exemption for new and rehabilitated multiple-unit dwellings in urban centers.

Sponsors: Senate Committee on Ways & Means (originally sponsored by Senators Wagoner, Mullet, Rivers, Palumbo, Rolfes, Brown, Honeyford, Wilson, L. and Zeiger).

Brief History:

Committee Activity: Housing Stability & Affordability: 1/23/19, 1/28/19 [DP-WM].

Ways & Means: 2/21/19, 2/28/19 [DPS, w/oRec, DNP].

Floor Activity:

Passed Senate: 3/12/19, 45-4.

Brief Summary of First Substitute Bill

  • Allows all counties, cities, and towns to provide property tax exemptions for eligible multi-unit residential housing projects in urban centers from July 1, 2022, to July 1, 2025.

SENATE COMMITTEE ON HOUSING STABILITY & AFFORDABILITY

Majority Report: Do pass and be referred to Committee on Ways & Means.

Signed by Senators Kuderer, Chair; Das, Vice Chair; Zeiger, Ranking Member; Darneille, Fortunato, Saldaña and Warnick.

Staff: Jeff Olsen (786-7428)

SENATE COMMITTEE ON WAYS & MEANS

Majority Report: That Substitute Senate Bill No. 5366 be substituted therefor, and the substitute bill do pass.

Signed by Senators Rolfes, Chair; Mullet, Capital Budget Cabinet; Braun, Ranking Member; Brown, Assistant Ranking Member, Operating; Honeyford, Assistant Ranking Member, Capital; Bailey, Becker, Billig, Conway, Darneille, Hunt, Keiser, Palumbo, Rivers, Schoesler, Van De Wege, Wagoner, Warnick and Wilson, L..

Minority Report: That it be referred without recommendation.

Signed by Senators Frockt, Vice Chair, Operating, Capital Lead; Carlyle, Liias and Pedersen.

Minority Report: Do not pass.

Signed by Senator Hasegawa.

Staff: Alia Kennedy (786-7405)

Background: Growth Management Act. The Growth Management Act (GMA) is the comprehensive land-use planning framework for counties and cities in Washington. Jurisdictions that fully plan under the GMA must designate urban growth areas (UGAs), within which urban growth is encouraged and outside of which growth may only occur if it is not urban in nature. Seven counties that fully plan under the GMA also participate in the Buildable Lands Program. This review and evaluation program determines if participating counties, and the cities within them, have designated adequate amounts of residential, commercial, and industrial lands to meet the growth need incorporated in their comprehensive plans. The seven participating counties include Clark, King, Kitsap, Pierce, Snohomish, Thurston, and Whatcom.

Property Tax Exemption. Eligible cities and counties may exempt from property tax the value of the construction, conversion, and rehabilitation of certain multi-unit residential housing projects in urban centers. The tax exemption applies only to the value of the construction or rehabilitation projects and does not exempt the value of the underlying property. The tax exemption on a qualifying property lasts for eight consecutive years. However, the exemption is extended to a 12-year period if the owner commits to renting or selling at least 20 percent of the units as affordable housing to low and moderate-income households.

To qualify for an exemption, the housing project must be located within a residential targeted area (RTA) designated by a qualifying county or city. The RTA must be in an urban center that lacks sufficient residential housing, including affordable housing, to meet the needs of the public who would likely live in the urban center if housing were available.

Qualifying cities and towns that may designate RTAs include:

County-designated RTAs must be in an unincorporated area of the county, within a UGA, and either:

Property owners within a designated RTA must submit an application for the tax exemption to the designating city or county. The city or county may include additional eligibility requirements for the tax exemption, including a higher percentage of units used for affordable housing to qualify for the 12-year exemption. Counties eligible to apply the tax exemption must require owners to commit to selling or renting at least 20 percent of the multi-family housing units for affordable housing to qualify for either the eight or 12-year exemption.

For the purpose of the property tax exemption, affordable housing is housing for low-to-moderate income households that does not exceed one-third of the household's monthly income. Low-income households must have an income that is no more than 80 percent of the median income of their county. Moderate-income households must have an income between 80 and 115 percent of the median income of their county.

Summary of First Substitute Bill: Beginning July 1, 2022, through July 1, 2025, all counties, cities, and towns may designate RTAs and provide property tax exemptions for eligible multi-unit residential housing projects in urban centers.

The expiration of the tax preference will be extended if a review finds that at least 20 percent of new housing is developed and occupied by households earning:

Appropriation: None.

Fiscal Note: Available.

Creates Committee/Commission/Task Force that includes Legislative members: No.

Effective Date: Ninety days after adjournment of session in which bill is passed.

Staff Summary of Public Testimony (Housing Stability & Affordability): PRO: There is a housing crisis in Washington State and more housing inventory is needed. A lack of housing is a limiting factor for economic development. This bill would allow every city in the state to take advantage of the property tax exemption and allow smaller cities to participate. Local governments need additional tools to address a lack of affordable housing and homelessness. Chelan currently has a project that would utilize this tax exemption and build a multi-family project to address an urgent lack of affordable housing.

Persons Testifying (Housing Stability & Affordability): PRO: Senator Keith Wagoner, Prime Sponsor; Mike Cooney, Mayor, City of Chelan; Carl Schroeder, Association of Washington Cities.

Persons Signed In To Testify But Not Testifying (Housing Stability & Affordability): No one.

Staff Summary of Public Testimony on Original Bill (Ways & Means): The committee recommended a different version of the bill than what was heard. PRO: The entire state is feeling the pressure for affordable housing. Small communities are in a housing crisis. Jurisdictions that have access to the multifamily tax exemption program say it is one of the most effective tools the state has ever provided in attracting development to areas that are not seeing growth because it directly reduces development costs. This is an important opportunity for all communities. The Legislature should consider reducing the threshold for qualifying counties from a population of at least 350,000 to a population of at least 170,000 so that Kitsap County would be eligible.

Persons Testifying (Ways & Means): PRO: Senator Keith Wagoner, Prime Sponsor; Carl Schroeder, Association of Washington Cities; Mike Cooney, Mayor, City of Chelan; Tom McBride, Kitsap County; Mellani McAleenan, Washington State Association of Counties.

Persons Signed In To Testify But Not Testifying (Ways & Means): No one.