All property is subject to a tax each year based on the highest and best use, unless a specific exemption is provided by law.  The county assessor determines assessed value for each property and calculates property taxes.  The property tax bill for an individual property is determined by multiplying the assessed value of the property by the tax rate for each taxing district in which the property is located.  The aggregate of all regular tax levies upon real and personal property by the state and all taxing districts may not exceed 1 percent of the true and fair value of the property.

The real property owned by a limited equity cooperative that provides owned housing for low-income households is exempt from property taxation if certain conditions are met.  First, the benefit of the exemption must inure to the limited equity cooperative and its members.  Second, at least 85 percent of the occupied dwelling units must be occupied by members of the limited equity cooperative.  Third, at least 95 percent of the property for which the exemption is sought is used for housing units or other noncommercial uses.  And lastly, the housing must be insured, financed, or assisted, through a federal or state housing program administered by the Department of Commerce; the federal Department of Housing and Urban Development; a federal housing program administered by a city or county government; an affordable housing levy; or an affordable housing surcharge.

If less than 100 percent of the dwelling units within the limited equity cooperative are occupied by low-income households, the limited equity cooperative is eligible for a partial exemption on the real property based on the percentage of low-income households as of January 1st of each assessment year for which the exemption is claimed.   Low-income household includes a single person, family, or unrelated persons living together whose income is at or below 80 percent of the median income adjusted for family size.  Median-income household includes a single person, family, or unrelated persons living together whose income is at or below 100 percent of the median income adjusted for family size.

Following the completion of the development or redevelopment of the property, members are prevented from selling their ownership interests other than to a median-income household.  Members are prevented from selling their ownership interests for a sales price that exceeds the sum of the sales price they paid for their ownership interest plus certain allowable improvements and assessments, and a 3 percent annual noncompounded return on qualifying amounts.

The property tax exemption for qualifying limited equity cooperative housing that provides low-income housing expires on January 1, 2033.

PRO:  Providing a property tax for a limited equity cooperative is another tool to address the housing crisis and the need for more affordable housing.  The property tax exemption would be provided to low-income households and reduce the cost on working families.  This approach is popular on the East Coast, and is an approach that could work here in Washington.  The forest-to-home model uses cross-laminated lumber to construct a multi-family housing development where all shareholders own the building.  While a nonprofit can develop the property now, this property tax incentive is needed to help increase affordability for home ownership once the project is developed.  This new tool could be used to bring back home ownership in areas experiencing gentrification.  The limited equity cooperative approach could result in homeownership for minorities and begin building intergenerational wealth.