How Many Tax Breaks Can One Housing Project Get?
Spokane offers several tax incentives to get housing built, and they are designed to layer on the same project. Here is how they stack, and the question that follows: what does the public get back?
Three incentives, three tax provisions
Three of the City's housing incentives provide different tax treatment to qualifying projects:
- MFTE (property tax). The Multifamily Tax Exemption frees a project's new construction from property tax for years at a time (RCW 84.14).
- Parking 2 People (sales tax). A sales-and-use tax deferral for turning an underused parking lot into housing (RCW 82.92).
- Commercial Conversion (sales tax). A sales-and-use tax deferral for turning an underused commercial building into housing (RCW 82.59).
The affordability terms differ by program and track. The 8-year MFTE track has no income or rent restriction; the other MFTE tracks and the two sales-tax programs attach defined affordability requirements. The sales-tax deferrals may ultimately be waived when their statutory conditions are met.
The stack is built into the form
Stacking these is not a loophole a developer has to engineer. It is printed on the application. The City's Parking 2 People application asks the applicant to check whether the project is also claiming the other two:
“This project has also applied for the Multifamily Property Tax Exemption…” / “This project has also applied for the Commercial Conversion Sales and Use Tax Deferral…”— checkbox options on the City of Spokane Parking 2 People application
So a single project can carry a property-tax exemption and two sales-tax deferrals at once. The programs are written to combine.
How it works, in a developer's words
A Spokane developer described the parking-lot deferral on the Deal Junkies real estate podcast, and how far its "parking lot" definition reaches:
“They called it a parking lot rule, but it really applied to anywhere you could park a car, which is land… And they gave us a sales tax waiver.”— 4 Degrees Real Estate, Deal Junkies podcast
It is worth hearing in his own words. Whether "anywhere you could park a car" is what a "surface parking lot" incentive was meant to reward is a fair question, and the interview is a good place to start forming your own view.
What does the public get back?
The documented terms are only part of the ledger. A qualifying MFTE residential improvement is exempt from property tax for a defined period. Parking 2 People and Commercial Conversion begin as sales-and-use tax deferrals and may become waivers when their conditions are met. Those facts do not establish the net fiscal result of a project.
The City should publish the full ledger for each program and stacked project: foregone or delayed tax, new tax and utility revenue, infrastructure and service costs, the duration of each provision, who bears each cost, and the housing delivered. That would let the public compare the complete cost with the complete return.