It will be harder next year to qualify for tax subsidies to build apartments and condos in Spokane.
The Spokane City Council on Monday reauthorized Spokane’s multifamily tax exemption for another five years. The decision significantly reduced the areas that will qualify for the subsidy and set lower limits to qualify for bonus exemptions when building affordable housing for rent.
Owners participating in the program paid $1.4 million less in property taxes this year because of the exemptions.
Under the program - first approved in 2000 and updated in 2007 - condo and apartment developers pay property taxes only on their land and the value of improvements before starting construction.
The subsidy is available in 23 districts throughout the city, largely in the city’s core and designated neighborhood centers. The exemption stays with the property, even if it’s sold, for eight years or 12 years if 20 percent of the units qualify as affordable.
Council members have argued that some neighborhood centers are in locations, such as land near Palouse Highway and Regal Street, that don’t need incentives for growth to occur. They also argue that development on the edges of town overburdens infrastructure.
The new map shrinks the area where subsidies are available to the downtown north of Interstate 90, areas along North Monroe, Hamilton, East Sprague and in the Kendall Yards development in West Central.
Among areas that no longer will qualify are the Garland Business District, downtown Hillyard, much of the West Central Neighborhood, areas around Holy Family Hospital, land at 29th and Grand, Indian Trail and 29th and Regal.
Councilman Steve Salvatori said the market has changed significantly since the program was last considered. In 2007, the market favored single-family homes. Now, the opposite is true.
“Under that map we had almost a third of the city incentivized,” Salvatori said. “We felt that the map from five years ago tried to do too much.”
About 20 people testified. Several suggested expanding the borders to include Hillyard. Others expressed caution about reducing any of the borders. Many said they supported the changes.
Mike Murphy, a developer of the River Run project, which is southeast of Government Way and Fort George Wright Drive, said removing his land from the incentive would hurt the development. He said that his project doesn’t receive other tax subsidies like competing nearby development Kendall Yards.
The council voted 5-1 for the new program. Councilman Mike Fagan cast the lone vote against. Councilwoman Nancy McLaughlin was absent.
Fagan proposed delaying a vote to consider keeping downtown Hillyard on the map and adding and area to the east of that Market Street business district. His motion failed on a 3-3 vote. Joining him to delay a vote were council members Amber Waldref and Ben Stuckart.
Councilman Jon Snyder said the council had considered the issue for six months and that the map could be adjusted to add Hillyard later. The map provides a strong focus to a core area of the city, he said.
“Previous councils have gerrymandered in various parcels,” Snyder said.
As time winds down on the old boundaries, developers are submitting applications to vest rights to the exemptions in areas that won’t be eligible after the law becomes effective Jan. 1.
Next week, for instance, the council will consider an exemption for developer Harlan Douglass on a complex for up to 1,000 units near East Lincoln Road and Nevada Street. That’s more than the entire number of apartments and condos built under the program in 12 years – 768.
One of Douglass’ projects that qualified for the multifamily exemption has been criticized by members of the North Indian Trail Neighborhood Council as spurring residential development on the edge of the city and burdening city infrastructure.
Besides shrinking the boundaries, the council also set stricter income limits for apartment projects to earn the 12-year exemption. Currently, apartments can get the extra four years of exemption if at least 20 percent of the units are aimed at renters who earn 115 percent or less of the median family income in Spokane County. That’s about $72,000 for a family of four. The change approved Monday night lowered that to 50 percent of the median income – $31,450.