Housing relief? Council OKs controversial tax break

To some low-income-housing advocates, spending $1,115 a month to rent a studio apartment in Seattle does not sound affordable. Mayor Greg Nickels and the Seattle City Council say it is.

On Monday, the council approved Nickels' proposal to renew and expand a tax break for developers who build apartments and condos the city considers affordable.

What is affordable, however, has ignited a debate about whether the city should fund housing for people who are trying to rise out of poverty, such as homeless people, or for those struggling to live in the city where they work, such as entry-level teachers and firefighters.

"What is the definition of affordability?" asked Councilmember Nick Licata, who cast the lone opposing vote. Licata argued on behalf of food-service workers, cashiers and janitors who earn even less than the people the city's tax break hopes to help.

Council members who supported the multifamily tax exemption called it a minor tool to fight the major crisis of affordable housing in the city.

"We are not trying to put this arrow in the quiver and make it do all things for all people at all times," said Councilmember Richard McIver, chair of the Housing Committee. "We will continually find more tools."

On Monday, the council renewed and expanded a tax break for developers of housing for people making 60 to 70 percent of median income. That original break was designed to save developers more in taxes than they would lose in rent by pricing units lower.

But because rents have gone up so much in recent years, developers could not save money and program participation dwindled.

The new tax exemption targets housing for people who earn 80 to 120 percent of median income, and expands the number of neighborhoods where developers can qualify.

Council President Richard Conlin and members Tim Burgess, Sally Clark, Jan Drago, Jean Godden, Bruce Harrell and McIver supported it, and Tom Rasmussen was absent.

The council hopes the expanded program will stimulate the construction of 500 apartments and condos in the next two years. During the last four years of the narrower tax exemption, 762 units were built.

These are examples of people the new tax break is designed to help: A single person earning $46,705, or 80 percent of the area's median income next year. A household of three earning $90,110, or 120 percent of the area's median income in 2009. The city defines an affordable place as costing no more than 30 percent of a household's income.

Under the expanded program, developers whose projects receive City Council approval will get a 12-year property-tax break, which in recent years saved builders $2.7 million annually. The rest of the city's property owners — mainly home and condo owners — will have to make up for the loss in tax revenue.

The owner of a typical Seattle home, worth about $440,000 now, can expect to annually pay $4.20 more for the next 12 years.

The mayor proposed and council approved raising the income targets and expanding the tax break from 17 to 39 areas in the city. Council members called it a strategy to gain an affordable foothold in areas where developers are building anyway.

John Fox of the Seattle Displacement Coalition said he's "stridently opposed" to the program.

Fox surveyed new building rents and compared them with the levels in the city tax exemption. "These set asides are $200 to $400 above average rents," he said.

But several nonprofit low-income-housing developers support the new tax exemption.

"We need more affordable-housing tools," said Brian Lloyd. He said the low-income- housing developers he works with do a good job providing housing for people who are well below median income levels. "But we don't have tools to provide housing at the next level — the moderate-income household."

The city now spends $40 million a year in voter-approved levy funds on low-income housing targeted at people who make below 50 percent of median income. Monday's debate may hint at what's to come next year, when the city plans to ask voters to renew the housing levy.

"This creates some help, and we may need to find more help," McIver said.

Sharon Pian Chan: 206-464-2958 or schan@seattletimes.com