As permitted under RCW 84.14 the City of Vancouver adopted a multi-family tax exemption program in 1997 to stimulate the construction or rehabilitation of multifamily housing as part of the Esther Short Redevelopment Plan and create a more active and vibrant downtown. The MFTE program was a major part of the City’s downtown redevelopment strategy and provided an incentive to attract more residents to the downtown area. Currently, the City offers the MFTE program in two designated residential target areas: The Vancouver City Center Vision Area (VCCV) and the Fourth Plain Corridor Subarea (added in 2007). The City has approved 33 MFTE program applications to date representing an estimated $608 million in private investment. The City has approved over 2,700 units including 686 affordable units under the program.
As affordable housing became more of a crisis, state law was changed to allow the use of the exemption for affordable housing units. The Vancouver City Council enacted a modification to the city’s MFTE program in January 2017. The City’s 2017 modification made the following tax exemption options available to applicants:
- An 8-year exemption for market-rate projects offering public benefits negotiated through a development agreement process.
- An 8-year exemption for projects with 20% of units affordable to households earning up to 100% of area median income (AMI).
- A 10-year exemption for projects with 20% of units affordable to households earning up to 80% AMI.
- A 12-year exemption for projects with 20% of units affordable to households earning up to 60% AMI.
As these project applications were reviewed and processed the discrepancy between the restricted income levels defined in RCW 84.14 and local median incomes of Vancouver households became apparent. RCW 84.14 defines moderate and low income “for the county where the project is located, as reported by the United States department of housing and urban development.”. HUD has grouped the median income for Vancouver households in a six-county Portland metropolitan statistical area in which the current median income is $92,100. The current median income specific to the City of Vancouver, using adjusted 2017 ACS data, is $64,900 which is 29.5% lower than the $92,100 Portland MSA area median income used by HUD. Using the MSA median income as the base line for income restrictions resulted in “affordable” units that were still outside the financial means of Vancouver residents.
City Council is authorized to adopt the more stringent affordability and income eligibility criteria underRCW 84.14.030(2): “The multiple-unit housing must meet guidelines as adopted by the governing authority that may include height, density, public benefit features, number and size of proposed development, parking, income limits for occupancy, limits on rents or sale prices, and other adopted requirements indicated necessary by the city or county.”
The City Center Redevelopment Authority (CCRA) per their bylaws is charged with making recommendations to City Council regarding the Multi-Family Tax Exemption Program. On September 21, City staff held a workshop with the City Center Redevelopment Authority to discuss the proposed adjustment to Area Median Income to reflect Vancouver's Median Household Income. The board agreed that affordable rents under the program should reflect rents that are based on Vancouver, versus more regionally-based incomes, but also expressed that impacts from this change to the new supply of affordable housing should be monitored over time. The CCRA will be making a formal recommendation to City Council prior to the public hearing date.
City staff are recommending using the more specific Vancouver median household income as the basis for establishing affordable rent limits. This would be accomplished by multiplying the maximum income and affordable rent levels obtained from the HUD area median income based on the Portland MSA income by 70% (a reduction of 30%).
City staff will conduct an annual analysis of the HUD area median income for Clark County in relation to Vancouver’s median household income and adjust the reduction factor accordingly. This annual review will ensure that affordable housing rents stay relevant to the City of Vancouver population. Additionally, staff will monitor the future use of the affordable housing options under the program and will report any significant changes to Council that might warrant further adjustments.