The city of Vancouver is planning to revise a tax exemption program designed to incentivize affordable housing, requiring developers to meet a more stringent definition of “affordability” in order to qualify.
The equation used to calculate affordable rents would be linked to Vancouver’s income data alone, where the median income is $64,900 for a family of four. Currently, the program uses income data for the greater Portland metro area, where the median family income is $92,100.
As a result, the so-called affordable units have remained out of reach for the typical Vancouver family, even as the Multifamily Tax Exemption Program granted developers of new apartments an eight-, 10- or 12-year break on their property taxes.
“It’s very clear that this program needs to be adjusted to better serve the affordable housing component in our city,” Councilor Sarah Fox said in a September workshop.
The city council has discussed realigning the program’s income parameters so they better fit Vancouver for more than a year.
“I think as we’ve discussed, and as we’ve heard from the public, when we use the label of affordability and we grant exemptions based on our current definition, I think it affects our credibility a little bit,” Councilor Erik Paulsen said at the workshop. “And so to align the definition of affordability with incomes in our actual community is a positive step forward.”
In 2019, Holland Partner Group qualified for the tax exemption program on its downtown development at Block 10 and shaved $772,000 off the project’s property tax bill. The projected monthly rents of the units caused some controversy among members of both the city council and public: Holland said the apartments would be priced from $1,496 per month for a studio, up to $2,578 for a two-bedroom.
At the time, Mayor Anne McEnerny-Ogle said it didn’t make sense to link Vancouver’s definition of affordability to the high-earning communities elsewhere in the greater Portland area.
“When you look at that, there are some extreme outliers in that data,” McEnerny-Ogle said.
To qualify for the tax break, developers need to show that a portion of their units are affordable. The stricter the affordability requirement, the longer the tax exemption lasts. For an eight-year exemption, 20 percent of the units need to be affordable for residents with a salary equivalent to the area’s median. For a 12-year exemption, 20 percent of the units must be affordable for people who make no more than 60 percent of the area’s median salary.
“Affordable,” as defined by the program, means that a resident pays no more than 30 percent of their income toward rent.
Under the old equation, a two-bedroom apartment could cost up to $2,073 per month and still qualify for the tax exemption — that’s less than 30 percent of the monthly income for a typical family of four in the broader Portland area.
Under the new Vancouver-specific parameters, that same apartment would have to be priced at $1,451 per month in order to qualify for the tax exemption.
The city grants the tax exemptions to developers within three zones: a downtown district west of Interstate 5 and south of Fourth Plain Boulevard; in central Vancouver, along Fourth Plain Boulevard and state Highway 500 between Northeast 72nd and Northeast 98th avenues; and on the east side of the city, in an area bound by Northeast 18th Street, Northeast 34th Street, East 18th Street and T Street.
Since 2001, 30 housing development projects within the city have qualified for the program. Together, they make up approximately 2,600 new apartments, with about a quarter classified as affordable housing.
At the September workshop, Councilor Linda Glover said she was concerned that realigning the program with lower income levels could price developers out of the city and ultimately deter them from building in Vancouver.
“This was put into place so that people would be developing, and they would have an incentive in some place that maybe wasn’t the most advantageous,” Glover said. “Will they quit developing because it doesn’t pencil out for them?”
According to Chad Eiken, the city’s community and economic development director, around 25 developers voiced their concerns in a series of listening sessions ahead of the council’s discussion Monday. Representatives from Holland, Ginn Development and Killian Pacific provided the most specific feedback, Eiken said.
Their comments largely reflected the concerns raised by Glover.
“The overall consensus among the developers we spoke with is that affordable housing simply cannot be built without significant public subsidy, period,” Eiken said.
“They indicated that if the proposed changes are adopted, they would not likely take advantage of any of the tax abatement options that require an affordability component or, if they did, the lost revenue would need to be recovered from some other source.”
A public hearing on the proposed changes will be held Monday, Dec. 7.