The Vancouver City Council on Monday passed a construction sales tax deferral to make it cheaper for developers to build affordable housing in parking lots.
Owners of surface parking lots are eligible for the tax deferral if they develop residential projects where at least half of the rental units are affordable for people making less than 80 percent of the area median income ($63,150 a year for a single person).
The program also applies to development of homes for ownership if they’re for people making less than 115 percent of median income (about $90,850 a year for a single person).
If the units or homes stay affordable for 10 years, they qualify for tax deferral forgiveness.
The city can maximize its impact by taking advantage of the program, created recently when the state passed a law giving cities the ability to create a retail sales and use tax deferral program as a tool to support affordable housing production, said Patrick Quinton, economic development director for the city.
The tax break would mostly come from the state, which has a 6.5 percent sales tax, while the Vancouver sales tax is 2.2 percent.
The program would likely cost the city less than $600,000 per year, according to a city staff report. The total tax deferral per unit would be $11,667 per unit.
Inflation and rising costs of construction materials plagued builders throughout 2024, making it more difficult to build affordable housing, according to the National Association of Home Builders.
Although few projects would qualify for the sales tax deferral, it’s a way to add affordable units to the city’s housing supply, take advantage of underutilized land and help leverage scarce public funds, Quinton said.