Gig Harbor reviews multifamily housing tax exemption program for affordable development

During the Gig Harbor City Council Study Session on March 13, 2025, city officials discussed the potential implementation of a multifamily housing tax exemption (MFTE) program aimed at addressing the growing need for affordable housing in the community. The MFTE program is designed to encourage the construction of multifamily and affordable housing, aligning with state requirements under House Bill 1220.

Housing, Health, and Human Services Manager Shay Smiley and Community Development Director Eric Baker presented an overview of the MFTE program, which offers property tax exemptions for new construction or rehabilitation of multifamily housing with at least four units. The program includes three tiers: an 8-year exemption for market-rate housing, a 12-year exemption requiring 20% of units to be affordable for low to moderate-income residents, and a 20-year exemption aimed at affordable homeownership options.

The council emphasized the importance of affordable housing in stabilizing the community and preventing homelessness. The discussion highlighted the financial implications of the MFTE program, noting that while developers would benefit from tax exemptions on residential components, they would still pay taxes on land and commercial portions of their properties. This shift in tax burden would be distributed among other property owners in Gig Harbor.

A case study from the city of Sumner was presented, illustrating the successful implementation of an MFTE program that revitalized their downtown area. Sumner's experience suggests that a phased approach could be beneficial for Gig Harbor, starting with the Village at Harbor Hill and potentially expanding to other areas if successful.

The council is now seeking guidance on whether to proceed with the MFTE program, which could significantly impact housing availability and affordability in Gig Harbor. As the city navigates this initiative, officials are committed to ensuring that the program aligns with community needs and goals for sustainable development.