Council studies multifamily tax‑exemption updates as two large downtown projects seek support

City planning staff and economic development managers reviewed Lakewood’s multifamily tax‑exemption (MFTE) program at the July 14 study session and explained recent code updates, program benefits and two pending large projects that developers say rely on the exemption to proceed.

Why it matters: the MFTE is a long‑used municipal incentive that exempts incremental property taxes for a set period to encourage multifamily development in targeted areas. Staff told council that the program spurs private investment, increases housing supply near transit and, over the long run, expands the taxable base while also offering longer exemptions when projects include affordable units.

Director of Planning and Public Works Jeff Remag summarized the 2023 code updates (Ordinance adoption noted in the packet) that aligned the program with state requirements and local goals. Key changes cited in the packet include: exclusion of accessory dwelling units (ADUs) from eligibility, an increase in applicant notice from 90 to 120 days, the addition of a 12‑year exemption option available when projects meet specified affordability thresholds (staff described the threshold as a percentage of affordable units at a specified AMI level), annual compliance reviews for 8‑ and 12‑year contracts, administrative eligibility approval with a resolution returning to council, and a minimum project size of 15 units.

Remag and Economic Development Manager Becky Nooty presented two projects referenced in the packet. Springbrook 2 is described as a 76‑unit project with an estimated development cost of about $25 million. Alliance was described as a 309‑unit project with land and construction costs in the tens of millions (packet figures: land roughly $9 million; planning and engineering about $5 million; construction around $69 million). Staff also showed a sample economic‑impact estimate from a comparable study (cited as a sample example from Tacoma) that projected roughly $5.5 million in annual economic output for a modeled project.

Councilmembers probed program goals. Councilmember Francietta urged that the city needs predictable tools that also help meet state and regional requirements for affordable housing bands; he and others said the MFTE tends to encourage market‑rate development and said the city should use complementary incentives for lower‑income bands. Several councilmembers noted that code updates since 2023 have increased developer interest: staff said seven MFTE projects were approved in the program’s first 20 years and five additional projects have come forward since the 2023 changes.

Staff said the MFTE is primarily an economic development and housing‑production tool: it helps expensive projects “pencil” given current capital costs and financing requirements, but it is not a stand‑alone affordable‑housing subsidy. Staff described examples of affordability tradeoffs: a hypothetical $95 million project with a 12‑year MFTE might forego about $12 million in taxes (roughly 20% of that project’s value over the exemption period) while producing a stream of several million dollars in reduced rents for qualifying affordable units over the same period.

Staff recommended continuing to use the MFTE in targeted Residential Target Areas (RTAs) to support growth near transit, while councilmembers asked staff for additional analyses comparing projects that used MFTE vs. those that proceeded without it and for more detail on how the program contributes to meeting the city’s housing targets (staff cited an estimated need of roughly 500 net new units per year to meet local goals). Council did not take action; staff said conditional approvals for the Alliance and Springbrook 2 projects are tentatively scheduled for the next regular council meeting.