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Spokane staff propose MFTE change to bar short-term rentals in new tax-exempt buildings
Summary
City planning staff brought a code amendment to bar short-term (transient) lodging in buildings receiving multifamily tax exemptions going forward; the change would not apply to projects with existing contracts. Council members questioned trade-offs between enforcement simplicity and potential impacts on development feasibility.
Amanda Beck, planning services, briefed the Urban Experience Committee on a proposed amendment to Spokane’s multifamily tax exemption (MFTE) code that would explicitly prohibit short-term (transient) lodging in projects receiving an MFTE going forward.
The change would require new MFTE projects to provide “permanent residential occupancy,” the staff memo said, and would not retroactively alter currently approved MFTE contracts. Beck said the city already asks annually whether MFTE buildings operate short-term rentals but that compliance now relies on self-reporting and manual follow-up.
“Short-term rental use cannot get the tax benefit,” Beck said, noting that verifying that prohibition has been administratively difficult and that County assessor coordination is required when exemptions are adjusted. She told the committee city staff want a clearer rule to reduce administrative burden and align with state guidance from the Department of Commerce and applicable RCWs.
Several council members said they understood the intent — to preserve long-term housing supply — but warned of unintended consequences. Councilmember Cascart said short-term rental income can be necessary for some projects to “pencil” and suggested alternatives such as upfront declaration of which units will be transient or fees that recapture some of the tax benefit for units used as short-term rentals.
Spencer, a planning staffer, said the county assessor currently recalculates taxable square footage when short-term rentals are identified, but staff must rely on property owners to report operations. Beck said staff could explore approaches that require an up-front declaration of short-term units and a formal accounting to the assessor, but that the amendment before the committee aims to simplify administration by prohibiting short-term rentals in new MFTE projects entirely.
The committee did not take a final vote; Beck said the proposal would return for additional review and that implementation would not affect projects with existing MFTE contracts.
