Study: Kirkland’s multifamily tax exemptions shift modest tax burden, deliver affordable units at lower per‑household cost than a levy

Kirkland — A consultant team presented preliminary results on Oct. 21 from a fiscal impact analysis of Kirkland’s multifamily tax exemption (MFTE) program, finding the program has supported hundreds of units of affordable housing while shifting a small portion of property tax obligations to other taxpayers.

Lede: Burke & Associates (contracted through ARCH) analyzed assessor data and MFTE reporting and estimated that MFTE properties in Kirkland exempted about $626 million in assessed value in 2025. The consultant estimated roughly $2.1 million in total property taxes were shifted in 2025 and about $581,000 of that was the city’s portion; the program supported about 210 MFTE‑restricted units as of October 2025.

Why this matters: The analysis focused on comparing the cost to taxpayers of MFTE (tax shift across taxing jurisdictions while exempted) with alternative methods of delivering the same number of affordable units, such as a city levy (lid lift) to build or to subsidize the rent. The consultants concluded that the per‑household cost to a median Kirkland homeowner would be substantially higher under a hypothetical levy than the program’s current tax shift, and that MFTE helps produce affordable units at lower immediate cost to local taxpayers.

Findings in brief: - Exempted assessed value: about $626 million in 2025 across 11 active MFTE properties; MFTE value is ~1.3% of the city’s total AV that year. - Shifted taxes (2025): consultants estimated roughly $2.1 million in total taxes shifted across jurisdictions, with the city’s share about $581,000; the estimated per‑median‑homeowner share for the total shift was approximately $15 annually (county/schools/fire districts comprise most of the rest). - Delayed/foregone taxes: because the assessor often defers recognition of new construction value, the city loses some foregone revenue during the exemption period but may receive delayed taxes after the exemption ends; consultants modeled how delayed taxes could change over a multi‑decade horizon and noted uncertainty around assessor timing and valuation assumptions. - Rent benefit: ARCH/consultant analysis estimated those MFTE‑restricted units saved residents about $2 million a year in rent compared with market rents for the same units; the annual rent benefit exceeded the city’s foregone portion of taxes on an annual basis.

Comparisons: Consultants built a hypothetical levy scenario to fund construction or a rent subsidy for an equivalent number of affordable units. Using available improvement valuations and Department of Commerce construction‑cost references, the levy amount needed to build or subsidize the same capacity would translate to an estimated median‑homeowner burden larger than the MFTE tax shift in the short term.

Councillor questions: Council asked for additional sensitivity detail about deferred new‑construction values, assessor timing and how increased assessed value after the exemption period offsets foregone revenue. Consultants agreed to provide an updated table and an interactive tool for staff to run future scenarios; a final report and staff tool are expected in November.

Next steps: Burke & Associates will incorporate council feedback, produce a final report and deliver a tool the city can use to model MFTE impacts for future proposals; staff will return to council with the final report in November.