Tumwater opens consultant-led review of multifamily housing tax exemption ahead of 2026 sunset

Tumwater staff told the Planning Commission it will hire a consultant to evaluate the city's multifamily housing tax exemption (MfTE) and recommend whether to extend, revise or let the program expire on Dec. 31, 2026.

Erica Smith Erickson, who briefed the commission, described the MfTE as a state-authorized program that limits property-tax liability on the residential improvements of qualifying multifamily projects for a fixed term. "The multifamily housing tax exemption is a program that supports new multifamily housing, and affordable housing within the city," Erica said in her presentation.

Staff summarized local options in current code: an 8-year program (available in parts of the Capitol Boulevard corridor and the Brewery District) that currently does not require an affordability component, and a 12-year program that requires 20% of units to be rented or sold at affordable levels tied to area median income (AMI). Erica listed current local projects that have participated or sought participation in the program: 350 North (built and participating), Craft District (conditional) and the Rookery (conditional). She also said Tumwater does not qualify for a 20-year/major-transit variant of the state program.

Commissioners focused on who ultimately bears the cost of the exemption. One participant stated, "It's a tax shift," arguing that tax relief for residential improvements reduces the tax base for other property owners. Commissioners asked staff to quantify how much revenue is shifted, how broadly it spreads (citywide versus neighborhood-level impacts), and whether the shift would impose noticeable burdens on lower-income property owners.

Erica said the consultant will be asked to analyze the program's financial impacts, historical approvals, timing from application to final occupancy, and options to require affordability in the 8-year program or otherwise redesign local eligibility. She confirmed that conditional approvals are valid for three years and that projects receive tax relief only after final occupancy and final certification into the program.

Commissioners also asked whether approvals can be converted from rental to ownership during the program and how affordability obligations are tracked; staff said affordability is counted as a share of units (for example, 20% of units at the specified AMI) rather than attached to named individual units and that staff will verify whether conversions are allowed under state or local code.

Staff said the city is preparing a consultant request for proposals and plans to return with findings and recommended code changes between August and October, with possible ordinance or code amendment language in November. Commissioners urged the consultant's scope include clear, public-facing materials'examples, cost scenarios (for instance a 50-unit example), and a concise fact sheet showing how a sample project would change tax liabilities across property-owner categories.

The commission did not take a formal vote on program changes during the meeting; Erica said the evaluation and any code amendments would be shaped by the consultant's findings and the council's later actions.