Everett council hears plan to lower MFTE project threshold from 16 to 4 units, staff says tax impact would be minimal

Everett city staff on Wednesday presented proposed changes to the city’s Multifamily Tax Exemption (MFTE) program that would lower the minimum eligible project size from 16 units to four and expand the boundary where projects can qualify, as the city seeks to boost infill and “missing middle” housing.

Frank Hong, housing policy development lead, told the council the MFTE program, in place since 1999, has supported roughly 3,700 units and about $850 million in construction activity statewide. Staff said the principal changes are lowering the unit minimum to 4 and adding lower-density residential zones (NR and UR4) to the eligible residential target area. Planning Commission and the state Department of Commerce have reviewed and expressed support for the draft ordinance.

“Lowering the minimum eligibility from 16 to 4 units and expanding the target area will help drive additional housing units, especially addressing middle housing,” Hong said in the presentation. He told council staff estimated the change could add an incremental 15 to 100 units per year, and modeled the per-taxpayer cost as roughly $0.30 to $2 annually depending on uptake.

At the public-comment portion of the hearing, local housing developer Ishmael Mohammed said the higher 16-unit threshold excludes many infill projects and urged council to adopt the 4‑unit minimum and citywide eligibility so small builders and homeowners can make projects feasible. “These updates support Everett’s housing action plan by encouraging infill housing, missing‑middle options, and stronger feasibility tools,” Mohammed said.

Council members pressed staff on three technical points: how affordability is defined under the set‑aside options, how the estimated taxpayer impact was calculated, and whether the exemption applies only to new construction or can be used for rehabilitation or conversions. Hong explained that the state’s set‑aside and AMI (area median income) rules set minimums — for example, the 12‑year term typically requires a 20% set‑aside with some affordability tied to 80% AMI — and that staff had used recent MFTE projects and levy distributions to compute a per‑unit shift in the tax base. He also said rehab and conversion can qualify but must meet additional conditions (for example, some rehab rules require a property to be vacant for a year).

Council closed the public hearing and scheduled a second reading and final action for July 29. The ordinance before the council is Council Bill 2606‑35, which would amend chapter 3.78 of the Everett Municipal Code in accordance with RCW 84.14.

The council’s questions and staff’s responses underscored the policy tradeoffs: staff emphasized MFTE is primarily a tool to increase housing supply, while several council members noted the city is also pursuing separate tools to increase ownership opportunities, such as community land trusts and condo reform. Staff said earlier uses of MFTE on ownership projects have been limited mainly to mission‑driven organizations (for example, Habitat for Humanity) because standard market‑rate ownership products have not typically captured the developer-side incentives the same way rental projects do.

The council will revisit the ordinance on July 29 for further deliberation and possible adoption.