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Council and planning commission debate construction excise tax in draft Housing Production Strategy
Summary
Consultants presented a draft Housing Production Strategy and more detail on a proposed construction excise tax (CET); planners and councilors expressed mixed support and asked staff to retain CET in the draft for further public hearings while collecting more data on revenue and development impacts.
City consultants and staff presented a public review draft of the Housing Production Strategy (HPS), describing 12 recommended strategies to increase housing supply and the implementation steps and timelines. "We've kind of winnowed these strategies down to a list of, I believe, 12," Matt Hasty of MIG said, noting the report is intended as a roadmap and that the city must report on fair and equitable housing outcomes under state rules.
Brendan Buckley of Johnson Economics reviewed the construction excise tax (CET), explaining the residential CET is capped at 1% of permit value under state law and that an illustrative rate of 1% (applied to five‑year average permitting activity) could yield roughly $300,000 per year. "The CET can be applied to residential development and commercial development...the residential CET is capped at 1% of the permit value of new residential development," Buckley said. Commissioners and councilors tested the assumptions: some affordable‑housing advocates said CETs help stack financing and leverage state funds, while builders and several planning commissioners warned CETs can add cost in a market with limited developable land and be passed to buyers. Staff explained adopting a CET would require an ordinance (not a citizen vote) but would be subject to state allocation rules for the revenue.
The working group that reviewed the draft reported a split on CET: three supported it, three opposed, and two abstained. Consultants asked whether the council and commission wanted CET retained in the revised draft to allow public hearings and further analysis; councilors generally asked for more revenue and impact detail and signaled they were not ready to adopt CET tonight.
