Multifamily Property Tax Exemption (MFTE) Program Reauthorization
Overview
The City of Seattle first adopted the Multifamily Property Tax Exemption Program (MFTE) in 1998 and has reauthorized the program five times since then. The current MFTE Program is codified in SMC Chapter 5.73 and is scheduled to sunset on September 10, 2025. As such, the Seattle Office of Housing (OH) is overseeing an in-depth evaluation of the MFTE Program to inform recommendations for reauthorization legislation in Quarter 4 of 2025. Please note that separate legislation allowing OH to approve 12-year extensions of property tax exemptions scheduled to expire in 2025 was approved by City Council in March 2025.
What is MFTE?
The Multifamily Property Tax Exemption (MFTE) Program provides a tax exemption on eligible residential improvements in multifamily housing developments in exchange for income- and rent-restricted homes. Seattle’s MFTE program is the largest in the State of Washington, with over 6,600 MFTE homes currently part of the program.
What does reauthorization entail?
Over the last year, the Mayor's Office and OH have analyzed key information about the MFTE program to understand which aspects should be improved or changed through the legislative reauthorization process. OH has gathered feedback from constituents (renters, developers, property owners and operators); analyzed housing market and MFTE program data; and collaborated with the University of Washington to evaluate the costs and benefits of the MFTE program. This information informs proposals for the next iteration of MFTE (“Program 7” or “P7”).
Proposed Program 7 Legislation
The Mayor's Office and OH will be presenting the proposed legislation to Seattle City Council for Program 7 of the MFTE program on Wednesday, August 13 at 10 a.m. during a special meeting for the Housing and Human Services Committee.
You can view the agenda and read the full proposed legislation by clicking this link.
Proposed legislation for Program 7 includes:
- Reducing MFTE program participation fee to $2,000 base fee, plus $200 per unit, up to a maximum of $10,000 per project.
- Increasing the allowable rent and income limits for MFTE units, based on the area median income (AMI) levels.
- Establishing MFTE affordability requirements for standard and alternative bedroom configurations.
- Modifying comparability requirements and the distribution of MFTE units and unrestricted units.
- Replacing the Program 6 rent cap with the State rent cap authorized by HB 1217. A current 4.5% rent cap remains in place for current renters in MFTE P6 properties.
- Allowing developers to change their agreements to reflect new MFTE P7 rules, if a Final Certificate of Tax Exemption has not been issued yet.
- Clarifying various definitions and application, reporting, and administrative processes.
I live in an MFTE apartment. How will the new P7 legislation impact me?
Will my rent go up?
If you already live in an MFTE apartment, your unit/lease follows the rules that were in place when your lease was signed. The income and rent regulations for your unit/lease won't change.
The proposed program changes for rent and income limits will affect new buildings and units not under lease agreement prior to this law going into effect. If your apartment is regulated to be affordable for people with incomes at 60% of the area median income (AMI), the limit will stay at 60% of AMI.
However, the Office of Housing updates MFTE rents every year based on changes to the area's median income. So while your building's affordability level stays the same (like 60% AMI), your actual rent amount may increase each year depending on changes to the annual income and rent limit tables. Your property manager may adjust your rent up to the annually published limit.
What about the rent cap?
If you had a lease agreement in place before this law goes into effect, you will maintain the annual rent cap that was in place when you originally signed your lease. If your rent increases have been capped at 4.5%, this cap will remain in place until your tenancy in that apartment ends.
The proposed legislation caps future rent increases at 10%, to align with Washington State HB 1217.
How will income recertification change?
If you recertify your income every year, we're making it simpler:
- Years 1-2: After you complete the full income certification process (with all your documents) when you move in, for the next two years, you can just sign a simple form stating your income. There is no need to gather all those documents again.
- Year 3: You'll need to provide all the supporting documents again, just like you did when you moved in.
This means less paperwork and faster processing for most years, while still keeping track of income changes consistent with Washington State requirements for tax exempt multifamily housing.
OH Engagement on MFTE Reauthorization
- Survey Feedback: Over 600 MFTE renters shared their experiences via a survey.
- Virtual Meetings: Two webinars (May 17 and October 23) provided updates and gathered input from stakeholders.
- Written Feedback: Constituents submitted written input to highlight program strengths and areas for improvement.
- Data Analysis: Reviewed renter demographics, income, housing costs, and market data to propose updates to rent and income limits for Program 7.
UW report
A team of researchers at the University of Washington evaluated MFTE’s costs and benefits. The researchers compared tax exemption values to the amount of rent discounts for MFTE-designated apartments. The report also highlights program challenges and considerations for reauthorization legislation. Read the final report here.