CBPS Compliance Services Washington | Avoid Penalties
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MultiFamily
What is MFTE?
MFTE (Multifamily Housing Tax Exemption) programs are property tax waiver programs enacted by cities and counties to support local housing goals. Under Chapter 84.14 RCW, local governments can give exemptions for new construction, conversion, and rehabilitation of multifamily residential improvements with at least four units.
Under these exemptions, a property owner does not have to pay property taxes on the residential improvements for a given number of years. The property owner still pays tax on the land and on non-residential improvements like the commercial portion of a mixed-use building.
Considerations
- MFTEs can result in either a loss of tax revenue to the community, or a tax shift where other property owners will pay more in taxes.
- MFTE programs require staff time to conduct regular monitoring, oversight, and reporting. R
- Regular updates can be necessary to make sure the program provides a sufficient incentive to maximize public benefits.
Types of MFTE
MFTE programs are usually divided according to the length of the program
8-year MFTE program,
For an 8-year MFTE program, there are no requirements for affordable housing, although some cities provide their own requirements. Many communities use this to promote market-rate housing construction in neighborhoods where new housing investment is needed.
12-year MFTE program
A 12-year MFTE program must set aside at least 20% of housing units for low- and moderate-income households. Under the statute, household income is based on Area Median Income (AMI), with households with incomes at 80% of AMI or less considered “low income”, and households at 115% of AMI or lower “moderate income”. This MFTE is used for providing affordable rental housing options, including choices in market-rate private housing projects.
20-year MFTE program
A 20-year MFTE program requires that 25% of units be sold as permanent affordable housing for households at 80% AMI or below, with a nonprofit or government agency sponsoring the sale and restrictions in place for resale to ensure long-term affordability. This is a new option implemented in 2021 and is intended to be used to encourage affordable housing homeownership. There is an option for permanent affordable rentals (20% of units for 99 years at 80% AMI or less) but a deadline for passing this program restricts new programs.
Note that communities can also choose to impose higher affordability requirements and include other requirements for MFTE projects as well.
Frequently Asked Questions
Do multifamily buildings count?
Yes. All multifamily buildings over 20,000 square feet are Tier 2 covered buildings. Non-residential buildings are split between Tier 1 and Tier 2 by size.
What is CBPS compliance?
CBPS (Clean Buildings Performance Standard) is a Washington State energy efficiency law that requires certain commercial buildings to meet energy performance targets. Compliance helps reduce energy costs, lower emissions, and avoid state penalties.
Clean buildings are essential to meeting our state energy goals. In 2019 the Clean Buildings bill was signed into law, expanded in 2022, and augmented in 2023. The objective is to lower costs and pollution from fossil fuel consumption in the state’s existing covered buildings, multifamily buildings, and campus district energy systems. The law also provides Tier 1 and Tier 2 incentives to encourage building owners to make energy efficiency improvements earlier than required.
What are the penalties?
Tier 1 penalties are $5,000 plus $1.00 per square foot per year, accumulated daily for up to 18 months. Tier 2 penalties are a flat $0.30 per square foot and are not prorated.