3.22.040 Tax exemptions for multifamily housing in residential target areas.
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A. Intent. Limited eight- or 12-year exemptions from ad valorem property taxation for multifamily housing in urban centers are intended to:
1. Encourage increased residential opportunities within urban centers designated by the city council as residential target areas;
2. Stimulate new construction or rehabilitation of existing vacant and underutilized buildings for multifamily housing in residential target areas to increase and improve housing opportunities;
3. Assist in directing future population growth to designated urban center target areas and thereby reducing development pressure on single-family residential neighborhoods;
4. Achieve development densities which are more conducive to transit use in designated urban centers;
5. Encourage new construction or rehabilitation of owner-occupied multifamily housing where identified as desirable; and
6. Encourage income-based housing opportunities.
B. Duration of Exemption. The value of residential improvements qualifying under this chapter will be exempt from ad valorem property taxation for:
1. Eight successive years where all applicable criteria herein are met under subsection (D)(9)(a) of this section; or
2. Twelve successive years if all applicable criteria herein are met under subsection (D)(9)(b) of this section. In all cases the duration of exemption shall be measured beginning January 1st of the year immediately following the calendar year after issuance of the final certificate of tax exemption.
C. Limits on Exemption. The exemption does not apply to the value of land or the value of improvements not qualifying under this chapter, nor does the exemption apply to increases in assessed valuation of land and nonqualifying improvements. In the case of rehabilitation of existing buildings, the exemption does not include the value of improvements constructed prior to submission of the completed application required under this chapter. The exemption does not apply during the construction phase of the project prior to issuance of the final MFTE certificate.
D. Project Eligibility. A proposed project must meet the following requirements for consideration for a property tax exemption:
1. Location. The project must be located within a residential target area, as designated in VMC 3.22.030.
2. Application Date. A complete MFTE application must be received prior to receiving a construction occupancy permit.
3. Tenant Displacement Prohibited. Property proposed to be rehabilitated must be vacant at least 12 months before submitting an application and fail to comply with one or more standards of the applicable state or local building or housing codes on or after July 23, 1995.
4. Size. The project must include at least four units of multifamily housing within a residential structure or as part of a mixed-use development. A minimum of four new units must be constructed or at least four additional multifamily units must be added to existing occupied multifamily housing. Existing multifamily housing that has been vacant for 12 months or more does not have to provide additional units so long as the project provides at least four units of new, converted, or rehabilitated multifamily housing.
5. Permanent Residential Housing. At least 50 percent of the space designated for multifamily housing must be provided for permanent residential occupancy, as defined in VMC 3.22.020.
6. Proposed Completion Date. New construction multifamily housing and rehabilitation improvements must be scheduled to be completed within three years from the date of city council approval of the conditional certificate.
7. Compliance with Guidelines and Standards. The project must be designed to comply with the city’s comprehensive plan, building, housing, and zoning codes, and any other applicable regulations in effect at the time the application is approved. Rehabilitation and conversion improvements must comply with all applicable housing codes. New construction must comply with the International Building Code. The project must also comply with any other standards and guidelines adopted by the city council for the residential target area in which the project will be developed as defined in Table 1 below.
8. Owner Occupancy. Projects within a residential target area that are developed for owner occupancy shall include a contract or other guarantee acceptable to the director ensuring that some or all of the units within the project are used for purposes of owner occupancy. Each MFTE unit shall be occupied by the owner as their primary residence.
9. Options Under the Program. To be eligible for the MFTE tax exemption program option under this chapter, the applicant must either commit to providing income-based housing in exchange for a 12-year tax exemption, or, alternatively, must pay an affordable housing fee in lieu of providing income-based housing (“affordable housing fee”) and meet certain density requirements in exchange for an eight-year market rate tax exemption. The criteria for these options are set forth below:
a. The market-rate exemption option is an eight-year exemption that is contingent upon payment of an affordable housing fee in lieu of providing income-based housing as a part of the project (“affordable housing fee”). The affordable housing fee is determined by the specific target area and density as set forth in Table 1. Depending upon the target area and the density of the project, the affordable housing fee shall be either 25 percent or 50 percent of the net present value of the property tax exemption over the life of the exemption. Affordable housing fees paid pursuant to this subsection shall be held in a separate fund and used to develop affordable housing in the city. The ownership option units will not be subject to the affordable housing fee. Starting from the date of the conditional certificate of tax exemption approval and throughout the exemption period, the MFTE ownership units shall not sell for more than two times the United States Department of Housing and Urban Development (HUD) HOME homeownership value limit for newly constructed housing in Clark County, which is updated annually by HUD. Owners may contact the director at any time to confirm current resale price limits. The owner shall provide the director written notice of property sale 30 days in advance of recording the new deed with the Clark County Auditor. Exceeding the resale price limit shall constitute noncompliance and will initiate the cancellation of the exemption under VMC 3.22.040(Q) and subject the owner to the effect of cancellation under VMC 3.22.040(Q)(1). The required number of ownership units for each target area are set forth below in Table 1.
Table 1 below summarizes the options and corresponding requirements for market rate projects in each residential target area. To encourage production of larger family-size units, for the purposes of calculating the development density required to reduce the affordable housing fee in-lieu percentage, three-bedroom units will count as one and one-half units and four or more bedroom units will count as two units.
|
Residential Target Area |
Option 1 Market Rate With Affordable Housing Fee |
Option 2 Market Rate With Density Requirements and/or Affordable Housing Fee |
Option 3 Ownership |
|
Downtown Waterfront |
50% |
275 dwelling units/acre + 25% Affordable Housing Fee In Lieu |
No Affordable Housing Fee In Lieu; Minimum of 12 units required |
|
Vancouver City Center |
50% |
225 dwelling units/acre + 25% Affordable Housing Fee In Lieu |
|
|
East Vancouver |
50% |
200 dwelling units/acre + 25% Affordable Housing Fee In Lieu |
|
|
Uptown |
25% |
160 dwelling units/acre |
|
|
Evergreen/Grand |
25% |
90 dwelling units/acre |
No Affordable Housing Fee In Lieu; Minimum of 4 units required |
|
Fourth Plain Corridor |
25% |
90 dwelling units/acre |
|
|
Mill Plain Corridor |
25% |
90 dwelling units/acre |
|
|
Upper Main Street Corridor |
25% |
90 dwelling units/acre |
b. The income-based option is a 12-year tax exemption under which applicants must commit to renting at least 20 percent of the total development units as income-based housing to households with annual incomes at or below 80 percent of area median income. If the total number of MFTE units calculated contains a fraction, then the number of MFTE units shall be rounded up to the next whole number. The ratio of MFTE unit types (bedrooms) shall be equal to the unit type ratio for the entire development. The property owner must provide information regarding tenant outreach regarding the availability of designated income-based units when advertising the property.
E. Application Procedure. A property owner who wishes to propose a project for a tax exemption shall complete the following procedures:
1. File with the city the required application and the required fees. The initial application fee to the city shall consist of a base fee of $5,000 plus $75.00 per multifamily unit. If the city denies the application, the city will retain that portion of the fee attributable to its own administrative costs and refund the balance to the applicant.
2. A complete application shall include:
a. A completed city of Vancouver multifamily limited tax exemption application form;
b. A description of the project including the type of project and exemption requested;
c. Preliminary floor and site plans of the proposed project;
d. Detailed list of unit size, number of bedrooms and bathrooms and projected rent or sales price;
e. A detailed project budget, financing plan and operating projection;
f. A detailed description of green building construction practices proposed for the development;
g. A detailed advertising plan describing outreach methods for income-based tenants;
h. For rehabilitation projects, the applicant shall also submit an affidavit that existing dwelling units have been unoccupied for a period of 12 months prior to filing the application and shall secure from the city verification of property noncompliance with the city’s minimum housing code;
i. A statement acknowledging the potential tax liability when the project ceases to be eligible or is canceled under this chapter;
j. Verification by oath or affirmation of the accuracy of the submitted information;
k. Application fee receipt.
F. Application Review. City staff will review applications to determine eligibility based on subsection D of this section and evaluate the effect of the deferred tax proceeds. The city will review applications under the approval criteria, procedures, and program guidelines in effect when the city deems an application complete.
G. Issuance of Conditional Certificate. The director may certify as eligible an applicant who is determined to comply with the requirements of this chapter. A decision to approve or deny an application shall be made within 90 days of receipt of a complete application.
1. Approval. If an application is approved, the applicant shall enter into a contract with the city, subject to approval by the city council in a form of a resolution, regarding the terms and conditions of the project. Upon council approval of the contract, the director shall issue a conditional certificate of acceptance of tax exemption. The applicant shall record the certificate with the Clark County auditor. The conditional certificate shall expire three years from the date of city council approval unless an extension is granted as provided in this chapter.
2. Denial. If an applicant is denied, the director shall state in writing the reasons for denial and shall send notice to the applicant at the applicant’s last known address within 10 days of the denial. An applicant may appeal a denial to the city council within 30 days of receipt of notice. On appeal, the director’s decision will be upheld unless the applicant can show that there is no substantial evidence on the record to support the director’s decision. The city council’s decision on appeal will be final.
H. Conditional Certificate Completion. Beginning on the date of the conditional certificate approval, the property owner has three years to obtain an occupancy permit.
I. Extension of Conditional Certificate. The conditional certificate may be extended by the director for a period not to exceed 24 consecutive months except as provided below. The applicant must submit a written request stating the grounds for the extension, accompanied by a $1,000 processing fee. An extension may be granted if the director determines that:
1. The anticipated failure to complete construction or rehabilitation within the required time period is due to circumstances beyond the control of the applicant;
2. The applicant has been acting and could reasonably be expected to continue to act in good faith and with due diligence; and
3. All the conditions of the original contract between the applicant and the city will be satisfied upon completion of the project.
4. An additional 12-month extension may be granted where each of the following criteria are met:
a. The request for the extension is for a later phase of a development subject to a development agreement; and
b. The conditional certificate was granted prior to February 2015; and
c. Ownership of the property has been transferred subsequent to the granting of the conditional certificate.
J. Application for Final Certificate.
1. Upon completion of the improvements agreed upon in the contract between the applicant and the city and upon issuance of a temporary or permanent certificate of occupancy, the applicant may request a final certificate of tax exemption. The applicant must file with the city the following:
a. A statement of expenditures made with respect to each multifamily housing unit and the total expenditures made with respect to the entire property;
b. A description of the completed work and a statement that the rehabilitation improvements or new construction on the owner’s property qualify the property for limited exemption;
c. If applicable, a statement that the project meets the income-based housing requirements as described in RCW 84.14.020; and
d. A statement that the work was completed within the required three-year period plus any authorized extension.
2. Within 30 days of receipt of all materials required for a final certificate, the director shall determine which specific improvements satisfy the requirements, whether the work was completed, and the rent and income limits of the units are consistent with the application and the contract approved by the city and is qualified for a limited tax exemption under this chapter.
K. Issuance of Final Certificate.
1. Review and Approval. If, after reviewing the application for final certificate, the director determines that the project has been completed in accordance with the contract between the applicant and the city and has been completed within the authorized time period, the city shall, within 10 days, file a final certificate of tax exemption with the Clark County assessor.
2. Denial. The director shall notify the applicant in writing that a final certificate will not be filed if the director determines that:
a. The improvements were not completed within the authorized time period;
b. The improvements were not completed in accordance with the owner’s application or the contract between the applicant and the city; including if applicable as income-based housing requirements; or
c. The owner’s property is otherwise not qualified under this chapter.
3. Appeal. Within 14 days of receipt of the director’s denial of a final certificate, the applicant may file an appeal with the city council. On appeal, the director’s decision will be upheld unless the applicant can show that there is no substantial evidence on the record to support the director’s decision. The city council’s decision on appeal will be final.
L. Post-Exemption Rent Restriction. At the expiration of the 12-year tax exemption period, a five-year rent restriction will apply to the MFTE units to reduce potential displacement of tenants. In each of the five years following the expiration of the multifamily tax exemption, annual increase in the income-based unit rents shall not exceed the unit rent in the previous year by five percent plus the Consumer Price Index-U factor, as referenced in VMC 3.08.100. During this five-year period, the applicant shall continue to provide the city with timely annual reporting pursuant to subsection O of this section and participate in the city’s compliance monitoring program pursuant to subsection P of this section. In the event that a household occupying an MFTE designated unit voluntarily vacates the unit during the five-year post-exemption period then that designated MFTE unit shall no longer be subject to any further rent restrictions and may return to market rate status.
M. Exemption Renewal. For income-based projects that are within 18 months of exemption expiration the exemption period may be extended for an additional 12 years contingent upon approval by city council. For the property to qualify for a potential extension the applicant must commit to renting at least 20 percent of the multifamily housing units as income-based units for low-income households earning at or below 80 percent of the area median income. Income-based projects previously approved at an MFI rate above 80 percent (100 or 115 percent) must agree to make MFTE units affordable to tenants with a median family income level at 80 percent or below.
1. Application. Property owners must request the 12-year exemption renewal no later than September 1st (four months prior to initial MFTE expiration date). Staff will review exemption application and project for compliance before making recommendation to city council for consideration. A $1,000 fee is required for the exemption renewal request.
2. Extension Expiration Notice. At the end of both the tenth and eleventh years of a 12-year extension of a tax exemption, applicants must provide tenants of rent-restricted units with notification of intent to provide the tenant with rental relocation assistance as provided below.
3. Tenant Relocation Assistance. At the expiration of any 12-year exemption or any 12-year exemption extension, the applicant must provide tenant relocation assistance in an amount equal to one month’s rent to a qualified MFTE tenant within the final month of the qualified tenant’s lease. To be eligible for tenant relocation assistance the tenant must occupy an income-restricted unit at the time the exemption expires and must qualify as a low-income at the time relocation assistance is sought. If the income-based requirements remain in place for the unit after the expiration of the exemption, relocation assistance in an amount equal to one month’s rent must be provided to a qualified tenant within the final month of a qualified tenant’s lease who occupies an income-restricted unit at the time those additional affordability requirements cease to apply to the unit.
N. Annual Compliance Review. For the duration of the exemption the owner of the rehabilitated or newly constructed development shall file a notarized declaration annually with the director that includes the following:
1. A statement identifying the total number of occupied and vacant multifamily units receiving a property tax exemption;
2. A certification that the property continues to be in compliance with the contract with the city including any provisions related to income-based housing; and
3. A description of any improvements or changes to the property constructed after the issuance of the certificate of tax exemption;
4. The total monthly rent or total sale amount for each unit;
5. For exemptions granted under the income-based housing provisions of this chapter, the income of each renter household at the time of initial occupancy; and
6. For exemptions granted under the income-based housing provisions of this chapter, documentation showing that 20 percent of the units were rented as income-based housing to low- or moderate-income households. The property owner must maintain records supporting this declaration and those records and the multifamily units are subject to inspection by the city. Failure to submit the annual declaration or maintain adequate records may result in the tax exemption being canceled.
O. Annual Reporting. For the first year of reporting, final MFTE certificates issued by the city in a calendar year shall be reported to the Washington State Department of Commerce by April 1st providing the information required by Chapter 84.14 RCW. For the remaining years of the exemption period applicants shall submit annual monitoring reports to the city no later than December 1st.
P. Annual Monitoring. A review of the rent rolls is required annually including unit number, unit size (bedrooms/bathrooms), household size, income, rent, and utilities. City staff will conduct on-site reviews of tenant files randomly. There is a $500.00 annual monitoring fee.
Q. Cancellation of Tax Exemption. If the director determines the owner is not complying with the terms of the contract, the tax exemption will be canceled. This cancellation may occur in conjunction with the annual review or at any other time when noncompliance has been determined. If the owner intends to convert the multifamily housing to another use or otherwise discontinues compliance with this chapter, the owner must notify the director and the Clark County assessor within 60 days of the change in use.
1. Effect of Cancellation. If a tax exemption is canceled due to a change in use or other noncompliance, the Clark County assessor may impose an additional tax on the property, together with the interest and penalty, and a priority lien may be placed on the land, pursuant to Chapter 84.14 RCW.
2. Notice and Appeal. Upon determining that a tax exemption is to be canceled, the director shall notify the property owner by certified mail. The property owner may appeal the determination by filing a notice of appeal with the city clerk within 30 days, specifying the factual and legal basis for the appeal. The city council will conduct a hearing at which all affected parties may be heard and all competent evidence received. The city council will affirm, modify, or repeal the decision to cancel the exemption based on the evidence received. An aggrieved party may appeal the city council’s decision to the Clark County superior court. (Ord. M-4420 § 4, 2023; Ord. M-4416 § 4, 2023; Ord. M-4332 § 4, 2021; Ord. M-4225 Exhibit A, 2018; Ord. M-4186 § 2, 2016; Ord. M-3987 § 1, 2011; Ord. M-3355, 1998; Ord. M-3314, 1997)