Housing & Human Services Committee 8/13/2025

Good morning.

Good morning, everybody.

Today is Wednesday, August 12th.

This is a special Housing and Human Services Committee, and it will now come to order.

It is 10.02.

I'm Deborah Juarez, Chair of the Housing and Human Services Committee.

Will the clerk please call the roll?

Council Member Juarez.

Here.

Council President Nelson.

Council Member Rink.

Council Member Sokka.

Here.

Vice Chair Salmon.

Here.

Chair, there are three members present.

Thank you.

That was the roll call for our students watching to make sure who's here and who's not.

You guys are the students, right?

Yes, you are.

Okay.

So as a new chair of this committee, I'm passing the gavel to my vice chair, Council Member Solomon, who has graciously been monitoring this committee while the seat was empty until my return, and he will be facilitating this meeting because he was the vice chair, and today he will serve as the chair.

So with that, I'm passing the gavel to Council Member Solomon, who will serve as the chair today.

All right, thank you very much, Council Chair Juarez.

All right, if there are no objections, the agenda will be adopted.

Hearing none, the agenda is adopted.

Thank you all very much for coming to this Wednesday morning meeting of the Housing and Human Services Committee.

Good to have you all here.

Always wanted to thank our city clerks and our council central staff and our staff from the executive's office for making today's meeting possible.

We will now open the public The hybrid public comment period.

Public comments should be related to items on today's agenda and within the purview of this committee.

Clerk, how many speakers do we have signed up today?

We have three in person and four remote.

Okay.

All right.

We will allow each speaker two minutes.

And we'll start with the in-person speakers first.

Clerk, could you please read the instructions for the public comment period?

The public comment period will be moderated in the following manner.

The public comment period is up to 20 minutes.

Speakers will be called in the order in which they're registered.

In-person speakers will be called first, after which they will move to remote speakers until the public comment period is ended.

Speakers will hear a chime when 10 seconds are left of their time.

Speakers' mics will be muted if they do not end their comments within the allotted time to allow us to call on the next speaker.

The public comment period is now open, and we'll begin with the first speaker on the list, Lori McGuin.

And to expedite the process for those of you who are listening to public speak, if you want to, you know, get yourselves prepared and lined up.

Also want to reflect for the record that Council Member Brink has joined us.

Please begin when you're ready.

Hi, thank you, Councilmembers.

Good morning.

My name is Lori McEwen.

I'm the Vice President of Development at NHTSA Stegen.

We're a development company that has been engaging in neighborhoods in Seattle since the early 1980s.

I'm here today to encourage your support for the MFTE Program 7 legislation.

The MFTE Program has been an important tool for housing production and housing affordability.

NHTSA Stegen has a portfolio of nearly 1,300 units with over 300 MFTE units that have either just delivered, are currently in production, or are in entitlement in Seattle.

This program has been critical for helping us to build new housing because it can directly support projects to move forward that would not have made financial sense otherwise.

It helps housing providers to offset some of the macro instability, like interest rate uncertainty, rising construction costs, and of course tariffs.

Beyond the production of new housing and dedicated workforce housing, this program, if approved as currently written, will retain thousands of currently affordable apartment units in the city.

However, these units are at risk of exiting the program if a workable MFTE extension is not included in the legislation.

In our experience, Program 6 was not appropriately calibrated, and you now have the opportunity to take meaningful action to support housing production.

The version of Program 7 before you represents a balanced, compromise approach.

Although there are opportunities to make a couple adjustments to produce more housing, such as increasing the alternative one-bedroom AMI level from 65 to 70 percent, to more closely align with the current program.

With this Program 7 proposal, there's a real opportunity in front of you right now to retain existing MFTE units that meet the needs of residents making between 40 and 90 percent AMI to create new workforce housing, but also to support the production of critically needed new housing overall.

Thank you so much.

Looking forward to your support.

Next up, we have Norris Cooper.

Hello.

Thank you, council members.

My name is Norris Cooper, and I am a development manager at Holland Partner Group.

Holland Partner Group is a developer, property manager, and general contractor that is local to Seattle and throughout the West Coast.

We have several projects that have participated in the MFTE program, the Huxley, Caroma, Westlake, the Independent, the Ayrs, the Tower, I'm the first one to participate through the Director's Rule.

These projects total roughly 1,500 units, with 300 or so being MFTE units.

The AIR was able to participate through the Director's Rule, which was helpful given the gap in rents as you go up the tower.

Overall, the MFTE program is a great program that allows workforce housing to be included in market rate housing.

in downtown in the core neighborhoods like Ballard, Fremont, South Lake Union.

It's a win-win program, and it can help, especially during economic challenges, interest rates soaring and uncertainty.

There's construction costs, escalation and inflation that we've experienced.

And so it can help the returns of a project to meet what an equity partner wants, which thereby produces more housing overall.

and retains affordable housing within the core of Seattle market.

The MFTE program is a voluntary program and I'm here to support Program 7. The new legislation is a win-win and it will help more projects to participate.

As it currently sits now, Program 6...

And so, you know, Program 7 is good overall, but we are a little bit concerned with the alternative bedroom approach, but thanks.

Thank you.

Next up, we have Randy Banneker.

Mr. Chair, members of the committee, welcome back.

Council Member Juarez, nice to see you.

I'm Randy Banneker.

I'm here on behalf of the Seattle King County Realtors and here to strongly support Council Bill 121039, which establishes vital consumer protections for homeowners targeted by unsolicited offers to purchase residential property.

This legislation is a thoughtful and necessary response to the growing prevalence of predatory home buying practices that disproportionately affect vulnerable homeowners, particularly seniors, and those facing financial distress in communities of color.

As professionals committed to the ethical real estate practices and the preservation of generational wealth, we commend the city for advancing policy that requires clear disclosures to homeowners before a purchase contract is signed, including notice of their right to an independent appraisal, legal counsel, and representation by a licensed real estate broker.

It also provides a meaningful cancellation window, empowering homeowners to reconsider offers made under pressure or without full market exposure.

It also establishes enforcement mechanisms and a private right of action, ensuring accountability for bad actors who exploit gaps in consumer awareness.

The bill complements existing state law while tailoring protections to Seattle's unique housing market and equity goals.

It aligns with Seattle's broader anti-displacement strategy and reinforces the importance of informed decision-making in residential transactions.

We encourage the council to adopt this ordinance and continue working with industry professionals to promote transparency, fairness, and housing stability across all neighborhoods.

Thank you.

We'll now move to remote speakers.

First up, we have Maria Barrientos.

Maria, please press.

Yep, you got it.

Yes.

Good morning.

My name is Maria Barrientos.

I'm asking the Council to support the MFT Program 7 proposal in front of you today.

I've been building housing in Seattle for over 35 years, and a fun fact is I was on the first ever MFTE Policy Committee when it was first envisioned in the late 1990s.

That's kind of sad to say I've been developing that long.

I was involved because it's ideologically very important to me, as Seattle did not have a tool for market rate developers to provide below-market units in their buildings.

And what a success it's become.

It's created a lot of affordable units.

To date, I believe there's more than 6,000 middle-income individuals and families across the city because of this program.

At present, MFT is the only housing tool available for middle-income renters, making sure that they don't become increasingly cost-burdened trying to afford market rent places to live in.

A lot has changed in our city since the late 90s, and our need for more tools in the toolbox to create housing at an affordable level has grown exponentially.

Please keep in mind also that this program is voluntary.

As we saw with Program 6 in place during one of Seattle's most expansive housing booms, the use of the program declined considerably because it became a burden to housing owners and was no longer an incentive.

Tools like MHA and the housing built by our nonprofit housing development community is going to continue to provide the lower AMI homes in our city.

So what I'm asking is that you support this approach outlined in Program 7, which ensures it's going to return as a strong voluntary program for market rate developers to use to create workforce housing.

Thank you.

Next up, we have Irene Wall.

Good morning, council members.

There are many problems associated with this MFTE program.

Too many to talk about in a few minutes, but I want to bring up a couple of points.

The preamble selectively quotes the UW report, but leaves out very important nuances and details, including that it is impossible to prove that MFTE is or was a needed incentive to development.

It also leaves out the fact that even with the generous tax exemptions, 85% of renters in MFTE units are still housing cost burdened.

It does not mention this conclusion.

When compared to the general rental market, income restricted MFTE units may only represent a modest discount.

And in some cases, MFTE rents exceed average market rate rents.

MFTE is a failed program that only serves a tiny minority of renters at a huge cost to other taxpayers and a huge loss of revenue to the city.

Ask your staff why the fiscal note does not mention the $80 million shifted to other taxpayers last year or the nearly $40 million in foregone revenue lost to the city.

With the $250 million budget deficit, how can you turn your back on this huge sum of missing revenue?

A few months ago you received a five-year report on MHA and that report included a really interesting fact that The developers expect a 15 to 20 percent profit return on investment.

Is your retirement account getting 20 percent?

I doubt it.

The Office of Housing spent months trying to figure out what to do with this program.

They held Zoom meetings and invited developers and property managers to offer their opinions, and they mostly just whined and complained.

They asked tenants if they liked their rent reductions in their new buildings, but there was no outreach to any of the taxpayers who are funding this graft.

Why are the taxpayers not considered equal stakeholders in this scheme?

MFTE...

Thank you.

Next up we have David Haynes.

I think you remember when City Council took away the incentives for developers and then said okay you can just pay an MHA fee and then they allow the same nonprofits that are going to be getting the money for social housing and the Jumpstart to access 1.3 billion dollars and then hire somebody who's for profit to build something that's modern third world that's warehouse echo.

We still have A desperate housing and homeless crisis and we got a conflict of interest on the council and the conspiring landlords who are getting in the way of legislation that would help us solve the supply and demand squeeze and allow for the developers to build higher with affordable housing built into it without only allowing non-profits that are politically connected that are unqualified to build You know, Deborah, congratulations for returning to council.

I hope that you're more successful.

And I wish that you would realize that if you, like, led the solving of the homeless crisis by going to the White House and meeting with Trump in a professional manner, And let him realize that Seattle needs a billion dollars of the original 50 billion dollars of the American Rescue Plan money that was supposed to go towards solving the homeless crisis that could still be used if Seattle would just create the better policies that this council was supposed to get rid of that the previous council created that you could help still find because the central staff kept a lot of things generalized during the last budget that exacerbated The public safety crisis, the homeless crisis, the housing crisis, the small business crisis, and the economic deficit crisis that the mayor keeps getting in the way of.

We need a more independent council that doesn't allow for the mayor to continue running interference for repeat offenders and using the homeless crisis money to put...

Thank you, David.

Let's last public comment.

Okay.

All right, as there are no more commenters, we will now have the public comment.

If there are no objections, the public comment period will be closed.

All right, very good.

Let's move on to our items of business.

Clerk, can you please read item one into the record?

Item 1, Council Bill 121039, an ordinance relating to residential property transactions requiring certain disclosures to owners before presenting an offer to purchase a residential property, establishing consumer protections for owners of solicited residential property, adding a new chapter 6.610 to the Seattle Municipal Code.

And this is for briefing and discussion, and we are joined by Krista.

Please introduce yourself for the record and begin when you are ready.

Good morning, council members.

Krista Vyas, deputy director of policy in the mayor's office.

And unfortunately, my colleague from finance was not able to make it this morning.

She was at the last presentation.

She might be able to come in at the end, but she had a conflict that prevented her from being here.

So you're just going to get me today on this.

No worries.

I'm feeling much better.

Thank you.

So today I am going to talk to you about the mayor's proposed legislation regarding predatory home buying practices.

And the order of the day is just to review the key components of the legislation with you and see if you have any questions.

And while you're getting set up there technologically, I just also want to reflect for the record that Council President Nelson has joined the committee.

Thank you, Thaddeus.

So I first just want to briefly discuss what do we mean by predatory home buying.

First of all, it's unsolicited offers for homes that are not currently on the market.

This can come in the way of letters, postcards, text messages, calls, even people knocking on your doors.

The vulnerable populations most at risk for this kind of behavior are the elderly, the financially distressed, and communities of color.

This often involves heavy-handed pressure tactics and can result in below market offers for homes.

So this is the behavior that we are looking to regulate.

And this is all coming in the context of the mayor's executive order to mitigate displacement pressures on Seattle residents as we look to move towards the biggest update to the city's comp plan and the city's history.

So with all the new zoning proposals being put in place that we anticipate will be occurring soon, we wanted to make sure that vulnerable homeowners are not at risk of these predatory practices.

So what does this legislation do?

High level, it will obligate potential buyers to disclose certain information to homeowners about their rights.

It provides an out for homeowners to cancel their purchase contract after signing.

And it gives the city the ability to find businesses and individuals who do not comply.

So I'm now going to just Talk about the specifics of this and how this would work.

So at least five days in advance of signing a purchase contract, the potential buyer or the buyer's rep must provide written notice to the owner.

And the notice must include information about how to access resources to assess fair market value, outlining the owner's right to appraisal, with the potential buyer being responsible for the cost of the appraisal, Highlighting the owner's right to a real estate agent and to seek legal counsel and any other information that the FAS director deems appropriate.

So this is provided in advance.

When it comes time to a purchase contract, there is another notice that is a separate disclosure notice that must be required that includes all the additional information I just relayed and specifying that the owner has the right to cancel the purchase contract without penalty.

And we will be requiring signatures on this disclosure document to ensure that it's actually provided and received.

And FAS will also be providing information, requiring information on the disclosure form about how the homeowner can get in touch with the city's Consumer Protection Bureau should they have any issues or questions.

And then after signing the purchase contract, the owner can still hire an appraiser at the buyer's expense within 10 days after the contract execution.

The owner can also cancel the purchase contract within 10 days after receiving the appraisal.

And even if the owner does not seek an appraisal, they can cancel the purchase contract within 10 days with no penalty.

So this is designed to ensure that if somebody is pressured into signing, or even if they just have second thoughts about signing, that they are able to get out of the contract.

So our legislation does align closely with the state house bill.

We had issued an executive order wanting to do something on predatory home buying before we saw that the state legislature was going to be taking up a bill.

So we ended up watching closely what they were doing in Olympia.

And while we liked what we saw, we did think that there was room for improvement.

So I just wanted to point out some of the differences between our bill and the state bill.

So we do impose more stringent fines for violators.

We are giving homeowners more time following execution of the purchase contract to obtain an appraisal and cancel the contract.

I think the state only had three days, and we did not think that was sufficient, so we added 10 days.

And then we are also requiring stronger documentation requirements and a separate disclosure notice just to make sure that the homeowner is getting the information they need to make an informed decision.

And as mentioned by one of the speakers here, we are also establishing a private right of action for homeowners if a buyer fails to comply.

So that's kind of the high-level differences.

with the state bill.

And then this next slide is one that FAS staff would have been prepared to speak to.

But I can say, from what I know, that FAS will be overseeing the implementation of this bill.

They will be pulling together a plan for education, both to home buyers and to home owners.

And they will be setting up information on their website as well and also providing training.

And then making it clear the distinctions for people between the state bill and the city bill to avoid any confusion.

So with that, that's the end of the presentation.

I'm happy to take questions, but I just want to thank you for the opportunity to be here.

We're really excited to see this bill get approved.

Thank you.

Before I ask my colleagues about questions, we have a quick question for you in terms of FAS is doing the education and training.

Are they also the enforcement component here?

Yes.

Okay.

Thank you.

Council President Nelson.

And here's Laura from FAS.

Hi.

I'm Laura Beck from FAS.

My apologies.

I was in a panel interview today.

Okay.

Well, welcome.

All right.

So, again, seeing hands, I believe, Council President Nelson, your hand was up first.

Okay.

Thank you very much, and thank you for this presentation.

This is very important legislation.

So I always go with, we're trying to prevent bad behavior, and the bad behavior here is predatory home buying practices, right?

And so we need to give, and to me, that means we have to provide, we have to arm potential sellers early on so that they can make good decisions when these predators come by, okay?

One thing, a weakness that I see in the state legislation that I believe the executives or ours could address is on page six proposed regulations, so this is again the state.

At least five days in advance of signing a purchase contract, and then the first bullet point is how to access resources to assess fair market value of home.

You need to assess the fair market value right around the time you put your home on the market if you're going to do that.

And so I would like that addressed.

And then on page eight, when you're talking about the comparison, That issue is not, it's not taken into account.

It looks like the changes that I agree with to the state legislation that the executive's bill does are all, would all help after the fact.

So we're doing more stringent fines on violators.

You know, maybe number two does.

No, following execution of purchase, you know, so stronger documentation.

So all of these, and then the last bullet is private right of action.

All good things, but those happen after the violation or even after a potential homeowner makes the decision.

I'm not sure if I'm hearing a question there, but let me try to clarify what our legislation does.

So even in advance of sitting down and signing a contract, The buyer will be required to provide a disclosure statement to the homeowner that they have a right to hire a real estate agent, identify where they can look for fair market value resources.

So if the buyer is proposing a certain amount of money for this person's home, like you see a lot of cash for homes or whatever, This person will get a very clear notice about what they can do to double check whatever price this person's being offered in advance of signing any contract.

And it says at least five days in advance, right?

But it could be longer than that.

And then the person is not obligated to sign the contract.

It is important to have a fail-safe after the fact and after someone signs the contract in case they want to get out of it, right?

But the upfront disclosure notice is intended to help arm home buyers with the information they need to decide whether they even want to sit down and contemplate signing a contract.

So does the trigger of the timeline include when one of those notices would go up in a public place or on somebody's doorstep?

So I think that's a good question, and that's probably part of implementation.

And I think I can turn that over to Laura, but I think you probably wouldn't start providing that sort of disclosure information unless you had initiated some sort of back-and-forth conversation with someone.

Like, we might still see the postcards and the calls without this type of information.

It's once they start engaging with the home buyer, that they will be obligated to disclose all of this information.

Okay, well, I think that you, I explained the spirit of my thoughts and if it's an implementation, that's fine.

I just don't, we don't need to hammer this out or I'm not saying that there has to be an amendment here, but go on.

Do you want to say anything about timing of how this is what all work?

Yeah, I think as far as the implementation, and that's one of the challenges, I think, is getting this information out to the public.

Where are the best places?

I really do actually like the idea of having something included maybe on an advertisement.

That's not part of the legislation as it stands now.

But an example might be is we do that for when somebody impounds your car.

It gives an RCW that you can reference or something for the public to know what laws might be surrounding that.

I think that the major engagement is going to have to be at the community level for organizations that are in communities or serve people that are more likely to be preyed upon than others.

Which would be the elders, the seniors, limited English speaking neighborhoods and neighborhoods that are going through a lot of change.

What that plan actually looks like, we don't have it specified yet.

But we took notes from the last meeting on some of the suggestions.

So that's still working out.

Excellent.

Thank you very much for those two points.

I like the first suggestion you said, you know, putting it on like the towing notices.

And then also, of course, it's mostly about community.

Cool.

All right, great.

Council Member Rank.

Yes.

Oh.

Sorry.

Thank you.

I'm sorry, did you have your, I have a little hand up.

Oh, your hand was up first.

Yeah.

I'm sorry.

No, it's okay.

Please go.

I think I was.

Please.

She'll let her elder go first.

Yes, ma'am.

Thank you.

Yes, auntie.

First of all, yeah, exactly.

First of all, thank you for the PowerPoint, which I always print out.

Thank you for the page numbers.

Very important to me.

So can we go to page eight?

And this is just what I wanted to catch.

So House Bill 1081 was passed in 2025, correct?

This year?

Yeah.

So on the first bullet point says, allow city to impose more stringent fines on violators.

I guess implicit in that sentence is that the state does impose fines on violators.

So if they do, then how are we allowed to exceed the state law in fines?

Because usually the state law is the ceiling.

We can do things as long as we don't go above the state law.

Yeah, so it's been a few months since I've been in conversation with our attorneys over this, but we determined that the state law was sort of the baseline, and we could go over and above that and strengthen that.

And so that's what you're seeing here, and that's what we've done generally.

We didn't try to get too far away from the state law because we didn't want something wildly different that was just adopted by the state, but we selectively strengthened certain areas of the state law that we thought would be helpful for homeowners in Seattle.

Which would make sense for every city municipality that's looking at this law that would have the sensibilities of that city or that municipality about what fits as a fine for that If you don't know it, that's okay.

I can have someone pull it up for me.

What are the fines on the state side?

I'm just curious, what is the number that you...

If you don't know it, that...

I mean, ballpark...

Yeah, ballpark.

So this would go through their Attorney General's office if it ends up...

You could either take your complaint to the state if you wanted under the state law or you could take your complaint to the city.

We are going to, because of the disclosure notice and the information we're providing, we're anticipating that people who have problems in Seattle will likely call the city.

But I think the state fine, you know, they're in the ballpark of like $4,000, $5,000 for a first offense.

Don't quote me on that.

I'm just giving you sort of a general idea.

And then I think our initial fine is like $7,000 with ability to increase over time with multiple violations.

So, were there any particular, maybe, well, you don't have to name them, but were there, I kind of understand the history of House Bill 1081, were there particular groups that were doing mailers and knocking on doors and doing it online, that, why this was targeted and then of course the mayor picked up on it and did his executive order?

Were there, is that when it, how did, how did that manifest?

So, I mean, I'm not sure how it manifested at the state, except they too are making lots of changes in local land use codes and requiring more density.

And so I do think as you start to talk about increasing density, you raise fears about displacement.

And so I'm not sure what precipitated this discussion at the state, but here at the city, it came about in the context of our comprehensive plan update.

and concerns about displacement.

And so Mayor Harrell issued an executive order on displacement that identified a variety of strategies and areas that we wanted to strengthen in the city.

And this was one gap that we noticed in terms of predatory home buying.

I will say we don't have a strong handle on the extent of the problem.

And this, in some ways, will really help us identify to what extent these practices are happening.

We hear anecdotally I think many of us have been on the receiving end of some of these very aggressive tactics, but to the extent to which people end up feeling under duress and signing these contracts and later regretting them, I don't think we're really going to know to what extent that's happening until we start hearing from people.

And this gives us a way to start regulating a lighter regulation, I would say, because it's We had looked at a system where maybe we would try to license these types of businesses, but it was prohibitively expensive.

And given we don't know the extent of the problem, we decided to start out this way to see if we could get a handle on it first.

This is a great first step, a great stopgap measure with the comp plan coming in, density displacement, and also steering people back to their local municipality or city to do the complaint.

So that would be in the notice, which is great.

So well done.

I saw the executive order.

So thank you.

And the mayor.

Thank you.

Thank you.

Thank you, Chair.

Council Member Brink.

Thank you, Chair.

And maybe not a surprise, my questions actually build on the points that Council Member Juarez just raised, but I want to start on the point that this legislation is so important.

In fact, I was out in the Dawson neighborhood just this weekend talking to residents about Predatory home buying practices and talking about this legislation and folks were really excited to hear that this is something that the city is taking up and interested in.

So just want to emphasize at the top my excitement about this and really this I see as an important step forward in us trying to mitigate these practices.

And so I also want to applaud the executive and the sponsors for taking it a step farther beyond what the state has done, particularly in the areas of providing homeowners more time Following the execution of a purchase contract while also providing these stronger documentation requirements.

I think these are important elements of this bill.

My few questions for today is just if you can extrapolate a little bit more on how we've shaped the right to private action section.

And in the legislation, I'm not seeing a hard and fast dollar figure.

So can you give a sense on how much someone could expect to recoup if they decided to pursue a right to private action?

Yeah, I think that would be dependent on sort of the perceived damages and what the actual violation entailed.

But I can get more detail for you from our law department I'm assuming it's a case-by-case basis.

There certainly isn't any limit in our legislation.

So I think that would be something that would be adjudicated through the court system.

In our last meeting, we discussed the challenges in working on this policy because, to a certain extent, we don't know what we don't know.

My hope with this legislation is that this iteration of it is a first step, and as we gather more information and we understand more about how these practices proliferate and impact folks that will revisit and improve, so I'm wondering what information will we be gathering?

What information would we start getting access to as a city that could inform future policy decisions in this area?

And would that information be housed and held by FAS or Office of Housing?

Yeah, go ahead.

So as far as the complaint process, that would be something that would be tracked in FAS.

It could either come through the Customer Service Bureau or it would be internally tracked by the Consumer Protection Division, so that data would be available there, kind of on two levels.

Customer Service Bureau and the Find It, Fix It data would trickle to us, but we might have additional data beyond that as far as what the complaints were, what the outcomes were, and what the investigation looks like.

Is there a second part to your question?

No, that was just, yeah, I think that answers the kind of information we'll start receiving and where we'll be gathered.

So thank you for that answer.

And thank you, Chair.

Thank you.

Councilmember Sokka.

Thank you, Mr. Chair, and thank you for this presentation today.

I want to thank the mayor for bringing this important piece of legislation forward.

Now is the time for our city to better address predatory home buying and Just as recently as last week at one of the many neighborhood night out sessions that I attended in my district, some elderly neighbors were talking about this in terms of recent impact on some of their now former neighbors.

And so this is a challenge.

It is an opportunity for our city to better address the underlying issues, what's going on here.

In some cases, what's going on with these home buyers, they're engaging in unfair behavior, deceptive behavior, coercive tactics, some cases intentionally omitting material fact about the broader deal and broader opportunity.

Unconscionable or unscrupulous business practices, and I mentioned a term that my fellow lawyer here at the dais will understand, Councilmember Juarez, is sometimes engaging in unconscionable contracting.

And so we have an opportunity here as a city to do better and better protect, in many cases, our most vulnerable Because predatory home buying practices do target the most vulnerable in our community.

And homeowners who sell in response to some of these oftentimes unsolicited offers, we know receive sometimes less than fair market value.

Oftentimes less for fair market value if they had listed on the open free market.

Predatory home buying practices we know often target communities of color, contributing to worsening economic disparities, displacement, the complete gutting of generational wealth opportunities, while also buttressing historical patterns of racial segregation.

Legacy oppression.

So this is a tool, in my view, to combat and help shut down, although not entirely, legacy oppression, systemic racism among our most vulnerable, including our elderly population.

So I applaud the mayor again for proposing this.

I think it's a terrific first step that we'll wanna continue to iterate on and improve over time.

I'm excited about the disclosure requirement.

Providing the bright light of transparency for all is a powerful tool.

As I kind of review this bill, I'll be looking to the adequacy and sufficiency of those disclosures, but I think in general the principle of Enhanced disclosures is good for all, like the opt-out provisions for a contract and penalties for non-compliance.

If our own council central staff experts were here at the table, I would ask about some policy options to potentially strengthen the bill, but I will work with them offline to see, to explore possibilities in that regard.

Meantime, can you help me better understand The penalty structure here.

How were the penalties, the proposed penalties, I note that it is, they range from $7,500 for the first violation to $10,000 for second and subsequent violations.

How was that penalty structure set?

And how are we confident it's enough to provide a sufficient deterrent effect for repeat and flagrant violators?

How was it set?

Are we confident?

How are we confident it's enough to deter, especially the more deep pocketed violators?

So we deferred to the recommendation of our finance office, who has the Consumer Protection Bureau within it, about what seemed reasonable fine-wise.

So, Laura, I don't know if you're able to answer that question.

But if not, we can get back to you on, I mean, my suspicion is it's kind of in line with, you know, other levels of fines for similar types of things.

But, you know, we can get more information for you.

Yeah, I would say that the fines, because there's a lot of unknowns here, we don't know what price range they're looking at and those types of things.

I think the fines, at least at this point, will prove the point that, A, a violation has occurred for first or second, and that will help support the people that have been victims to this when they do want to take legal action to say that this has already been investigated by the City of Seattle.

The person that was doing the predatory lending has been cited in this amount for this.

So I think it's kind of a good first step for that.

It's a fairly large fine as far as consumer protection is considered.

I think one of our most highest fines right now is about $5,000.

So...

Okay.

No, thank you.

Yeah, if you could follow up on that, that would be very helpful.

And also...

So fines can be a...

An effective deterrent effect, so is enhanced transparency in other regards.

Maybe just spitballing here are some possibilities, but for flagrant and repeat violators, after a certain period, like publicly posting those responsible parties on a city, publicly accessible site or list, don't want to appear on that list.

In terms of...

In terms of the effective date, and I'm glad that there's going to be some sort of education period here to educate people in legitimate businesses, engaging this.

This is designed to offset and address those disparities we talked about, but also educate the prospective home buyers.

So I'm glad there's going to be some education piece associated with this.

How long is that education, I don't know, effort intended to run exactly?

And then when is the proposed effective date of this legislation?

I'd hope that there are, you know, one, the education piece contemplates the effective date for once the penalties start to kick in.

But when's the effective date?

So I believe the effective date is when the legislation is signed.

And then there will be a period of education, but I don't know.

How that works in terms of like, is there a grace period or anything like that once that information gets up and out the door?

But I'll defer to Laura on that.

As far as the education for the community, I think that that can definitely start once the legislation is signed.

That should be one of our first things is to get that information out there to say, you have some options if you're approached by this.

As far as educating the business section of this, it is going to be a challenge because a lot of these companies may not be local.

There's not really a public listing to say, hey, these are all the places that will buy your house.

But we have started to unofficially collect some of those flyers, some of those phone numbers.

I'm a resident of Seattle, so I've been saving them from my mailbox to see who's out there and kind of the areas that are there.

So I can't really tell you How long that information would go out.

The information will be on, obviously, the websites.

But that time period, I don't think, needs to be very long because we really don't know what we don't know.

We don't know how to contact that industry.

Sure.

So thank you for that.

And I'll say this.

This is an area that I'm going to be exploring more with our central staff expert team, because we are seeking to impose a brand new regulatory scheme, which is much needed, past due.

Should have had it yesterday, to be honest.

But it benefits all parties, all people involved, when they know about this, know how to either...

how they can exercise their new rights pursuant to this new law or become compliant with it, right?

So in any event, I want to make sure we have a thoughtful rollout and that these punitive But much needed penalties don't necessarily start kicking in right away or the implementation date isn't date of legislation or whatever the standard sort of bill is here.

Just principles of good governance demand a thoughtful look at that.

But in any event, I'm excited about this bill and looking forward to supporting it and potentially improving upon it.

But I appreciate the efforts done and pass needed.

Thank you, Mr. Chair.

Yeah, and I think it's worth mentioning that the state bill is in effect currently, and so there is some sort of, you know, regulation of this industry occurring as we speak, right?

So...

And these would...

The proposed Seattle-specific implementation of that regulation would be go above and beyond, right?

Correct.

Yeah, yeah.

Awesome.

Thank you.

Thank you very much.

I know we have another presentation to get to, so in the interest of time, I want to thank our presenters.

In terms of education, each one of us does a newsletter.

Each one of us, if you have stuff you want to give to us that we can push out to the community, I'm happy to do that.

That would be great.

And I do have...

If FAS is going to be doing the enforcement of this, I just want to make sure that there's the capacity in that body to be able to do that, considering that they also have a responsibility for our after-hours establishment enforcement.

So I'm hoping that FAS has the capacity to do this because...

Having a law with no teeth does us no good.

So again, thank you very much.

As you are transitioning to our next item on the agenda, clerk, when you are ready to read that into the record, that'd be great.

Thank you.

Agenda item two, Council Bill 121055, in order it's relating to the multifamily housing property tax exemption program, renewing and modifying the program, including to make changes in conformity with state law, repealing chapter 5.72 of the SMC and amending chapter 5.73 in sections 5.75090 and 23.58.062 of the SMC.

And the Senate is for a briefing and discussion.

So please, our presenters, introduce yourselves for the record and begin when you are ready.

Chris DeVias, Deputy Director of Policy in the Mayor's Office.

Isaac Horowitz, Policy Advisor in the Mayor's Office.

Michael Winkler-Chin, Director of the Seattle Office of Housing.

Hi, Jennifer LeBrec, Central Staff Analyst.

Good morning, council members.

We have a presentation for you today to discuss our proposed legislation to renew the multifamily tax exemption program.

So just a word of warning.

It's a pretty long technical presentation.

We are more than happy to take questions as we go, especially if things are not clear or you have some technical questions that you want answered.

We will try to move through this at a fairly quick pace, but we also know this is a lot of information.

We want to make sure that some of these really important concepts are explained well.

Thank you for that.

Thank you for that precursor.

I just want to note that we may lose quorum at noon.

We will keep that in mind.

So we're here today to talk to you about the renewal of the MFTE program, which is set to expire in September.

The current program, which people refer to as Program 6, has been extended about three times at this point.

So we heard from Council earlier this year that they really wanted to see us bring back an update, and that is what we have done.

And over the last few months, OH has conducted quite a bit of outreach on this program, and that has certainly informed some of our proposals here today.

So I just want to give a little bit of background on this, and I think this is probably one of three slides that have such a big wall of text, but most of them don't, so don't worry.

But I just want to talk about a little bit about the state program first, because this program is authorized by the state.

It was authorized back in 1995, and what MFT did What the state authorized is for local jurisdictions to create different programs for market-based housing development to construct, convert, or rehab.

And in exchange for that housing, the home builders get a tax exemption depending on the length of the program.

There's an eight-year program, there's a 12-year program, and there's a 20-year program.

The eight-year program is actually just a straight-up housing program and doesn't come with any restrictions for housing.

Seattle does not currently use that one.

The 12-year program does come with some restrictions, and that is the one we're going to be focused on today.

And then there's a 20-year home buying one, which is also included in our legislation.

We're not going to spend a lot of time on that.

Not where a lot of the changes are happening, but we will talk about it a little bit as we go on.

So I just want to mention, as we heard from some of the public speakers today, that participation in this program is voluntary.

Homebuilders are only going to elect to participate in this program if they can realize sufficient economic benefit.

So what the home builder gets in return for participating in agreeing to restrict a certain number of units as income restricted is they get to a pass on their property taxes on the residential improvement portion of their building.

They still pay taxes on the land and the non-residential improvements.

The city does not lose those taxes, however.

Those taxes are shifted to the rest of the city's tax base.

And I'll talk a little bit about that later, but in 2024, that amount of that tax exemption was $80 million, which is equivalent to about $145 per median household.

So the state has identified several goals associated with this program.

This is not strictly an affordable housing program.

As you can see here, there are multiple goals that the state has identified as worthy of this program and worthy of consideration for this program.

And as I mentioned, Seattle primarily has done the 12-year program, and here's the details of the state 12-year program.

The state 12-year program requires jurisdictions to set aside 20 percent of units for low and moderate income households.

And all I want to mention here is that the state definition for MFTE for low and moderate income differs from what the city uses for its affordable housing and what we consider low income.

So under the city's program, low income renters is 60 percent and below AMI and up to 80 percent for homeownership.

But in the MFTE program, low income is considered 80 percent AMI below and moderate income can go all the way up from 80 to 115 percent AMI.

And by area median income, that's the level at which someone is eligible for one of the units in the building.

And we will talk about that later as we go on.

Can I ask you a quick question?

Sure.

Yes.

Yes.

So on this slide five, the state definition of low income is 80% AMI and below.

Sorry.

Thank you.

So Seattle's MFTE program has been in place since 1998. It's available in all multifamily zones.

It has an initial 12-year exemption with another voluntary extension for 12 years at a reduced AMI level.

And for the Seattle program, we actually have a slightly higher percentage that we require of total units that must be affordable in order to participate.

As you recall, the state set a minimum of 20 percent units.

We require 25% of total units unless there's an opportunity to only provide 20%, if at least 8% of all of the units in the building are two-bedroom and more.

And this is in part in recognition of the fact that we're not seeing a lot of two-bedroom apartments getting built, and this is one way to try to incent those.

And then, as I mentioned, the legislation does include a home ownership option.

We are not going to spend a lot of time on that one.

It's used almost exclusively by nonprofit housing providers.

So on this next slide here, don't worry, I'm not going to go through this table.

The point of this slide is just to convey that we've had this program in place since 1998. There's been several iterations of it, and then the extension that I mentioned earlier is a relatively new change to the program, and that was incorporated in 2021 after the state authorized it.

And then here's just a map of where the active MFTE units are on the market today.

As you can see, they're fairly concentrated in the denser areas of the city, but they also can be found distributed throughout the city as well.

On this next slide, I want to spend a little bit of time talking about these two charts, because I think they're important to understand.

So starting with the bar chart on the left, what you see is the amount of Actual production of MFTE units under each of the programs that we've authorized.

And so program four, which was in effect from 2011 to 2015, is where we saw the highest production and also the highest participation.

And it has gone down over time.

But I also want to note that Really, this MFT program only kicked off under Program 4 in 2011, and the vast majority of units that we've seen produced under this MFT program have come from 2011 onward.

The graph on the right is getting at this opt-in rate.

So the graph on the left is just showing pure production.

It actually doesn't really account for the market conditions that might be going on at the time that are impacting overall production.

But this opt-in rate really does, I think, control for some of those other variables, because what it's looking at is the total number of units that are being produced divided by the number that are actually opting into So you can see from this chart on the right that, you know, it peaked under Program 4 at 25 percent participation rate.

That means 75 percent of the other projects out there that got permitted that year opted not to participate in MFTE.

Meaning they did not see or find an economic value in doing so.

And that rate has gone down under P6.

And what we've heard as the city has kind of increased its requirements and ratcheted up sort of conditions over time, it has become less attractive for some builders.

And so I just wanted to pause there and see if anybody had any questions.

Okay.

Nope.

So this chart here is just showing the types of units that are getting built under MFTE.

And to date, primarily one bedroom and a lot of studios.

So it is really challenging and expensive to build two and three bedrooms in Seattle.

The cost of construction is based on square footage, and you don't necessarily get double or triple the rent for these units.

Even though they're larger and they cost more to construct.

But we do have, you know, some two bedrooms getting built under this.

And while we would like to see more three bedroom, you know, I'm not even sure under this iteration if there's going to be enough incentive for that.

Gotcha.

We do have a quick question from Council President.

Council President.

Yeah, I'm sorry for not finding my hand when you said, are there any more questions, but what is the opt-in goal for this program?

You know, we don't have a set goal, right, because, and I'm going to talk about this later, but You know, you kind of need to strike a balance between there is a cost to this program, which, you know, I've mentioned.

It's the tax exemption cost that gets shifted to the rest of the tax base.

And then there's the benefit to the developer participating.

And in return, we get some rent buy-down for these restricted units.

We also get the benefit of just more housing generally getting built in the city.

And so I think...

You don't necessarily want to see 100% participation.

One, that would be extremely expensive for the rest of Seattle's tax base.

And two, that would probably be indicative of maybe an overly generous program.

So I don't have a set answer for you.

There's a lot of different factors that you want to take into consideration when you're trying to kind of set the dials for this program in a way that provides enough of an incentive that it's maybe going to help projects pencil that would not otherwise and also get some restricted units on the market.

But it's certainly not going to work for everybody.

The economics aren't going to work for everyone.

That's a long-winded way of saying, I'm not sure.

Well, I thought, so maybe I was reading between the lines or projecting, but the graph on page nine where it peaks at 25%, I would like to hope that we can get back to that at least because this is, I've said many times, a program that's extremely important because it makes it easier to build housing across the board.

I mean, it invites Participation rates are one indication that actual affordable housing is being built and so therefore we want to make sure that we invite as many developers as possible because it fulfills two policy goals, one which is more housing and the second is more affordable housing and then I'll add a third which is mixed income housing.

And so very much would hope that this program is tailored to incentivizing participation that would get us back to around 25%.

Recognizing the property tax hit that we'll take at the same time we've got a housing crisis.

Thanks.

Thank you, Councilmember.

And you will be hearing from us shortly about our interest in really making sure that this is a program that is going to help incent more supply, understanding we are in a housing crisis.

So I want to talk a little bit about the UW findings, and I want to say that the report, yes, the report is not able to establish the counterfactual, which is how much housing would have been built but for MFT.

The sheer number of units built under MFTE led the UW to conclude that they think it definitely has had a stimulative effect on housing production in Seattle.

So of the 300-plus multifamily rental properties that have participated in the program, A total of almost 34,000 housing units have been built, of which 7,000 are income restricted.

These numbers might look a little different than the numbers I showed you earlier because these are the numbers that the UW had at the time that they published the report.

So another important finding in the evaluation is that in all sub-markets and unit types, average income-restricted MFT rents are lower than market-rate rents in the MFT properties.

Now, we found larger rent discounts in higher rental markets, which makes sense, and for larger units.

So smaller units, say a congregate room or a small CEDU, will be naturally more affordable as it is.

And so you're less likely to see a rent buy-down at that AMI level.

But it also helps those projects pencil because those are projects with smaller margins and that are charging less.

So we all know the housing market in Seattle is extremely expensive to develop in.

And I think at those smaller unit levels, this can really have a positive So that's the benefit to help get those projects The report also found that the tenant income certification process and some of the comparability requirements were quite onerous and cause for sort of some consternation from stakeholders.

And so that is something that we're going to be hoping to rectify with this update.

And then I just wanted to note that because there's been some question about this, that the vacancy rates in MFT units track very closely to the vacancy rates of the market rate units in the building.

So to the extent that there are vacancies for MFT units, they seem to be on par with the market rate ones.

If there aren't any questions, I will move on.

So now I want to get a little bit into our proposed legislation, but before I do that, I really want to set the table and talk about what we're trying to achieve with this update and the goals of this update.

So first and foremost, Top of mind for the mayor is to encourage the creation of workforce housing and more housing generally.

So we've all been in these conversations about the comprehensive plan and how it's really important to liberalize our zoning to allow more housing and more housing choices across the city.

But I think you've heard me say that that in and of itself is insufficient to kind of juice the market and incentivize housing.

So this is one of the additional things that we can do in addition to those zoning changes.

We also want to reduce the administrative burden, clarify and simplify requirements.

And as part of encouraging the creation of more housing, we are proposing to provide modest increases in the allowable area median income limits for the MFT units in this Program 7 update.

And I just want to speak a little bit about the context here because I think it's important when the current program, Program 6, was adopted in 2019, market conditions were much more favorable for housing.

And in recent years, as a result of those favorable market conditions, we have seen a flood of units coming online.

Which has been really great for renters.

I was just looking at some data the other day from King County that suggested one bedroom rents have remained flat for the last three years.

And so we have about a 7% vacancy rate.

Again, really good conditions to be a renter.

Not suggesting that rents still aren't high in Seattle, but I think it does demonstrate that having adequate supply really does Keep rents low.

And so I do think one of the best things we can do to continue to try to make Seattle more affordable is to make sure we have an adequate pipeline and adequate supply coming on because the data does speak for itself when you see that you have adequate supply and you have, you know, I just saw New York City had a 1.8 percent vacancy rate, right?

That's not healthy and honestly 7% probably isn't really healthy either because it's going to kind of slow down the pipeline.

And as soon as that vacancy rate starts to, I think, narrow and market conditions become more favorable, hopefully we will see development pick up.

But right now, our permits are kind of crashing and our pipeline has dried up as the market conditions are no longer favorable as they once were back in 2019. There's high interest rates, construction costs, and more recently tariffs.

So a lot of uncertainty in the market that is driving those permits down.

And so this is just really important context as we thought about the update, as we thought about our goals for really wanting to see more housing and wanting to ensure that there was some sort of pipeline.

So as that vacancy rate does start to reduce over time, and it will, That will cause rents to rise, especially if we don't have new units coming online.

So just wanted to talk about that a little bit.

And then this is just also to situate, this slide here, we wanted to situate where we thought MFT really fits within the city's strategies to try to address affordable housing.

We, of course, have our city investments in low-income housing.

Unprecedented level of investment.

That's an annual number of $350 million a year for the last few years.

That's our levy.

That's our jumpstart.

That's our MHA.

And, you know, the city has on the books a priority for our housing to focus on zero to 30, that really deeply affordable.

And so it also includes some homeownership.

So I have a little flag for that as well.

But it's mostly rental housing.

And that is where you're going to really see the deeply affordable housing get built.

The nonprofit developers, for the most part, who are accessing our funds have a huge capital stack that requires money from us, money from the state.

They get LIHTC taxes.

They themselves are exempt from taxes.

So it actually takes a lot of deep subsidy and to some extent even operating subsidies to make those more deeply affordable units work.

So that's what we're doing to try to address those lower income individuals who need more deeply subsidized housing.

So MFTE, on the other hand, Simply a tax exemption.

They don't have access to any other subsidies from the city, and they are simply getting a tax exemption on the residential portion of their property.

I don't want to, you know, suggest that's not nothing.

It certainly is something, but it's not sufficient enough to require them to be able to make deeply affordable units pencil.

And so as we saw with sort of the state goals for this program, workforce housing is certainly one of them.

And that's where we really think MFT shines.

This is an affordable city, an expensive city with high rents that I think even for the middle class, it's hard to find affordable housing.

And there was just an article in the paper the other day about Seattle shrinking middle class.

So we think workforce housing fills a niche.

And again, the more housing that gets built, we're never going to be able to solve all our affordable housing programs simply through subsidy.

Market rate housing actually does play an important role, especially as that housing stock ages.

And we need places for people to be able to move up and get new units and free up units for others.

So again, just part of the strategy here.

And then I do need to make a nod to the social housing investments that we are going to be benefiting from.

Shortly here, the revenue forecast that just came out, the numbers that you see here for social housing, are to the tune of potentially $66 million for this year.

I included the range there.

But I think that's really good news for the Social Housing Board and shows that they will have a very strong, dedicated subsidy source for the housing that they want to build, which is also mixed income and goes all the way up to 120 percent AMI.

So with that, I'm planning on getting into some pretty wonky technical aspects of the actual legislation that I think are important concepts to understand.

Feel free to interject with any questions.

I want to start by just talking about, I want to walk you through how we establish the rent under MFTE and how that works.

So I first want to start out by just noting a couple of key definitions in the legislation.

The legislation talks about what an MFTE unit is, and they talk about it in the context of a unit that's leased at an affordable rent.

And then there's another definition in the legislation that describes affordable rent.

And that affordable rent is the contract rent, and then the utilities, and then any required fees.

And the sum of those three things may not exceed 30% of the income limits set by HUD.

So it's important to understand how that rent is set.

And then these two tables here are equally important.

The first table at the top is an annual table published by HUD of the area median income limits.

And we use this table for a couple of things.

One, it indicates whether you're qualified for an MFTE unit.

So if you're a single person looking to rent a studio or one bedroom and you're curious if you qualify for MFTE at the proposed level that we're proposing for a one bedroom, if you made $82,500 or less, You would be qualified for that unit.

And then the chart below actually is what OH publishes when they impute the rent and the rent for that income-eligible unit.

So I see, I think I, did I see a hand?

Yes.

Council Chair Morris.

Thank you.

Thank you, Krista.

I have the paper printout.

So my 17 isn't your 17. So the 17 I have is AMI levels are used to impute rents.

So the one with the picture is 18 and now we're on your So I'm wondering, are we going to come back to my old 17, which is the one that has the- No, I apologize, council member.

I think you must have yesterday's version, and this is a slightly reorganized version.

But we didn't omit any slides, so we will get to your slides.

Okay, because that was the one that I had tagged and had questions, so great.

We will get to that.

I'm not crazy.

Okay, good.

No, you're not crazy.

Okay.

Okay.

So again, just to recap, The top rent sort of governs the income eligibility and helps us impute the rents from that.

And these two tables get published every year.

And this top table that HUD publishes every year is adjusted, and that tends to be those annual adjustments from any one year in what constitutes, let's say, 75% AMI in 2025. It might look a little different in 2026. The rent can't exceed whatever that annual adjustment is that HUD makes.

So we're going to talk about that a little bit more, but it's generally these annual changes in these tables that govern the rent increases.

So is this the table you were referring to, Council Member Juarez, the one that I'm So here's getting down to brass tacks.

This is our actual proposal based on those AMI levels of P7.

So what you see here on this table is you see on the left the different bedroom types.

Then I included P5 in here just to have some historical reference point of what those AMI levels were.

And then P6.

And then our proposed P7 and then the extension.

The P7's in yellow.

And as you can see here, the P7 largely aligns with either what we had in P5 or P6.

There's a couple of Small changes that are highlighted in red.

Here, the one-bedroom is about 5% more from P6, but it aligns with P5.

And then we upped the two-bedroom to 90% AMI just because we're still not seeing as many two-bedrooms as we would like.

And we thought that might be helpful.

And then with regards to the extensions, we are proposing that if someone chooses to extend another 12 years after the initial 12 years, that they are welcome to do so, but it will be at a slightly reduced rent.

At that point, the building's a little older.

They probably can't charge as much rent as they did at the outset.

I do know that that...

That is a little bit of a point of concern with some developers, but we thought that was a fair reduction for the extension.

So any questions here before I move on?

I do want to note that I've been talking a lot about how the market conditions have really changed.

It's very difficult to build.

One of our central goals of this program, of this update, is to help projects pencil.

And if you're looking at the difference between these AMI levels and the P6 AMI levels, you might think, This is not enough of a change.

This doesn't seem to kind of comport with, like, where are we wanting to go with this program.

But there's an important distinction that is not showing up on this chart that I want to call out.

And under the P6 program, there was a 4.5% rent cap that was applied to the program that basically had the effect of lowering the AMI levels you see here for P6.

In part because the rent cap was not reset when tenants turned over.

And so over time, the compounding interest of that rent cap resulted in effectively lower AMI levels for P6 than what you're seeing here.

So I have a chart here that shows you what the effect of that rent cap has been on the P6 AMI levels.

And the blue is what was approved in the legislation, and the gray shows you kind of the compounding impacts of how that rent cap has been applied for P6 over time.

So just going back to this chart again, I just want to stress that the benefit that comes with the proposal that we're suggesting to you is not so much that we're making huge changes in the AMI levels from either Program 5 or Program 6, But we are proposing to replace the 4.5 percent rent cap with the state rent cap that recently just passed.

And the state rent cap technically does not apply to new units.

We are suggesting that we apply the state rent cap to the MFTE restricted units in the first 12 years.

Allow that rent to reset when the tenant moves out.

For the most part, I don't anticipate the state rent cap will actually come into play.

So my next chart will show you this chart here.

shows you annual AMI adjustments from that HUD rent chart that I spoke about.

And while the HUD changes on average have only been 4%, you can see by this chart that they've actually been pretty spiky in recent years.

And the orange lines you see here are when the state rent cap would come into play.

So the state rent cap is 7% plus CPI.

So the lower orange line is the 7% and the higher orange line is the 10% cap.

And you can just visually see when that state rent cap would apply.

Otherwise, What is going to apply is the HUD adjustment that you see.

So for example, in this year, 2025, the HUD adjusted AMI change was 4.3%.

So technically, The property owners could increase rent by that amount this year.

I will say that I'd be curious to know whether to what extent anyone's kind of adjusting the rents very much these days.

As I said, we have data that show rents have been largely flat.

It's kind of a renter's market right now.

So this doesn't actually mean that they are increasing rents by this much.

They are definitely constrained.

themselves by what the market will allow.

So if there aren't any questions, I'll keep going here.

And then just one more thing on rents.

So one of the things that we did is we pulled COSTAR data of newer buildings built from 2020 onward.

of multifamily buildings, and we looked at what the median market rate rent is, and then we imputed the rent for the proposed AMI levels that we have set, and in almost all cases other than the congregate sleeping room, we would expect to see a rent buy-down.

Now, one thing I want to stress here is that we're not going to see P7 buildings getting built overnight.

Most properties are not penciling right now.

In fact, they're in the double-digit negatives.

And I don't expect what we do here with MFTE to be sufficient to get anyone off the sidelines.

But when market conditions do start to change, We are hoping that this is enough of an assist and an incentive that they might be able to come off sooner and make those pro formas work.

So this is interesting to me because the rents today have been not increasing as much as they have historically in the past, and it's considered sort of a suppressed rental market.

And so I would expect over time that we would actually see potentially bigger rent buy downs, especially if the Seattle market starts to tighten and rents do go up.

But we are proposing and designing an update really for the future and really for that hopeful upswing that we are going to need and want to see in permitting at some point in order to keep new units coming online.

So if there aren't any questions, we're going to pivot to some of the other requirements in the legislation that are pretty important to some of the stakeholders.

And with that, I'm going to turn it over to Isaac here.

Yeah, I was going to say, you know, you've got some good meat coming up.

So I want to make sure that we get to that, given the amount of time we have left.

How are we doing in time?

OK.

Yeah, so thank you Krista and thank you committee for going through this wonky presentation with us.

So as Krista said, one of the goals is reducing the administrative burden for this program.

And so one of the proposed changes in the mayor's proposed legislation is around alternative bedrooms or open bedrooms as they're more commonly called.

Some newer buildings have started including these types of bedrooms that look like the picture on the slide, where the bedroom doesn't have a window to the outside, and so they decide to create an opening along the ceiling to provide some ventilation and light into the bedroom.

So it wasn't clear if this was a studio or a one-bedroom, and that confusion led to some inconsistencies and disputes between city staff and builders.

And so this proposed legislation establishes an alternative bedroom framework.

So you can see the exact definitions of what a standard bedroom would be and what an alternative bedroom would be on the slide.

And the proposed legislation also would require lower rents for these open or alternative bedrooms, given that they would likely not be able to charge as much for an open bedroom.

And if you look at page, it starts on page 48 of the legislation, you can see the exact AMI-level limits broken down by how many alternative or open bedrooms there are in each unit.

Comparability is another area where there's been some confusion and inconsistency.

So the mayor's proposed legislation provides more clarity around how the MFTE units should be similar to the standard market rate unit in the building.

And essentially what the proposed legislation requires is that the MFTE units have the same functionality, be the same size, have the same number of bedrooms as the market rate rents.

or market rate units for the standard units, but that premium units, such as the ones that might be in the penthouses or the corner units that could have fancier appliances or countertops, wouldn't be used for comparing to the MFTE units.

Yes.

Yes.

So did the market rate units have open bedrooms?

Yes.

So the legislation would require that basically the same ratio of open bedrooms in the building, there would be the same percentage of MFT units as the market rate units.

In the past, without looking forward, in the past, the market rate and rental both had the developers were doing open bedrooms.

Okay, good.

Great, thank you.

Another topic that the proposed legislation covers is the distribution of the MFTE units throughout the building.

And the mayor's proposed legislation provides more clarity around where the MFTE units can be located, essentially requiring that they be distributed throughout the building, that they can't be concentrated on one floor or the lower floors of the building.

There are currently 15 projects that are in the process of applying to the MFTE program, and this legislation proposes allowing those applicants to convert to the P7 program, as we're calling it, without starting the whole process over again from scratch.

And with this slide, I'm going to pass it to Director Winkler-Chin, who's going to talk about some really important changes that aren't actually included in the legislation, but that will help improve some administrative processes that tenants and property owners have found confusing and burdensome around income verification.

Thanks, Isaac.

So I know I've heard from several of you about what our paperwork is looking like going into the future on this.

And the Office of Housing engaged with the renters in the units.

We actually did a renter survey first time, yay.

I think we got about a 10% response rate.

And they were very clear, as well as the property managers of the MFTE projects, that the paperwork was burdensome.

And so the Office of Housing is committed to simplifying compliance requirements to reduce the paperwork, especially for the renters and for the property managers.

And so we're currently updating our compliance guidelines in order to create a more simplified, user-friendly process for everyone.

They'll also decrease barriers in the application process for the renters as well.

So we've increased flexibility in how we verify income.

And if you've never applied for MFTE, this may not mean very much to you, but if you have, we will now allow the verification of income providing multiple options, including pay stubs, W-2s, tax returns, and third-party verification options.

And so we hope that that speeds up the process for qualifying for an MFTE home and supports faster lease-up.

And in the rare event that none of those options are possible, self-certification is allowed.

We're also significantly reducing paperwork for documenting income from assets.

So we will only verify regular withdrawals from assets that are used to pay for rent and living expenses.

We'll also allow self-certifications of income during annual recertification, reducing this process to a single page that the resident will fill out.

Full income recertification will only be required every three years.

And self-certification can then be used in the interim year.

So the year that you move in will be a full cert.

Years two and three will be self-cert.

And then at year four, you'll do a full cert again, which will then also still be within that reduced paperwork.

And we work collaboratively with the property managers in administering the MFD program requirements.

We have a special market incentives team, and they provide training and drop-in sessions designed to assist property managers with program compliance and reporting.

And I really want to thank them for working with us and trying to make the paperwork simpler and for also working with the residents who do call with some regular frequency and asking questions about the program.

Questions?

Questions from my colleagues.

I want to say, first of all, the simplification of the income verification, very welcomed.

I've heard from developers as well as renters.

When we recently did our Safe and Stable Rental Housing Forum a few weeks back, that was something that was called out as just the burdensome The paperwork that's required, again, it's one of those things where it seems like the city is getting in its own way in some ways.

So thank you for taking that on.

Questions from my colleagues?

Councilmember Sokka.

Thank you, Mr. Chair, and thank you for this presentation today.

I really appreciate you sharing your insights and expertise and the work that kind of went behind this proposed legislation and update to the program here.

V7, P7, whatever it's called, strikes me based off of my initial review as being a thoughtful approach that is going to It has the tendency to more likely bring about the kind of changes and outcomes that we'd ideally like to see for this program and seems like a lot of community excitement.

It's going to land well with impacted stakeholders so far.

So look forward to learning more.

Just want to call out I heard, Krista, you mentioned the King County rent stability over the last three years in particular.

It's aptly noted it's essentially a renter's market right now, if you will, which is true.

We also know that renters continue to be cost burdened.

And that is an important snapshot in time.

But if we look at the broader context over the last decade in King County, rents have increased 58%.

The average rents have increased 58% over the last 10 years.

In King County.

And I'm sure, no doubt, Seattle rental increases have been higher than the county-wide average.

And so on the one hand, yes, rents have seemed to stabilize for a bit.

It is a renter's market.

On the other hand, the broader context reveals the continuing ongoing opportunity to do better and address this share challenge.

In any event...

May I just make a plug then that I completely agree with everything you said, and I think this just underscores the importance of continuing to make sure we're doing everything we can to bring supply online, right, through permitting reform, Our up zones through the comp plan programs like this.

I mean, we need to make sure that we're signaling that Seattle is open for home building.

Yeah.

Yeah, absolutely.

So which actually leads to my next point.

So this is an important step.

It's not the end all be all.

It's not the magic bullet, not a panacea at all.

No such thing in this business.

It is an important step to help address supply.

And increased supply does address the underlying issues.

Again, not the only step.

And I don't purport to have all the answers on, you know, what's going to provide renters the type of relief that is truly needed.

So in 10 years from now, maybe the total rental increase will only be tied to inflation, for example.

But this is an important step, an important first step, and committed to working with impacted stakeholders, including the Renters Commission.

Shout out to Kay Rubin here in the audience in Council Chamber, who is one of the co-chairs of the Seattle Renters Commission.

Working with impacted stakeholders and figuring out what else do we need to do?

But this is mission critical.

So shout out to V7 or P7 and whatever this is, who knows?

So thank you, Mr. Chair.

Thank you very much.

We do have one more presentation that we need to move to.

So any final questions on the presentation we just heard?

Yes.

Okay.

Councillor Rink.

Thank you, Chair.

Appreciate it, and thank you all for this presentation.

I'll try and keep this quick.

I, at the top, want to voice also my concern for our drop-off in permits.

We know we need to be building more housing.

We need to restore our housing pipeline.

Our city just added 20,000 net new residents, and we have already been in a housing shortage for some time, and so we need to find ways to incentivize more development for two-bedroom and three-bedroom units.

Making these projects pencil, of course, is challenging given all of the economic conditions, especially this trade war that we're coping with, but hoping we can put together a meaningful program that partners will want to participate in so we can build more housing.

But my questions today are thinking about our current and future residents and MFT units.

We've discussed a lot of numbers here from AMI and maximum rent.

But I want to ground the listening public in the fact that Seattle's minimum wage is $20.86 an hour.

Translating that to annual salary, that lands at about $43,000 annually, which according to our AMI table, if that's a single person, that's landing just below 40% AMI.

And I think that's an important marker for us to be thinking about.

We know we have a range of affordable housing programs, but the folks who may be living within MFTE units would likely be more of a different kind of prevention and making above minimum wage.

And to that end, I'm curious about what we understand more based on that.

More about what we know about our current tenants and level of income.

Who are currently within our MFT units and how much do we understand about that demographically?

So I'm sorry, was that a question?

Yes, what do we understand about income levels of our- Yeah, I mean, we know that from the, I think it was even the UW report, that a fair number of MFTE renters continue to be cost burdened.

And it's probably at a similar rate to other renters out there who are cost burdened.

I guess the one benefit is they're probably getting some reduction in rent than what they were otherwise.

But they're probably, if we're looking for something that is keeping someone at that income level at 30% AMI, they're probably not in the right unit.

Could I add to that too?

OH has, this is based on some publicly available data, analyzed the average income of a household in an MFTE unit.

And right now, the average income in an MFTE unit is, I believe, about 50% area median income.

Now, to be fair, that reflects a range of unit types, right?

Some at 40%, some at 50%, some at 60%.

So that's across all.

Great.

Thank you.

And I want to emphasize also my appreciation for you all doing a renter survey.

I know we just got a 10 percent response rate on that.

I hope we can increase that in the future just to make sure we're centering that perspective.

In the interest of time, I'm going to hold there until we get through the next presentation.

But thank you, Chair.

All right.

Thank you.

All right.

Jen, are you ready to proceed with yours?

No problem.

We're all just sliding down.

Oh no, but she needs a chair.

So you gotta stand up.

We're just playing musical chairs.

Right.

So again, I'm Jennifer the Brook, central staff analyst.

I'll be doing today a brief overview of some policy considerations, five of them, and then talking about timeline and next steps.

Given the time we have today, this is a fairly brief overview at a high level.

And happy, of course, to follow up with you in person to talk through any of these items in more detail.

So talking through five policy considerations today, let's start with the rent moderator.

I think Krista has done an excellent job describing some of this, so some of this will be a little bit of a review.

MFDE Program 6 introduced for the first time a rent moderator.

Under Program 6, the increase in maximum allowable rents was either the increase in rent published by OH from the prior year or 4.5%, whichever is greater.

That rent cap applied to all MFTE units, including at turnover and new units coming online.

And this had the consequence of resulting in essentially two income and rent charts, one for Program 6, one for all other programs.

And I think you could say that the MFTE Program 6 rent chart was essentially suppressed or modified.

That was the chart you saw that Krista showed, showing that P6 rents were below rents that would have been based just on the HUD-published area median income alone.

Program 7 also has a rent moderator, although it operates differently in two ways.

Under Program 7, the moderator would be the increase in rents published by OH from the prior year or 7% plus inflation, not to exceed 10%.

And that standard is based essentially on the new state law that passed last year.

The only difference being that the state law applies to tenants and buildings that are 12 years or older.

And this would apply to MFTE units in buildings that were brand new.

It also only applies at lease renewal, so it wouldn't result in a modified rent chart like what we had under Program 6. I want to talk through a couple examples of how this would work, as the impact of this policy change really depends on what's happening with the change in median area income each year.

This will walk you through a couple hypothetical situations.

Let's say, hypothetically, that area median income limits, as published by HUD, increased by 3% in a given year, or from the prior year.

In that case, the increase in rents, as published by OH, Would also be 3% higher, and in this scenario, neither the program six rent moderator nor the proposed program seven would kick in because that 3% is below both.

Let's imagine that AMI increased by 6%.

Under program six, the rent moderator would apply, and the maximum allowable rent would only increase 4.5%, not 6%.

Under the proposed Program 7, the rent cap would not apply, so the rent increase would be 6%.

Final scenario, imagine that AMI limits, area median income limits, increased by 11%.

Under Program 6, the rent moderator would apply, and the maximum allowable rent increase could only be 4.5%.

Under the proposed Program 7, the rent cap or rent moderator would also apply, and the increase would be limited to 7% plus inflation up to 10%.

Policy options for the rent moderator include eliminating the moderator altogether for MFTE units, increasing the moderator, or decreasing it.

I'll stop there to see if there are any questions.

All right, the second policy consideration is around income and rent limits for new projects.

The proposed program seven, just as Krista described, maintains the same income limits for congregates, studios, and three bedrooms.

As Program 6, it increases the income limits for one-bedrooms and two-bedrooms.

And as a note, even for units where the income limits stay the same, for example, studios are regulated at 60% AMI across both programs, Program 7 rents are higher because they use the non-modified income and rent chart imputed directly from .

Under this Program 7, one-bedroom rents under Program 7 are about $400 higher than they would be under Program 6, and two bedrooms are about $543 more.

The difference in studios between Program 6 and Program 7, again, both of which are regulated at 60% AMI, is about $200 more, again, just due to the use of those two different rent charts.

Establishing income and rent limits is one of the main, if not really the main, policy choice for MFTE.

There are multiple policy considerations related to establishing income and rent limits, depending on the policy outcome desired.

Policy outcomes could include stimulating housing production, especially in today's environment where housing is largely infeasible to build, creating below-market housing, for low and moderate income tenants, calibrating the appropriate balance between public cost and public benefit, and ensuring that the program provides a sufficient economic incentive to be utilized by developers.

Policy options here are to maintain the income limits proposed in the Program 7, increase the income limits for some or all types of units, or decrease the income limits for some or all of the unit types.

Any questions there?

All right.

Our next policy choice, or policy consideration, I should say, is around properties that are extending.

As described previously, under both Program 6 and Program 7, properties that are reaching the end of their initial 12-year tax exemption do have the option to extend for another 12 years.

For both Program 6 and the proposed Program 7, rent limits for expiring properties that want to extend are required to be lower than what is required for a newly constructed project just entering the MFTE program.

The premise here is that everything else being held equal, a unit in a 12-year-old building would rent for less than a unit in a brand new building, so that it would make sense for the older building to be regulated at a lower level.

Under Program 7, rent limits for extending projects are 5% below what is required for new projects for congregate studios and one bedrooms.

And because state law says extending units can't exceed 80%, two and three bedrooms are 10 percentage points below what's required for new projects.

Program 6 required all units and extending projects to be regulated 10 percentage points below what was required of newly constructed projects.

There are a couple of policy considerations here.

The first is what the market rate rents are for extending properties and what level of buy-down from market rate rents is desired for the MFTE units in extended properties.

Another consideration is what rent levels are needed to encourage property owners to extend.

Current OH data shows that about 45% of the 30 properties that have expired since 2021, when the extension option became available, have opted to extend.

Policy options here include increasing rents but not past the 80% cap established by the state, decreasing rents, or maintaining the rents as proposed.

Questions?

Okay.

We do have a question from Council President.

Can you go back to that other page, that other slide?

My question is why does the...

I'm looking at it from the renter's perspective, and when you lower the income that you can make to stay in an apartment, is that the case?

Yes.

That is true, so these will be units that are...

Okay, so I just want to make sure that I understand, because we had this conversation a couple years ago.

So basically, all of a sudden, when a program ends, you lower the AMI, and so all these people that are making above that have to leave, and that happened to a friend of mine.

So why do we do that?

There are a couple things in place to try to help mitigate that impact, although it certainly has had an impact on some tenants.

You are correct that the income limit decreases for the unit.

Under the proposed Program 7, a tenant can stay in that unit if their income is up to 1.5% of the income limit associated with that unit or 115% AMI, whichever is greater.

Chris is tapping me on the shoulder.

So if it's okay, I'd love to follow up with you after this meeting and get you the right details on that.

There are some things in place to try to mitigate that.

But again, there will be some tenants who are impacted.

I just want to make sure that I heard you say a tenant can stay in there if they make 115% the AMI.

I believe that it is either if their income is one and a half times the income associated with that unit.

So if they're at 60% AMI, for example, they could stay if their income was 90% AMI.

For a higher unit, like this one bedroom or the three bedrooms that are renting at 80%, It would be 80% plus 40% would be 120 or 115% AMI, whichever is lower.

So in that case, it would be 115%.

So there's some FUDDRAM for their income to be over the income that is allowed for the unit.

But at some point, if their income is too high, then it is correct that that unit will lose its MFTE designation at the end, although the rent can't change until the lease ends.

Okay.

I just want to note that these are fairly long, eh, not super long programs.

Well, 12 years or whatever.

We're trying to incentivize...

Well, what we want is for people to make more and more over the course of their lifetime, and that's a fairly big chunk.

And so one would hope...

I just don't...

Rents go up faster than incomes, right?

And so we're trying to prevent people from being basically evicted from these units.

I do want to recognize that we only have two minutes left on our agenda.

It's my understanding that we will be losing quorum at noon, is that correct?

Or do we have folks who can stick around for a few minutes later?

How much more time do you need to get through your presentation?

I just have two more slides, so I probably need like two more minutes than any time for questions.

Okay.

As long as we have quorum, proceed.

You got two minutes.

Okay, so three more slides.

Two more policy considerations and then a timeline, but I'll be fast.

Historically, MFTE, reauthorization of the MFTE program has coincided with the scheduled sunset date, really meaning every four to five years council has needed to take Action to reauthorize this program because it has a sunset date.

Program seven takes a different approach, eliminating the sunset date, but also providing direction on what factors should be considered and potentially lead to changes in the program after four years.

Those factors include the program not achieving its established purpose, which per the proposed legislation, is increasing the supply of housing for low and moderate income households, including workforce housing, encouraging more housing production, and affirmatively furthering fair housing.

Other factors are the opt-in rate, changes in housing market conditions, and any other changes in state law.

Really, the policy options are to add back in a sunset date or for council to weigh in with other factors they think should be considered after four years as part of making changes to the program.

The final policy consideration here is around cost, and I think that Krista addressed part of this already.

There are two types of costs associated with the MFTE program.

Krista described one, which is this concept of shifted taxes, right?

I think it's something like $8.9 billion of assessed value that is just exempt from paying property taxes because of the MFTE program.

If MFTE property owners aren't paying those taxes, then those taxes are essentially shifted to other taxpayers, other property owners in Seattle, and that does increase the price of a median home.

In Seattle, their property tax bill by about $145.

There is also a foregone revenue impact to this program, foregone being a wonky word really for like loss.

So there's some revenue that is lost permanently to the city of Seattle because of MFTE.

I'm not going to go into the why here.

It's super technical and complicated.

But in 2024, the total amount of foregone revenue was $39 million.

That's across all taxing districts, which I can describe again in more detail.

But City of Seattle takes about half of that hit in terms of lost revenue, so about $20 million.

Policy options here are frankly limited.

The city doesn't have the authority to require that the impact of an MFTE exemption, for example, only be shifted and that there be no lost revenue or foregone revenue.

That kind of action would need to be authorized by the state.

Conceivably, the city could cap the number of new projects participating in MFTE so as to have some control over the cost impacts, but that has never been done before and probably has some administrative complexities to it as well.

A final thing, timeline and next steps.

So we're here today, August 13th.

Executive and central staff have presented.

We are gonna try to get this done in two committees.

So this is coming back for potentially for a vote on amendments and the legislation itself to the 910 Housing and Human Services Committee.

Because of that, amendment concepts are due the Wednesday after August recess, so September 3rd, so that we can have time to work on amendments and get them ready for the 910 Committee.

As we like to say, you know, that 9-3 is a deadline, but don't feel like you have to wait until the deadline to start talking to myself and Tracy Radcliffe about potential amendments.

Really would much prefer to work with you on them earlier rather than later in either Tracy or I.

will be around during all of August recess, one of us, so we can certainly work with you during that time.

And as a reminder, MFTE does sunset on September 10th, so this deadline or this timeline is really driven by the desire to kind of minimize any lapse between programs.

And that's it.

Okay, great.

Thank you.

Colleagues, any questions for our presenters?

Yes, Council President Nelson.

So again, I'm returning to the The revenue hit of the lost property tax and I just want to note that the $970 million housing levy supports the production of about 400 to 500 housing units per year or 3,600 units over the course of the eight years, but only 50 million of that is allocated to workforce housing and only And that's just home ownership, 50 million out of 970 million.

And there are no workforce rental units that are supported by our housing levy.

And when I'm looking at the chart on page seven that the mayor's office produced, that's compared to 3,744 MFTE units over 10 years of the last two programs.

I'm looking at, again, supply and workforce housing because there is, what I would say, an unacceptable gap in workforce housing and the city doesn't have any program that supports workforce housing besides MFT, really, for rental units.

And that, I would say, is the greatest need because of the sheer numbers of people that fall within the category that make between 60 to 90 percent AMI.

I think that is worth the hit on the revenue that this program could produce.

Could you please tell me how much it costs to produce a, you know, how does that compare to the cost of the production of a rental unit under the affordable housing program of the housing levy?

So with that commensurate, would the $39.4 million equate to how many affordable apartments at 60% AMI?

I don't have that math exactly in my head.

I can do some for you after this.

I will say it's not entirely an apples to apples comparison, in part because the tax, like that's a, when we invest through the Office of Housing, that's a one-time investment, and then the product is affordable for a 75-year period of time.

With the MFTE tax exemption, you have to think of it as an annual cost, So that's $39 million per year.

So essentially it's the cost to purchase one year of affordability.

Again, they both have a role and a place, but it is hard to do an apples to apples comparison on cost because one you're purchasing annually and sort of one you're purchasing for a 75-year period of 50 to 75 years, depending on the regulatory agreement.

Got it.

But the AMI levels do change over the course of MFDE units over time.

Go ahead.

Sorry to interrupt.

I'm done.

Okay.

Any other questions from the committee?

Okay.

Great.

Well, thank you very much.

I appreciate your presentation.

Looking forward to getting P7 done.

I'm sure our developer folks are looking forward to that as well.

So we will be having our next meeting.

Are we going to be doing a special meeting on the 4th?

It's undecided.

Well, we know we have something on the books for the 10th.

We may actually move something a little bit sooner so we can get it done by the deadline.

Yes.

And the chair is shaking her head yes.

So it shall be done.

Don't try to do that now.

Run in the train.

I'm your assistant.

I told you I'm your plucky sidekick.

Okay.

Okay.

Well, again, thank you very much for your presentation.

And thank you, everyone, for taking time out of your day to be here today.

We've reached the end of our agenda.

Is there any for the business?

Hearing none, then our next scheduled meeting is September 10th, 2025 at 9.30 a.m.

We stand adjourned.

It is 12.07 p.m.

Thank you very much, everyone.

Enjoy the rest of your day.