SPOKANE — Demand isn't the problem, it's the supply.
The Spokane City Council voted this week to expand a program that aims to facilitate development of more housing in Spokane.
In a city where vacancy rates are low and the population is rising, the multifamily tax-exemption program offers developers a tax incentive if they renovate or build at least four units of housing.
On Monday, the boundaries of that program were expanded by nearly 50%.
Overall, the multifamily tax-exemption zone will expand from 3,338 acres to 4,927 acres, accounting for slightly more than 11% of the total land area in the city.
The city last expanded the zone to include a section of the South Hill in 2017.
"When we expanded it to the lower South Hill we actually saw a significant increase in apartments being built," said City Council President Ben Stuckart.
The tax exemption applies only to the value added to the property through a renovation or construction, and the property owner continues to pay full taxes on the land. When the term of the exemption expires, the owner pays the full tax bill on the entire property.
The expansion includes new stretches along East Sprague Avenue and east along the north and south banks of the Spokane River. The zone also was broadened to include an area west of Market Street near Wellesley Avenue and the area north of Kendall Yards.
A development is eligible for an exemption of either eight or 12 years, depending on its level of affordability. Market-rate housing is exempt for eight years, while a 12-year exemption is awarded to developments that set aside at least 20% of units for residents with an income of 115% of the median area income or lower.
Councilwoman Kate Burke noted that she was not on the council when the program was adopted, but said she would have fought for exemptions to be allowed only if affordable and low-income housing was to be built.
"We're going about it a backwards way," Burke said. "We should be protecting people rather than investing in developers to do what they should already be doing in our community."
Councilwoman Candace Mumm noted that the city had previously attempted to set a higher standard of affordable housing for a project to qualify for a 12-year exemption, but found developers weren't taking advantage of it.
In 2012, the council revised the law to require 20% of units be set aside for those earning just 50% of the area median income to qualify for a 12-year exemption. Not a single developer applied.
"That was part of our decision, to open it up so that people would actually use it," Mumm said.
Stuckart defended the program, saying the city has a "basic supply and demand problem" that the multifamily tax exemption helps to address by adding market rate housing, which accounts for about 80 percent of the housing stock.