As we pointed out last week, it appears that the Council is not taking the work of the Mayor’ s Housing Affordability and Livability (HALA) Committee seriously. Not only is the Council pushing to pass damaging low-rise legislation but now they’re pushing to short circuit affordability created through the City’s Multifamily Tax Exemption (MFTE) Program. Below is the text of letter addressed to the Mayor but also sent out to HALA Committee members, the City Council, and other City staff. It’s time for the Mayor to get ahold of this process before more damage is done to housing affordability.

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February 7, 2015

Dear Mayor Murray,

I am writing you to point out yet another example of the City Council moving ahead with significant housing legislation that will adversely impact housing affordability in the city. Currently the Council’s Housing Committee is considering changes to the requirements for Small Efficiency Dwelling Units (SEDUs) and the Multifamily Tax Exemption (MFTE) Program.

Councilmember Clark is proposing a change MFTE that would require that units hold their rents to no more than 30 percent of the monthly income of a person earning 40 percent of Area Median Income (AMI)

This new requirement would reduce participation in MFTE and thus create fewer affordable units for people who earn 60 to 80 percent of Area Median Income (AMI). Ostensibly, the changes Councilmember Clark proposes are to create more participation at lower levels of income (40 percent AMI), but what this would do is not create units affordable to those lower levels, but result in no MFTE units at all.

The Office of Housing will tell you that based on their calculations the program won’t suffer any adverse impacts. But they have not taken into account higher rents that result from larger unit sizes and other requirements imposed by Councilmember O’Brien’s SEDU legislation last year.

Let’s look at an example; a 48-unit SEDU project with a 20 percent set aside and an annual expected City property tax of about $49,000.

In this example, because of the higher rents caused by last year’s legislation, participation is about a break even. What does it look like with a 40 percent requirement?

 At the 65 percent requirement the lost rent revenue is offset by the tax exemption. When the 40 percent requirement is imposed participation in the MFTE for SEDUs comes at an annual loss of more than $44,000.

Because of the higher rents created by the requirements from last year’s legislation, lowering the AMI requirements will mean SEDU projects just won’t participate in the MFTE program.

While the efforts of Councilmember Clark are motivated by a desire to create more affordability for lower levels of income, the result will be a drop in participation in MFTE and fewer overall affordable units.

We urge you and your Housing Affordability and Livability Agenda (HALA) Committee to intervene in the Council’s process and ask for this to be considered as part of the over all HALA process. If HALA can’t at least participate in the discussion of the impacts of this change, it further undermines their charge and the whole point of the Committee’s work, to “strengthen the Multifamily Tax Exemption (MFTE) program to more effectively spur development and retention of mixed-income rentals” (See attached HALA document, especially Section 1, Financing).

Sincerely,

Roger Valdez