Spokane drafts letter to Inslee over delay to affordable housing incentive

(The Center Square) – Spokane officials are drafting a letter to Gov. Jay Inslee requesting that he expedite a new tax deferral program to encourage the conversion of commercial buildings into affordable housing.

The letter still needs some tweaks and a vote before the City Council sends it to Olympia; nevertheless, it calls for Inslee to direct the Department of Revenue to expedite its rulemaking process that would implement Senate Bill 6175, which technically went into effect this month.

SB 6175 allows municipalities to enact resolutions that can establish a sales and use tax deferral for housing projects that convert otherwise neglected commercial property into housing.

“However, before municipalities can implement [its] provisions, and before developers can begin the lengthy application process,” according to the letter, “the Department of Revenue must complete the related rule-making process.”

According to Section 3 of the bill, if a property is only partly converted for a qualifying use and saves the rest for other purposes, then “the applicable tax deferral must be determined by apportionment of the costs of construction under rules adopted by the [Dept. of Revenue].”

During Monday’s Finance and Administration Committee meeting, Councilmember Michael Cathcart said he drafted the letter to help get the ball rolling for projects in downtown Spokane.

His letter calls on Inslee to direct the Dept. of Revenue to wrap up the process before the end of the year. The concern is that the elongated process might disincentivize developers, “effectively hitting pause on needed downtown housing developments,” according to the draft.

Last month, the Department of Commerce released a report that noted Spokane County was among 10 of 39 Washington counties that made little progress in increasing its housing supply to meet 2023 demands, only producing 89% of the almost 3,000 new units needed that year.

However, that data includes the entire county, not just Spokane’s city limits. Still, the report stated that despite offering around 11,000 subsidized units that income-qualified tenants could apply for, the county had over 34,000 households that would have qualified in 2023.

Despite Spokane County’s 2024 Point-in-Time Count noting its first decrease in homelessness since 2016, a 15% drop compared to 2023, the statistic also represents a 15% increase when looking back to 2022 and a 106% increase in contrast to the 2016 dip.

Councilmember Zack Zappone said he contacted Senate Majority Leader Andy Billig, D-Spokane, about a month ago about the issue. Billig confirmed that the Department of Revenue was aware and asked its staff to expedite its rule-making process.

“I know that it’s already in the works and being worked on,” Zappone said. “Not exactly sure if a letter would do anything in addition to what our local delegation is already advocating for us.”

Councilmember Jonathan Bingle disagreed, noting that the letter does not conflict with Billig’s request and that as many people reaching out as possible would only benefit the initiative. He referred to the letter as Spokane’s “stamp of approval.”

“Our Spokane developers stand ready to convert existing buildings in our downtown core to new and affordable housing,” the letter pleads.

Cathcart said he would present a final version to the City Council for a vote in mid-July or the weeks after, allowing feedback and suggestions until then.