Council considers affordable housing sales tax credit
House Bill 1406 encourages investments in affordable and supportive housing
Last updated 10/8/2019 at 5:35pm
The City of Mill Creek is considering a local revenue sharing program by providing up to 0.0146 percent local sales and use tax credited against the state sales tax for housing investments. This tax is available in increments of 0.0073 percent.
State lawmakers approved a bill encouraging investments in affordable and supportive housing across Washington. House Bill 1406 was signed into law by Gov. Jay Inslee on May 9.
The tax credit would be in place for up to 20 years, as stated in the City Council agenda packet. It can be used for acquiring, rehabilitating, or constructing affordable housing; operations and maintenance of new supportive housing facilities; and rental assistance for smaller cities.
The funding will only be spent on projects that serve people and families with income at or below 60 percent of the area median income. Cities can also issue bonds to finance the authorized projects, according to the agenda item.
If the City Council wants to consider receiving the HB l406 sales tax credit, a resolution of intent will need to be passed by Jan. 31, 2020. The tax ordinance must then be adopted by July 27, 2020, to qualify for a credit.
“We have time to answer some of these questions, talk to our peers, and figure out the best way to leverage these funds,” said Mill Creek Planning Manager Tom Rogers at a council meeting on Sept. 10.
The local sales tax authority is a credit against the state sales tax, so it does not increase the sales tax for the consumer. The intent of the legislation is to encourage local government investments in affordable and supportive housing. The funds will be considered a restricted revenue, subject to reporting requirements and audit review for compliance.
The use of this sales tax partially depends upon the size of the city’s jurisdiction. Counties with a population larger than 400,000 and cities with more than 100,000 people will choose between funding the construction of new affordable housing or funding the maintenance of new units in current supportive housing buildings.
Counties and cities with populations under 400,000 and 100,000 will have similar options, but may also have the option to use funds for rental assistance to tenants at or below the 60 percent median income.
For now, City staff aims to complete the resolution of intent in the next couple of months in order to hit the January deadline.