Multifamily Property Tax Exemption (MFTE) Program

The Multi-family Tax Exemption Program (MFTE) program was created by the State Department of Commerce in 1995 to stimulate housing growth in Washington cities. Implemented on a City or County basis. Under the program, the jurisdictions can give tax exemptions for new construction, conversion, and rehabilitation of multifamily residential improvements.

Under the exemptions, a property owner does not have to pay property taxes on the residential improvements for a given number of years. The property owner still pays taxes on the land and non-residential improvements, such as the commercial portion of a mixed-use building.

All cities, many towns, and Clark, King, Kitsap, Pierce and Snohomish counties are eligible to offer an MFTE program. Over 50 Washington jurisdictions currently participate. Requirements in state law can be flexible and let cities and counties tailor programs to meet policies. MFTE programs are usually divided according to the length of the program:

For an 8-year MFTE program, there are no requirements for affordable housing, although some cities provide their own requirements. Many communities use this to promote market-rate housing construction in neighborhoods where new housing investment is needed.

A 12-year MFTE program must set aside at least 20% of housing units for low- and moderate-income households. Under the statute, household income is based on Area Median Income (AMI), with households with incomes at 80% of AMI or less considered “low income”, and households at 115% of AMI or lower “moderate income”. This MFTE is used for providing affordable rental housing options, including choices in market-rate private housing projects.

There is also a 20-year MFTE program targeted for affordable housing development for homeownership and in 2025, legislation passed that created a new category for multifamily called the 20-year TOD (Transit Oriented Development) MFTE category. Recipients of this exemption must record a covenant or deed restriction codifying affordability.