Spokane City Council diverts state sales tax to fund affordable housing

Shop local, build affordable housing.

The city of Spokane plans to direct a portion of the state sales tax into the development of affordable housing.

The Spokane City Council voted unanimously on Monday to begin pocketing a 0.0073% sales tax – collected by Washington and rebated to Spokane – and funnel it into the acquisition, construction or rehabilitation of housing that is affordable to those earning 60% or less of the Spokane County median income.

Spokane shoppers need not fret, as the overall sales tax will not increase. Instead, the city will take a cut of the sales tax already collected by the state.

“No taxes are going to increase with this,” said City Council President Ben Stuckart. “The state is cutting a portion of their sales tax back to the city of Spokane for affordable housing.”

Although 7.3 cents for every $1,000 spent within city limits may not seem like much, the city expects the change to raise $405,000 a year.

Rather than collect the funding in drips annually, the city could seek to pool the revenue together upfront via a 20-year bond, which would net about $4 million, Stuckart said. It could further leverage the funds, to the tune of about $10 million, if it joined forces with Spokane County and Spokane Valley, Stuckart added.

“It’s significant, the largest source of revenue we’re going to have for affordable housing,” Stuckart said. “We’ve seen cuts at the state and federal level recently, so this is really big movement for affordable housing.”

The resolution states that many Spokane residents are “severely cost burdened with housing costs and the City of Spokane has determined that imposing the sales and use tax to address this need will benefit its residents.”

Councilwoman Kate Burke said the sales tax revenue is “a step in the right direction, but we need more funding.”

“It’s imperative we start moving in the right direction and building to the needs of our community,” Burke said.

Cities were given the ability to divert state sales taxes for their use on affordable housing in a law passed by the state Legislature and signed into law by the governor in May. It was one of several new laws passed by the Legislature earlier this year in an attempt to address decreasing housing affordability and availability across Washington.

The new state sales tax law requires a city to pass a resolution to announce its intent to collect the tax by Jan. 28, 2020.

For the city’s part, it’s also considering an expansion of the multifamily tax exemption zone that offers developers of apartments, condominiums and town homes a property tax exemption when they construct or rehabilitate a property of four units or more. That proposal is set to be heard in a public hearing at the City Council meeting on Aug. 12.