Taxes & MFTEs

MFTE shifts the financial burden away from large-scale developers and onto everyday taxpayers.

The Multi-Family Tax Exemption (MFTE) program gives tax breaks to multi-family housing developers in exchange for setting aside a small number of units as “affordable.” While that may sound like a reasonable trade-off, it has serious long-term consequences for Kirkland residents. These tax exemptions given to for-profit developers are funded in only one of two ways, both which negatively impact Kirkland residents:

Tax shift: Taxes paid by a property that later becomes exempt is “shifted” to the rest of the tax base (tax paying Kirkland residents). This is because the total amount of property taxes to be collected form the basis of the regular levy carried over from one year to the next. Simply put, you have the same amount of taxes to collect among fewer paying people. As a result, the cost of housing increases.

Foregone tax revenue: Property tax not included in the historic baseline that would have been paid if the property was not tax exempt is not recovered (think property improvements). This reduces the total amount of tax revenue to Kirkland, while increasing the total population. This can be acutely felt if a few single family homes are replaced by a large development. In short, Kirkland will receive less tax revenue on a per person basis, even after a tax shift, and can result in a deterioration in the quality of government provided services.

Additionally, many community members now include quotes around the word “affordability”, because whether “affordable” is defined as housing for someone who makes 80%, 50%, 30%, or 0% of area median income is also negotiable — yet the tax discounts to the developer are still expected.

This is further exacerbated by the waiver of impact fees. Usually, developers pay one-time impact fees to help fund investment in roads, parks, schools, and emergency services because new buildings bring new residents who create incremental demand. Under a MFTE, those fees may be waived.

Meanwhile, the City’s own April 2025 study session revealed the following (source):

• Transportation infrastructure costs have jumped by over $30 million compared to 2021

• The number of expected new trips from development has grown by more than 40%

• Despite this, per-trip fees are being reduced, and some projects still pay nothing under MFTE

• Individual homeowners, on the other hand, could face impact fees of up to $9,887 per single-family home, and over $20,000 for homes with an ADU and DADU

Advocacy groups like Futurewise successfully pushed to make MFTE mandatory in the Transit-Oriented Development (TOD) bill. Their intentions may have been good, but the impacts are real, especially in Kirkland where nearly 90% of our ambitious growth target is subsidized housing. We need to keep the local budget under local control.

We support affordable housing—but it has to be fiscally sustainable and fairly distributed. MFTE needs reform. Kirkland’s residents should not have to carry the weight of policies that promise affordability, but quietly drain the resources we all rely on.