Business Government

Gig Harbor council appears receptive to affordable housing program

Gig Harbor City Council members appeared receptive to a tax exemption program that would provide incentives for developers to build more affordable housing during a July 30 study session.

However, the council did not make any decisions following a lengthy discussion.

The city of Gig Harbor can choose to implement a tax exemption program, called a Multi-Family Tax Exemption (MFTE), for developers who are willing to build a certain percentage of dwellings with capped rental rates. These capped rates would make them affordable for people making a certain percentage below the city’s area median income. As of 2026, more than 50 Washington jurisdictions participate in the tax exemption program.

Joining the program could herald a sea change for Gig Harbor’s lower income residents, including older adults who live on fixed incomes. As home prices and the cost of living continue to rise, and with the Gig Harbor’s area median income at $118,000 per year, older adults are most likely to be financially burdened and potentially displaced.

The tax exemption program also could help more city staff members live within city limits. As of last year, almost every staffer lived outside Gig Harbor.

The city could choose a program that lasts 12 years or a program that lasts 20 years. After the program expires, those units may return to market rate.

Background

In 2023, the state mandated that jurisdictions overhaul their comprehensive plans to accommodate affordable housing, low-income housing and supportive housing. The city has spent the better part of two years bringing its housing code into compliance with this mandate.

That includes examining the Multi-Family Tax Exemption program, which provides developers with financial incentives, depending on the kind of exemption program a jurisdiction chooses. The program is voluntary, and developers are only required to participate if they want the financial benefits. Developers who want to create private, market-rate housing are also eligible to participate.

In July 2025, the city provided information and took feedback on the program during a town hall meeting. Public reception was lukewarm at best. The city indicated it would go back to the drawing board.

High area median income

Council members still had a number of questions for staff after the July 30 presentation, including what happens to families living in these units after the program ends. The tax exemption programs target “low-income” and “moderate-income” housing options.

The city’s area median income is about $118,000. Federal housing guidelines define a family making up to 80% of an area’s median income as “low-income.” A “moderate-income” family is defined as making 115% of area median income.

Staff and council members pointed out that a family would need to make more than $94,000 per year to live in one of these “low-income” units.

Additionally, these numbers will increase as area median income increases. When city conducted its original analysis in 2023, area median income was $107,000.

A choice of programs — including not participating at all

If the city implemented an MFTE program, city taxpayers see tax increases of up to $80 per year.

In addition to 12- and 20-year tax exemption programs, an eight-year option is available. However, city Community Development Director Eric Baker told the council the shorter version isn’t a viable option for jurisdictions “looking to get multifamily of any kind in a particular area.”

Instead, the programs Gig Harbor would consider are the 12- or 20-year programs, he said.

A 12-year program requires developers to set aside 20% of the units they create to house low- to moderate-income families — in other words, households making $94,400 to $135,700 per year.

A 20-year program would require developers to sell 25% of the units as permanent affordable housing for households making 80% or below area median income.

Both programs require construction centered on designated urban growth areas. In Gig Harbor’s case, that’s the entire city, Baker said. City leaders also could designate specific areas for development, such as the centers located on the Highway 16 corridor. These include the Kimball, Gig Harbor North, and Uptown areas.

Developers can choose to price affordable units below required levels or create more affordable units than the minimum, but they are not required to. The city may also require developers to build more affordable units than the minimum requirement or lower the percentage range at which developers must cap rent. The city is likewise not required to do this.

Baker said that if the city chooses to participate, but then pulls out before either 12 or 20 years are up, units created or in progress would not lose that status. Those units would also stay below market rate until the program would have otherwise ended.

Staff recommended going for a 12-year program, rather than jumping straight into a 20-year program.

Council concerns

Council members expressed concern about a range of issues, including how long affordable units would remain affordable and whether the tax exemption program would draw developers.

Council member Le Rodenberg asked whether the city could commit to participating in the program for a minimum time. Developers would probably appreciate some predictability, he said.

Baker confirmed that such language can go into any program the city implements, and that the council can stop the program at any point.

Council member Patrick Ammann said he is concerned about what happens to families who are living in affordable units when the program expires. The program isn’t a permanent affordable housing solution and doesn’t help the long-term affordable housing outlook for the city, he said.

“I don’t think housing is going to get any more affordable than it is right now,” Ammann said. “In the long term, we should probably look at other solutions as well.”

Income level

Council member Emily Stone emphasized she would not want to see any units priced above 80% area median income.

“Having an area median income of $118,000 is really significant for our area,” she said. Not many professions pay $94,000 per year and people who live on fixed incomes don’t even come close to making that amount of money, she said. 

“I want to be very mindful of affordability for all of our residents,” Stone said. “And so it’s really important for me to feel comfortable moving forward with a program like this, that there are some affordability parameters. I would not like to see anything above 80%, in my opinion. I think making under six figures is well worth the tax shift for residents in our community to be able to live and work here and play here.”

However, council members Ammann and Julie Martin disagreed, saying they did not want a hard income level cutoff for developers.

“I am mindful of sometimes that if we lock it in at just 80% and someone’s fortunate enough to get a little bump over that, it might make sense for us to have a range, like 80% to  100%, or 80 to 90% of [area median income],” Martin said. “It gives that person some flexibility as they may move up slowly in their income earning opportunities.”

City staff will bring council members a draft ordinance and a memo for further discussion.