Tax Incentives
Multifamily Property Tax Exemption (MFTE) Program
The Multifamily Property Tax Exemption Program is one way to encourage the development of multifamily units located in designated Residential Target Areas in Tacoma. The incentive exempts qualifying projects from property taxes on the assessed improvement value for 8, 12, or 20 years based on the level of affordability provided.
Project Eligibility
For a project to be eligible for the tax incentive, it must:
- Include a minimum of four new multifamily units
- Be located in one of Tacoma’s Residential Target Areas
- 8-year projects with less than 20 units must be built exclusively for homeownership. These units must be sold to households at or below 150% of Pierce County AMI and the purchaser must occupy the unit as their primary residence.
- For a 12-year exemption, 20% of the units must be affordable at 70% Pierce County Area Median Income (AMI) for 12 years
- For a 20-year exemption, 25% of the units must be permanently affordable
MFTE Adopted Changes
MFTE Changes Substitute Ordinance 29059 passed on October 8, 2025.
Changes to the 8-year MFTE Program:
- Projects with less than 20 units must be built exclusively for homeownership. These units must be sold to households at or below 150% of Pierce County AMI and the purchaser must occupy the unit as their primary residence.
- Projects with 20 or more units may be built as rental or home ownership units. There is no occupancy requirement or AMI requirement for projects over 20 units.
- No 8-year MFTE projects are allowed in census tracts 53053061300 and 53053061400.
Other changes:
- Once in an MFTE unit, households are eligible to continue to qualify as low-income or moderate income for the purposes of the MFTE unless the household’s income exceeds 90 percent of Pierce County AMI.
- When applying for a 12-year extension, the affordable units must rent for at least ten percent less than the market rate units to meet the affordability criteria, even if that is lower than 70% AMI.
- Before all MFTE agreements are approved, a signed and recorded Multifamily Property Tax Exemption Program Covenant Agreement must be provided. This will be a recorded agreement, lien and covenant running with the land, binding all the assigns, heirs and successors of the applicant to the program requirements.
These changes go into effect on November 7, 2025.
Application Process
Applications are accepted year-round. Applications are submitted through the permitting portal Accela.
- There is an application fee ranging from $2,000 to $10,000 depending on project size/number of units. $2,000 for the first four units and then $200 per additional unit to a maximum of $10,000.
- Applications must be submitted and approved before building permits are issued.
- An applicant must be the owner of a qualifying property
Once the application process is complete, staff reviews the application and provides a recommendation to the Tacoma City Council to approve or reject the project based on eligibility. Upon City Council approval, the owner enters into a contract with the City of Tacoma, establishing specific guidelines for completion and acceptance of the project. If the owner sells the property after the tax exemption has been granted, the exemption stays with the property and is transferred to the new owner.
If approved, the applicant has three years to complete the new housing with the tax exemption starting the calendar year following issuance of temporary or permanent Certificate of Occupancy.
As part of our Affordable Housing Action Strategy, we have updated our program. Effective March 14, 2022, we expanded eligible areas the 12-year exemption is allowed to be used, lowered the household income level to 70% of Pierce County AMI as published by HUD each year, added a 20-year option for projects that provide permanently affordability, and adopted the option for extending an exemption for an additional 12 years if affordability is added.
Frequently Asked Questions
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- Projects with less than 20 units must be built exclusively for homeownership. These units must be sold to households at or below 150% of Pierce County AMI and the purchaser must occupy the unit as their primary residence.
- 8-year projects 20 units or larger, have no affordability requirement and may be built for rental or home ownership.
- Some areas of the City do not allow the 8-year MFTE option. Learn more using the interactive map linked to the tip sheet on this page.
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The affordability requirement for the 12-year MFTE option is 20 percent of the units (spread across unit type) must be affordable. The units must be rented to households making 70 percent or less of the Pierce County AMI.
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AMI stands for Annual Median Income. The U.S. Department of Housing and Urban Development (HUD) releases the AMI data by county each year.
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The current limits from the U.S. Department of Housing and Urban Development (HUD) for rental and income limits are linked on this page.The current limits from the U.S. Department of Housing and Urban Development (HUD) for rental and income limits are linked on this page.
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The Department of Housing and Urban Development (HUD) annually releases the median income data for each county. The City of Tacoma requires that MFTE affordable units be rented to household making 70% or less of the Pierce County AMI. The income level is determined by household size. Rental rates are determined per number of bedrooms.
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The City of Tacoma requires the owner of the property to submit an annual report due to each February consisting of filling in documents, which include:
- An affidavit signed by the owner or representative that the property remains in compliance with the terms of the MFTE agreement, notes any changes to the property and states the current occupancy rate.
- An affidavit signed by a representative of each unit that is an affordable unit. This affidavit includes: annual income of the household, number of people in the household and the rent being charged to the household.
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- Once in an MFTE unit, households are eligible to continue to qualify as low-income or moderate income for the purposes of the MFTE unless the household’s income exceeds 90 percent of Pierce County AMI.
- When income exceeds 90% AMI the next available unit in the project must become an affordable unit to replace the one that is no longer in compliance. Displacement is highly discouraged, and at all times, the rental housing code must be followed.