Seattle city officials have just initiated new legislation to ignite a transformation of unused office spaces into residential housing. In a unanimous decision by the City Council, the recent bill that exempts certain construction sales taxes aims to streamline the repurposing of commercial properties to help address housing shortages. Mayor Bruce Harrell and Councilmember Mark Solomon announced the legislation as part of the city's broader effort to revitalize Seattle's downtown area.
"We want downtown Seattle to not only be a great place to work and run a business, but also a place for families and residents of all kinds to live and thrive," Mayor Harrell stated, as per the City of Seattle's official website. Following a change in state law, developers can apply for a deferral of the 10.3% sales and use tax on the costs associated with these conversions. A stipulation set by the City requires that, to qualify for this tax benefit, developers must offer at least 10% of the resulting housing units at affordable rates for households earning at or below 80% of Area Median Income.
The move was motivated by studies indicating Seattle's high potential to benefit from such office-to-residential conversions. By deferring sales taxes, the costs for these projects significantly drop, making them more economically viable for developers. The Office of Planning and Community Development (OPCD) projects the creation of 1,000–2,000 housing units within 7 years, including 100–200 affordable units, as a direct result of this legislation.
In conjunction with the city's Multifamily Tax Exemption program, OPCD anticipates an even greater surge in residential development. The policy is hoped to culminate in 3,000–6,000 new units over the same 7-year timeline, including 300–600 marked as affordable. Some of the proposed conversion projects are already in the initial stages of review and analysis, building off the momentum garnered from OPCD's 2023 office-to-residential conversion competition.
This tax exemption initiative is part of Mayor Harrell's Downtown Activation Plan, which comprises a series of strategies to increase housing accessibility. Among other actions are strategic zoning change proposals along Third Avenue to foster housing development and a design review holiday to reduce the time and costs of completing housing projects.
