Numerous programs are available to Washington jurisdictions to incentivize the development of affordable housing in urban areas. These incentives are important tools local governments can implement to support the development of affordable housing in their jurisdiction. This page outlines some of these available incentives, who is eligible, and links to available resources. Some of these programs include requirements for affordable housing.

Full details of multiple programs are available in the sections below. For a quick overview of available options based on the challenges jurisdictions may experience, you can refer to the matrix on page 67 of the Guidance for Updating Your Housing Element (PDF).
Tax and fee exemptions and deferrals
One way jurisdictions can support increased production of housing is by offering one or more of the following financial incentive programs, which make it easier for developments to “pencil,” meaning a developer is able to make the development happen because it will have adequate return on investment. Programs like this have the advantage of not requiring the jurisdiction to provide funds up front and leveraging the private market, allowing for a big impact on housing supply without a large budget.
The Multi-Family Housing Property Tax Exemption (MFTE) program provides a property tax exemption in exchange for the development of multifamily and affordable housing in designated “residential targeted areas.” The MFTE program is authorized by RCW 84.14.
It authorizes 8-year exemptions to encourage the development of multifamily housing, and 12- and 20-year exemptions to encourage the development of affordable multifamily housing.
Who’s eligible?
All cities, many towns, and unincorporated urban growth areas of Clark, King, Kitsap, Pierce and Snohomish counties are eligible to offer an MFTE program. Over 50 Washington jurisdictions currently participate. You can find the latest eligibility information on the table on page 5 of the 2025 MFTE Legislative Updates Fact Sheet (PDF).
Guidance and annual reporting
More details, including annual reports and guidance, can be found at Commerce’s MFTE homepage.
Any city or town may authorize a sales and use tax deferral for new housing construction if the city finds that there are significant areas of underutilized commercial property and a lack of affordable housing in areas around the property.
“Underutilized commercial property” means an entire property, or portion thereof, currently used or intended to be used by a business for retail, office-related, or administrative activities.
An owner of underutilized commercial property seeking a sales and use tax deferral for conversion of a commercial building to provide affordable housing must complete the procedures in RCW 85.59.030. This includes a statement that the applicant would not have built in this location but for the availability of the tax deferral.
Referral program requirements:
- The investment project must be completed within three years of approval of the application unless an extension is granted by the city or town.
- The investment project must be primarily for multifamily housing units, defined as a building or a group of buildings having four or more dwelling units not designed or used as transient accommodations and not including hotels and motels. Multifamily units may result from rehabilitation or conversion of vacant, underutilized, or substandard buildings to multifamily housing.
- At least 10% of the units must be affordable housing for low-income households (<80% AMI).
Additional requirements may be added by the city. These requirements must be met in the year the certificate of occupancy is issued, plus the next nine years. If a conditional recipient maintains the property for qualifying purposes for at least 10 years, deferred sales and use taxes are waived.
By June 30, 2026, cities and code cities must allow conversion of commercial buildings in commercial, mixed-use or residential zones to residential uses. (RCW 35A.21.440, RCW 35.21.990.)
Guidance and annual reporting
The Department of Revenue has a webpage with guidance on using the Conversion of Underutilized Commercial Property tax deferral.
Beginning in 2025, Commerce produces an annual report on this tax deferral:
“Parking to People,” or the sales and use tax deferral for underdeveloped urban land redevelopment (RCW 82.92), is a pilot tax deferral program available to owners of underdeveloped land interested in building affordable housing in Bellevue, Kent, Spokane, Tacoma and Vancouver (RCW 82.92.020).
“Underdeveloped property” means land used as a surface parking lot for parking motor vehicles off the street or highway that is open to public use with or without charge. “Affordable housing” is defined as affordable homeownership housing at RCW 82.92.010(1) and affordable rental housing at RCW 82.92.010(2).
Process:
- A qualifying city must adopt the program, as described by RCW 82.92.020.
- Property owner applies to the city for a conditional certificate of approval for an eligible project.
- After receiving the conditional certificate, the applicant must provide the certificate and an application to the Department of Revenue (DOR).
- DOR then issues a sales and use tax deferral certificate for state and local sales and use taxes due under chapters 82.08, 82.12, and 82.14 RCW on each. (RCW 82.92.100)
- Applicants must complete the investment project within three years of the application’s approval.
- Applicant must report to the city for a determination, and then to DOR for an audit of deferred taxes. (RCW 82.92.070).
After receiving a conditional certificate of approval from a qualifying city, an application must be submitted to the Department of Revenue before initiation of construction.
If all program requirements have been met, the deferred sales/use tax is waived by the department after the tenth year. Applications will not be accepted after June 30, 2032.
Guidance and annual reporting
The Department of Revenue has a web page with guidance on using the Parking to People tax deferral.
Beginning in 2025, Commerce produces an annual report on this tax deferral:
Local governments fully planning under RCW 36.70A (the Growth Management Act) may impose impact fees for fire protection facilities, parks, schools, and transportation facilities. Local governments can choose to charge different rates for different classes of construction, such as residential, commercial and retail. Local governments can also choose to collect impact fees on only a single type of construction. Except under specific circumstances, a local government must refund fees not expended or dedicated within 10 years of collection.
Local governments may choose to offer the following incentives:
According to RCW 82.02.060, local governments have the authority to adjust impact fees for “low-income housing, and other development activities with broad public purposes,” including early learning facilities. RCW 82.02.060(2) and RCW 82.02.060(4) outline the extent to which jurisdictions may modify impact fees for affordable housing and the specific requirements that must be outlined in the jurisdictions’ impact fee ordinance.
Jurisdictions may grant partial exemptions to developers of low-income housing from impact fees, reducing the impact fee obligation of the proposed development project by as much as 80% without necessitating the use of other public funds to compensate for the reduction. However, when jurisdictions choose to fully exempt a development project and waive the full impact fee, the remaining 20% of the waived impact fee must be covered by public funds from sources other than the impact fee account.
See Residential Proportional Impact Fees and System Development Charges Guidebook (PDF).
Who’s eligible?
Any city or county, as authorized by RCW 82.02.060(2) and (4).
Guidance on this incentive is also included in Commerce’s Guidance for Developing a Housing Action Plan (PDF), page 133. MRSC has also published information on impact fee reduction.
If impact fees are collected, local governments MUST provide for the following, which are not considered incentives:
- Proportional impact fees: Residential Proportional Impact Fees and System Development Charges Guidebook.
- Impact fee deferrals: Read the 2024 impact fee deferral report or find past reports on Commerce’s legislative reports page.
- Reduce impact fees for ADUs (RCW 36.70A.681(1)(a)): The city or county may not assess impact fees on the construction of accessory dwelling units that are greater than 50 percent of the impact fees that would be imposed on the principal unit.
Annual reporting
Beginning in 2018, Commerce produces an annual legislative report on the deferral, which can be found on the Legislative Reports web page.
Guidance
Waivers and exemptions are discussed in Section 10 of Commerce’s Residential Proportional Impact Fees and System Development Charges Guidebook (PDF).
Regulatory incentives for affordable housing
Beyond fee exemptions and deferrals, jurisdictions have many tools they can use to incentivize the development of affordable housing in their communities.
In addition to the information below, jurisdictions can refer to MRSC’s guide to Affordable Housing Techniques and Incentives and Commerce’s Guidance for Developing a Housing Action Plan (PDF).
Any city or county planning under the Growth Management Act may enact or expand affordable housing incentive programs providing for the development of low-income housing units through development regulations or conditions on rezoning or permit decisions, or both. These affordable housing incentive programs can apply to residential or mixed-use development. An affordable housing incentive program may include, but is not limited to, one or more of the following:
- Density bonuses within the urban growth area, co-living, transit-oriented development or other law.
- Height and bulk bonuses;
- Fee waivers or exemptions;
- Parking reductions, unless already limited by state law, or
- Expedited permitting.
Rental housing units to be developed shall be affordable to and occupied by households with an income of fifty percent or less of the county median family income, adjusted for family size;
Owner occupancy housing units shall be affordable to and occupied by households with an income of eighty percent or less of the county median family income, adjusted for family size.
The legislative authority of a jurisdiction, after holding a public hearing, may change the income levels.
Low-income housing units developed under an affordable housing incentive program shall be committed to continuing affordability for at least fifty years. A local government, however, may accept payments in lieu of continuing affordability.
Who’s eligible?
Any city or county planning under the Growth Management Act.
Guidance
MRSC has published information, including examples from both Washington and other states, on the use of inclusionary zoning and other incentives, and an overview is in Commerce’s Guidance for Developing a Housing Action Plan (PDF), page 130.
RCW 36.70A.545 requires that properties owned by religious organizations be eligible for increased density bonuses if they serve low-income tenants for 50 years. In this case, jurisdictions may develop policies based on the level of need for the proposed housing and the ability of infrastructure to handle increased density.
Who’s eligible?
This law applies to any city or county fully planning under the Growth Management Act.
Guidance
MRSC has information on application of the religious density bonus.
A jurisdiction can adopt an exemption from State Environmental Policy Act (SEPA) review if its comprehensive plan was already subject to environmental analysis through an environmental impact statement (EIS). Any residential, mixed-use or smaller scale commercial development that is roughly equal to or lower than the density goals of the comprehensive plan is exempt from further review. The local government must consider the specific probable adverse environmental impacts of the proposed action and determine that these specific impacts are adequately addressed by the development regulations or other applicable requirements of the comprehensive plan; subarea plan element of the comprehensive plan; planned action ordinance; or other local, state or federal rules or laws. By removing an extra layer of review and potential risk, a SEPA infill exemption can encourage development within the designated area. These exemptions are authorized by WAC 197-11-800 and WAC 197-11-305.
Who’s eligible?
Any city or county fully planning under the Growth Management Act can offer SEPA infill exemptions, as authorized by RCW 43.21C.229.
Guidance
The Department of Ecology has created a matrix summarizing the SEPA exemptions (PDF) available to jurisdictions and the criteria and requirements for each, and additionally publishes a webpage for detailed information on SEPA infill exemptions. Additionally, MRSC has published information on exemptions.
Public agencies (local governments or utilities) can discount or gift land they own for “public benefit,” defined as affordable housing (up to 80% AMI). These agencies must adopt rules to regulate the transfer of property. Staff should inventory publicly owned available lands that may meet criteria for donation and assess environmental or other constraints that may inhibit project suitability prior to site selection. Consider the broad range of public agencies that may be willing to sell, trade, or donate land for a public purpose. Land purchased as staging areas for major construction that may be turned toward housing at the end of the project are a good candidate for programs like this.
Who’s eligible?
Any state agency, municipality, or political subdivision, including counties and utility districts, are eligible to provide low- or no-cost leases or transfers of surplus public property for affordable housing projects, as authorized in RCW 39.33.105.
Guidance
MRSC has published information, including RFP examples, on the use of surplus public property for affordable housing, and an overview and examples of surplus public property is included in Commerce’s Guidance for Developing a Housing Action Plan (PDF), page 139-141.
Parking requirements can be a major factor affordability of housing. For housing projects requiring surface parking, that parking often occupies land that could otherwise be used to add more income-producing housing units. Structured parking allows for the efficient use of land but significantly adds to a new development’s construction cost, which gets passed on in the rental rate or sales price of each housing unit. While reducing parking requirements alone won’t by itself result in production of more dwelling units affordable to less than 80% of low- and moderate-income households, it will help reduce what might otherwise be viewed as unnecessary development costs.
Guidance
MRSC has published a guide to parking regulations. An overview of tools local governments can use to reduce overparking is included on Commerce’s Planning for Middle Housing web page.
Providing an efficient, predictable and user-friendly permitting process can encourage new housing construction by reducing potential confusion or perception of risk among developers as well as lowering their administrative carrying costs. For jurisdictions planning under the GMA, review must meet the requirements in RCW 36.70B.
Who’s eligible?
Any jurisdiction can evaluate their permitting processes to increase usability and consistency. These improvements can apply to more than just affordable housing, though many jurisdictions provide additional expedited processing to projects including affordable housing.
Guidance
MRSC has published a guide to streamlining local permit review procedures, and an overview is included in Commerce’s Guidance for Developing a Housing Action Plan (PDF), page 125. Commerce has more information on our Local Project Review page and in the Local Project Review Guidebook (PDF).
The Governor’s Office for Regulatory Innovation and Assistance (ORIA) has a project questionnaire which can help identify what permits, approvals, and licenses are needed. Their regulatory handbook has more information on laws and decision trees.
Communities can identify priorities for investment in sewer or water extensions or sidewalks to support upzones, or to catalyze development around new amenities such as transit hubs or community centers. Strategic selection of infrastructure priorities in the capital facilities element can help support development of housing in a jurisdiction.
Jurisdictions can utilize latecomer agreements to leverage private investment to create infrastructure. These agreements ensure that early investors are compensated by property owners who later utilize their infrastructural investments to create new developments, creating a greater incentive to develop property. These agreements are authorized by RCW 35.72 (street projects), RCW 35.91 (municipalities contracting for water and sewer projects), and RCW 57.22 (water-sewer districts).
Guidance
MRSC has published a guide to latecomer agreements in Washington.
The best locations for a community revitalization financing (CRF) program are undeveloped and underdeveloped areas because this program depends on an increase in property value. For this program, “permanently affordable housing” is defined as affordable to low-income (80% AMI or less) for 40 years for rental housing and 25 years for ownership housing.
Who’s eligible?
In Washington state, the CRF program authorizes cities, towns, counties and port districts to create a tax “increment area” and finance public improvements within the area by using increased revenues from local property taxes generated within the area (RCW 39.89).
Guidance
MRSC has published a guide to tax increment financing (TIF) in Washington. The Department of Revenue has also provided an overview of tax increment financing. An overview is included in Commerce’s Guidance for Developing a Housing Action Plan (PDF), page 144.