Multi-Family Tax Exemption (MFTE) Program

On June 9, 2025, Bellingham City Council approved the following changes to Bellingham’s Multi-Family Tax Exemption Program, after a public hearing on the topic:

• Minimum project size for all MFTE projects was increased from 4 or more housing units to 5 or more housing units to align with House Bill 1110 middle housing requirements for affordable housing.  
• The 8-Year market-rate MFTE option was expanded to encourage more multi-family housing in urban villages leveraging existing infrastructure and services. 
  • The 8-Year market-rate MFTE option was expanded beyond the Downtown District, Old Town, Fountain District, and Samish Way urban village target areas to include Fairhaven, Barkley, and the Waterfront District urban villages. 
  • Allows co-living housing. Co-living housing is a residential development with sleeping units (i.e., bedrooms) that are independently rented and lockable and provide living and sleeping space, and residents share kitchen facilities with other sleeping units in the building. The minimum co-living project size for the 8-year program exemption is 10 bedrooms (co-living units). 
• The 12-Year MFTE option wherein at least 20% of housing units must meet affordability requirements was expanded to encourage housing affordable to a wider variety of incomes. 
  • The 12-year MFTE option was expanded beyond Downtown District, Old Town, Fountain District, Samish Way, Fairhaven, and Barkley urban village target areas to include 1) the Waterfront District urban village, and 2) all zones allowing middle housing or multi-family housing that are located outside of designated urban villages. 
  • For rental occupancy, the Area Median Income (AMI) threshold requirement was adjusted to 80% AMI for all unit sizes.  
  • For owner occupancy, the moderate-income level of 80%-115% AMI was retained to incentivize creation of condominium housing. 
  • Allows co-living housing as described in the 8-year program above. The minimum co-living project size for the 12-year program exemption is 10 bedrooms (co-living units) with an income threshold of 50% AMI for required affordable units. 
• A new 20-Year MFTE option was added encourage opportunities for permanently affordable homeownership. 
  • Applicable citywide and requires that at least 25% of housing units offered for sale be deed-restricted at 80% AMI or less for 99 years. 
  • Allows co-living housing as described in the 8-year program above. The minimum co-living project size for the 20-year MFTE is 10 bedrooms (co-living units) with an income threshold of 50% AMI for required affordable units. 
• Extensions may be granted for properties with approved 8 or 12-year MFTEs to encourage housing affordable to a wider variety of incomes. 
  • Properties with approved 8-year or 12-year MFTEs nearing the end of their exemption periods may be extended for an additional 12-year tax exemption if 20% of their units are rented at 70% AMI or lower. 
• Requirements for relocation assistance were added to minimize displacement risk and its impact on tenants. 
  • The previous 12-month vacancy requirement and tenant displacement prohibition for MFTE qualification were repealed. In their place, requirements were added for new construction or rehabilitation resulting in displacement whereby applicants must provide existing tenants with housing of comparable size, quality, and price and a reasonable opportunity to relocate. Criteria for comparability include distance to employment, taking into account means of travel to work (e.g., proximity to public transit). 
  • Requirements were added for displacement resulting from expiration of 12-year MFTEs whereby applicants must provide tenant relocation assistance in an amount equal to one month’s rent to a qualified tenant within the final month of the qualified tenant’s lease. If a tenant’s lease extends beyond the expiration of the exemption, the applicant would still be required to provide relocation assistance at such a time as the lease failed to meet those requirements. 
• To ensure housing meeting affordability requirements is not less desirable or built to a lesser standard: 
  • Provisions were added to the 12 and 20-year MFTE options requiring the mix and configuration of designated affordable units be substantially proportional to the mix and configuration of market rate units in the project and constructed of similar quality finishes as market rate units in the project.