Author: Jered Lerum

For many in the real estate and property management world, the mention of “MFTE” (Multifamily Tax Exemption) tends to inspire a familiar reaction: an exasperated eye roll or a deep sigh, as if you’ve just been asked to solve a riddle wrapped in a puzzle. And honestly, we get it. With its complex requirements depending on the city, its mountain of paperwork, and the ongoing compliance checks, it’s easy to see why the program has earned a reputation for being, well, complicated.

But here’s the thing: once you’ve cracked the code, MFTE offers incredible benefits for property owners and renters alike—think tax breaks for owners and affordable rents for residents. It just takes a little patience (and a knowledgeable property management partner) to get through the fine print. Bringing a multifamily housing project to completion in today’s challenging market is no easy task.

PROGRAM BENEFITS

Construction costs continue to rise, and competition is ever present. The dance between profitability and financial ruin weighs heavy on even the most seasoned investor. The Multifamily Tax Exemption (MFTE) can be a deal maker when it comes to the viability of a multifamily project.

Edison47 is proud to have communities participating in the MFTE program in 4 cities including Seattle, Redmond, Port Orchard, and Tacoma.

We take pride in being trailblazers for the MFTE program in Port Orchard. We didn’t just participate —we were asked to provide our expertise to city officials to write what would later become the official guidelines for the city as a whole.

Edison47 has utilized the MFTE programs across multiple projects. Most municipalities offer either an 8, 10 or 12 year program. On the lower end of the term, developers are able to leverage a tax abatement without impacting market rents; as the term increases rent offsets tied to AMI (Area Median Income) come into play. With these programs, you are required to limit income to a given percentage, required to certify the income, employment and household composition while ensuring the applicants continue to meet the given properties rental criteria, easy right?

Edison47 has benefited from years of program implementation, oversight and development with multiple agencies.

SHOW ME THE NUMBERS

Though the setup, auditing and compliance of establishing such a program is substantial, the cost of not implementing a program can be staggering. At one Edison47 community (Proctor Station) the eight-year tax exemption was set to expire; this was going to increase property tax expenses $480,000. Edison47 and the team from Rush Capital worked with the City of Tacoma to structure a new program allowing for the conversion of 31 apartment homes (20% of the community) into affordable MFTE compliant units upon unit vacancy; netting a savings of $2.1M over 12 years or approximately $175,000 annually resulting in a $1.5M increase in the asset’s value!

Our commitment to the MFTE program reflects our broader mission: creating housing solutions that blend affordability with quality, while contributing to the growth and diversity of each community we serve.

For more information on implementing MFTE in your community, feel free to reach out for consulting at opportunity@edison47.com

WHAT IN THE BTR-YOU TALKING ABOUT?

The Build-to-Rent (commonly known as BTR) phenomenon is a growing sector of the rental market in which entire communities of single-family homes are developed for the sole purpose of being leased as rental units. Often coined “The New Starter Home” renting a single-family home is seen as a stepping stone between an apartment rental and home ownership. While private owners have historically leased homes sporadically throughout traditional neighborhoods, BTR neighborhoods are developed from the ground up for the sole purpose of renting.

_{Gig Harbor, WA- Skansie Pointe, Edison47’s first BTR community completed in 2023}

WHY THE DEMAND FOR BTR?

BTR communities have become popular with those not quite ready to pay a hefty down payment or as a step on the path to homeownership. Popularity for these communities began shortly before the COVID pandemic, which only intensified demand with an increase in the workforce’s ability to work from home. A wave of renters moved from their tiny downtown lofts to larger rentals further from the office.

With housing costs high, and supply low, there is a strong market in advertising the benefits of renting a home rather than purchasing. Beyond the individual homes themselves, residents of BTR communities often benefit from clubhouses and common spaces not offered in traditional neighborhoods. These homes typically include private outdoor spaces in addition to private garages. The list of benefits in renting a BTR home is lengthy, but highlights include; no taxes or HOA dues, no large down-payments, repairs and maintenance included, no shared walls, and access to community spaces like clubhouses, fitness centers, private parks and more!

EDISON47 AND BTR

In 2023, Edison47 with our development partner, The Rush Companies, completed our first BTR community, Skansie Pointe. Located in Gig Harbor, Washington, Skansie Pointe consists of 174 homes across 8 acres and is anchored by a 3,000 SF clubhouse. This neighborhood is a shining example of the potential return for investors of BTR neighborhoods.

“For the past 35 years at The Rush Companies, we have been in the business’s of both building and selling homes and building and holding apartments. We see strength in the BTR single family and attached housing communities and are investing in that market as a long term business. We will continue to evolve and provide housing that meets the ever changing needs of our communities.”

-Scott Walker, Vice President, The Rush Companies

LOOKING TO THE FUTURE

We are thrilled to announce the construction of a second BTR community, Hudson at Mill Pond in Yelm, WA. This community will consist of 56 homes slated to be move-in ready this summer. Unlike anything else in the area, we will be offering 2 and 3 bedroom homes for rent boasting quartz countertops, stainless steel appliances, gas fireplaces and private garages.

Stay up to date with construction at www.hudsonatmillpond.com and follow us on Instagram at @hudsonatmillpond