The Seattle City Council approved legislation to expand a tax break for developers to 22 additional neighborhoods, including Ballard, ending for now a long debate over whether the city's Multi-Family Tax Exemption program will increase affordability for middle-income workers.

Council member Nick Licata was the lone dissenter of the legislation last week, arguing that the changes "undermine its effectiveness." He proposed an amendment not to expand the program to several areas like Ballard that have already exceeded its target growth rates.

"Each one of these communities are growing beyond what we've set goals for, which means that we should be giving attention to the needs of these additional residents that we're asking to move into our city," Licata said.

Instead of encouraging growth in areas that are choking with it, the city should instead focus on making infrastructure improvements that go hand-in-hand with increased density, such as open space and better transit service, said Licata.

But his amendment failed and the plan was approved in a 7-1 vote.

It targets a higher income bracket than the current program, which sunsets next year.

Developers currently get a 10-year tax exemption on the residential portion of a project when a certain percentage of the units, rentals or homes for sale, are affordable to those earning between 60 percent and 70 percent of Seattle's median income.

The expanded version increases the tax break to 12 years and is supposed to create at least 500 new below-market rate units for those making between 80 percent and 90 percent of median for renters, and between 100 percent and 120 percent for homebuyers.

Few developers have used the current version, saying it doesn't pencil out at such a low-income bracket. Since 2004, it has helped produce 763 units of long-term, low-income housing in Seattle.

Critics of the plan say there are plenty of units out there already and in the pipeline affordable to the higher income bracket.

An outspoken critic of many of the city's actions around housing, Seattle Displacement Coalition coordinator John Fox, blames city leaders for pandering to special interest and equated the plan to a "gift of our tax dollars."

"What is the public purpose being served here?" said Fox last week in front of the full council. "We don't need to subsidy at this higher end and especially not when by doing so it shifts the tax burden onto the rest of us and especially low income tenants."

The program is expected to cost the average assessed household approximately $4.20 a year in property taxes, according to Mayor Greg Nickels office.

The plan has been highly criticized for not doing enough for lower-income residents. The city says this tool is meant to create more affordable housing for a different segment of the working population that are finding it increasingly difficult to live in the city, such as teachers, grocery clerks and other moderate wage workers.

Nickels spokespeople point out the city spends about $40 million a year on operating subsidies for rental housing for people who are homeless and low income. There is also down payment assistance for first time homebuyers who earn less than $44,000 a year, among other programs.

Chair of the council housing committee, Richard McIver, said the plan will create more mixed incomes and is necessary to avoid further segregating Seattle's neighborhoods.

The council members also recognized the tool is a limited one and would not cure the city's affordability challenges.

"Multi-Family Tax Exemption isn't about low-income people," said Council member Sally Clark. "It doesn't do that. You can't build a program that makes fair exchange on what the owner can make off a unit versus the property tax that we can trade off."

Mayor says tax plan will create housing affordable to workers

Mayor Greg Nickels applauded the City Council for passing legislation that he said will create housing affordable to teachers, nurses, grocery clerks and other moderate wage workers.

As part of his "Seattle Homes Within Reach" program, Nickels proposed to provide a 12-year tax-exemption for private developers to include below-market rate units in new buildings. The incentive will be expanded from 17 to 39 neighborhoods to provide additional developers an incentive to set aside 20 percent of their rental units to households earning no more than $65,000 for a family of three. The program is expected to cost the average assessed household approximately $4.20 a year in property taxes.

"I thank the Council for joining with me to make sure Seattle is affordable to working families," said Nickels. "The City of Seattle has a long history of meeting the housing needs of the poor and low-income earners. But we need to face the reality that many others are being priced out of today's housing market."

Visit council member Richard McIver's Web site to read the text of the ordinance, http://www.seattle.gov/council/mciver/.

Rebekah Schilperoort can be reached at rebekahs@robinsonnews.com.