Seattle has approved a new ordinance, CB 120937, establishing a sales and use tax deferral program for converting underutilized commercial buildings into residential housing, including affordable units. The program was enacted under the authority of Washington State’s E2SSB 6175 and aims to stimulate redevelopment in targeted urban areas, particularly in downtown Seattle. Property owners undertaking conversion projects must allocate at least 10% of units as affordable housing for households earning 80% or less of the area median income. The program is expected to incentivize investment by reducing upfront construction costs by deferring sales and use taxes. City officials anticipate this will help revitalize the downtown area, which has struggled with high office vacancies since the pandemic. Developers must apply for the tax deferral before beginning their projects and comply with affordability requirements for at least ten years. If a project loses eligibility within this period, deferred taxes become due immediately. The program is set to accept applications until 2034, with an estimated 12 conversion projects anticipated within the first seven years.
Seattle’s tax deferral program addresses both housing affordability and economic recovery by facilitating office-to-residential conversions. This initiative is expected to attract developers to revitalize vacant commercial properties, adding much-needed housing supply while supporting downtown businesses and infrastructure.