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In a significant move to address housing needs and rejuvenate downtown, Mayor Bruce Harrell, alongside Councilmember Mark Solomon, proudly announced the unanimous adoption of legislation designed to encourage the conversion of underutilized commercial properties into residential housing. This new tax exemption aims to facilitate affordable office-to-housing transformations in Seattle.
“We envision downtown Seattle as an inviting place not just for businesses, but also for families and diverse communities to live and flourish,” remarked Mayor Harrell. “This legislation not only makes it more feasible to convert office spaces into homes but also aligns with our commitment to revitalizing the urban core, thus creating a sustainable home for future residents.”
Councilmember Solomon echoed these sentiments, stating, “Empty office buildings present a unique chance to enhance our city’s housing landscape. We need innovative solutions to transform downtown into a vibrant community, and this legislation is a proactive step towards achieving that vision.”
The newly passed legislation follows recent modifications in state law that permit the deferral of a 10.3% sales and use tax on conversion construction costs. To qualify for this exemption, developers must allocate 10% of the new housing units as affordable for households earning at or below 80% of the Area Median Income (AMI). If these units remain affordable for a decade, the deferred taxes will be permanently waived.
Research indicates that Seattle stands among those U.S. cities with exceptional potential for successful office-to-residential conversions. This tax deferral initiative is expected to reduce financial burdens, making many conversion projects viable. The Office of Planning and Community Development (OPCD) predicts that the city could see the creation of approximately 1,000 to 2,000 housing units within seven years, including 100 to 200 units designated as affordable.
Moreover, if this policy is paired with the city’s Multifamily Tax Exemption (MFTE) program, estimates suggest that it could facilitate the construction of 3,000 to 6,000 units over the same period, with 300 to 600 of these being affordable units.
Previously, Mayor Harrell introduced measures to eliminate regulatory hurdles for transitioning existing commercial structures into residential spaces, inspired by ideas stemming from OPCD’s office-to-residential conversion competition held in 2023. Several proposals from that competition are already in the early stages of review and feasibility analysis.
This initiative is part of Mayor Harrell’s Downtown Activation Plan (DAP), aimed at broadening housing options within the downtown area. Additional proposals include zoning modifications along the Third Avenue corridor to expand housing development opportunities and a design review exemption intended to streamline the completion process for housing projects.
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