CERTIFICATION OF ENROLLMENT
ENGROSSED SECOND SUBSTITUTE SENATE BILL 6175
Chapter 332, Laws of 2024
68th Legislature
2024 Regular Session
CONVERSION OF COMMERCIAL BUILDINGS TO AFFORDABLE HOUSING—TAX
INCENTIVES
EFFECTIVE DATE: June 6, 2024
Passed by the Senate March 6, 2024 CERTIFICATE
Yeas 46 Nays 1
I, Sarah Bannister, Secretary of
the Senate of the State of
DENNY HECK Washington, do hereby certify that
President of the Senate the attached is ENGROSSED SECOND
SUBSTITUTE SENATE BILL 6175 as
passed by the Senate and the House
of Representatives on the dates
Passed by the House March 5, 2024 hereon set forth.
Yeas 94 Nays 2
SARAH BANNISTER
LAURIE JINKINS
Secretary
Speaker of the House of
Representatives
Approved March 28, 2024 10:54 AM FILED
March 29, 2024
Secretary of State
JAY INSLEE State of Washington
Governor of the State of Washington
 ENGROSSED SECOND SUBSTITUTE SENATE BILL 6175
AS AMENDED BY THE HOUSE
Passed Legislature - 2024 Regular Session
State of Washington 68th Legislature 2024 Regular Session
By Senate Ways & Means (originally sponsored by Senators Trudeau,
Billig, Frame, Kuderer, Mullet, Nguyen, Nobles, Randall, Saldaña,
Valdez, and C. Wilson)
READ FIRST TIME 02/05/24.
1 AN ACT Relating to housing affordability tax incentives for
2 existing structures; amending RCW 84.14.010; adding a new chapter to
3 Title 82 RCW; and providing expiration dates.
4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:
5 NEW SECTION. Sec. 1. The legislature finds that:
6 (1) Many cities in Washington are actively planning for growth
7 under the growth management act, chapter 36.70A RCW, and through tax
8 incentives, the private market can assist Washington in meeting its
9 housing goals;
10 (2) Many downtown centers lack available affordable housing,
11 which results in long commutes that increase greenhouse gas emissions
12 and by using existing buildings to create affordable housing units,
13 units can be available more quickly and with a reduced impact on
14 waste streams and the environment compared to newly constructed
15 units;
16 (3) The construction industry provides living wage jobs for
17 families across Washington;
18 (4) In the current economic climate, the creation of additional
19 affordable housing units is essential to the economic health of our
20 cities and our state;
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 1 (5) It is critical that Washington state promote its cities and
2 its property owners that will provide affordable housing;
3 (6) Constructing new housing units can take years, and many
4 existing buildings can be repurposed quickly to meet the state's
5 workforce and affordable housing needs;
6 (7) Many existing buildings are located in downtown centers, near
7 work and services where there is limited land available for new
8 construction;
9 (8) In downtowns across the state, there is a high level of open
10 commercial space, which will likely remain, due to changes in how
11 businesses use office space following the COVID-19 pandemic;
12 (9) A meaningful, fair, and predictable economic incentive should
13 be created to stimulate the redevelopment of underutilized commercial
14 property in targeted urban areas through a limited sales and use tax
15 deferral program as provided by this chapter; and
16 (10) This limited tax deferral will help the owners achieve the
17 highest and best use of land and enable cities to more fully realize
18 their planning goals.
19 NEW SECTION. Sec. 2. It is the purpose of this chapter to
20 encourage the redevelopment of underutilized commercial property in
21 targeted urban areas, thereby increasing affordable housing,
22 employment opportunities, and helping accomplish the other planning
23 goals of Washington cities. The legislative authorities of cities to
24 which this chapter applies may authorize a sales and use tax deferral
25 for an investment project within the city if the legislative
26 authority of the city finds that there are significant areas of
27 underutilized commercial property and a lack of affordable housing in
28 areas proximate to the land. If a conditional recipient maintains the
29 property for qualifying purposes for at least 10 years, deferred
30 sales and use taxes need not be repaid.
31 NEW SECTION. Sec. 3. The definitions in this section apply
32 throughout this chapter unless the context clearly requires
33 otherwise.
34 (1) "Affordable housing" means:
35 (a) Homeownership housing intended for owner occupancy to low-
36 income households whose monthly housing costs, including utilities
37 other than telephone, do not exceed 30 percent of the household's
38 monthly income;
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 1 (b) "Rental housing" for low-income households whose monthly
2 housing costs, including utilities other than telephone, do not
3 exceed 30 percent of the household's monthly income.
4 (2) "Applicant" means an owner of commercial property.
5 (3) "City" means any city or town, including a code city.
6 (4) "Conditional recipient" means an owner of commercial property
7 granted a conditional certificate of program approval under this
8 chapter, which includes any successor owner of the property.
9 (5) "Eligible investment project" means an investment project
10 that is located in a city and receiving a conditional certificate of
11 program approval.
12 (6) "Governing authority" means the local legislative authority
13 of a city having jurisdiction over the property for which a deferral
14 may be granted under this chapter.
15 (7) "Household" means a single person, family, or unrelated
16 persons living together.
17 (8)(a) "Initiation of construction" means the date that a
18 building permit is issued under the building code adopted under RCW
19 19.27.031 for construction of the qualified building, if the
20 underlying ownership of the building vests exclusively with the
21 person receiving the economic benefit of the deferral.
22 (b) "Initiation of construction" does not include soil testing,
23 site clearing and grading, site preparation, or any other related
24 activities that are initiated before the issuance of a building
25 permit for the construction of the foundation of the building.
26 (c) If the investment project is a phased project, "initiation of
27 construction" applies separately to each phase.
28 (9) "Investment project" means an investment in multifamily
29 housing, including labor, services, and materials incorporated in the
30 planning, installation, and construction of the project. "Investment
31 project" includes investment in related facilities such as
32 playgrounds and sidewalks as well as facilities used for business use
33 for mixed-use development.
34 (10) "Low-income household" means a single person, family, or
35 unrelated persons living together whose adjusted income is at or
36 below 80 percent of the median family income adjusted for family
37 size, for the county, city, or metropolitan statistical area, where
38 the project is located, as reported by the United States department
39 of housing and urban development.
p. 3 E2SSB 6175.SL
 1 (11) "Multifamily housing" means a building or a group of
2 buildings having four or more dwelling units not designed or used as
3 transient accommodations and not including hotels and motels.
4 Multifamily units may result from rehabilitation or conversion of
5 vacant, underutilized, or substandard buildings to multifamily
6 housing.
7 (12) "Owner" means the property owner of record.
8 (13) "Underutilized commercial property" means an entire
9 property, or portion thereof, currently used or intended to be used
10 by a business for retailing or office-related or administrative
11 activities. If the property is used partly for a qualifying use and
12 partly for other purposes, the applicable tax deferral must be
13 determined by apportionment of the costs of construction under rules
14 adopted by the department. For the purposes of this subsection,
15 "qualifying use" means used or intended to be used by a business for
16 retailing or office-related or administrative activities.
17 NEW SECTION. Sec. 4. (1) For the purpose of creating a sales
18 and use tax deferral program for conversion of a commercial building
19 to provide affordable housing under this chapter, the governing
20 authority must adopt a resolution of intention to create a sales and
21 use tax deferral program as generally described in the resolution.
22 The resolution must state the time and place of a hearing to be held
23 by the governing authority to consider the creation of the tax
24 deferral program and may include such other information pertaining to
25 the creation of the deferral program as the governing authority
26 determines to be appropriate to apprise the public of the action
27 intended. However, the resolution must provide information pertaining
28 to:
29 (a) The application process;
30 (b) The approval process;
31 (c) The appeals process for applications denied approval; and
32 (d) Additional requirements, conditions, and obligations that
33 must be followed postapproval of an application.
34 (2) The governing authority must give notice of a hearing held
35 under this chapter by publication of the notice once each week for
36 two consecutive weeks, not less than seven days, nor more than 30
37 days before the date of the hearing in a paper having a general
38 circulation in the city. The notice must state the time, date, place,
39 and purpose of the hearing.
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 1 (3) Following the hearing or a continuance of the hearing, the
2 governing authority may authorize the creation of the program.
3 NEW SECTION. Sec. 5. An owner of underutilized commercial
4 property seeking a sales and use tax deferral for conversion of a
5 commercial building to provide affordable housing under this chapter
6 on an investment project must complete the following procedures:
7 (1) The owner must apply to the city on forms adopted by the
8 governing authority. The application must contain the following:
9 (a) Information setting forth the grounds supporting the
10 requested deferral including information indicated on the application
11 form or in the guidelines;
12 (b) A description of the investment project and site plan, and
13 other information requested;
14 (c) A statement of the expected number of affordable housing
15 units to be created;
16 (d) A statement that the applicant is aware of the potential tax
17 liability involved if the investment project ceases to be used for
18 eligible uses under this chapter;
19 (e) A statement that the applicant is aware that the investment
20 project must be completed within three years from the date of
21 approval of the application;
22 (f) A statement that the applicant is aware that the governing
23 authority or the city official authorized by the governing authority
24 may extend the deadline for completion of construction or
25 rehabilitation for a period not to exceed 24 consecutive months; and
26 (g) A statement that the applicant would not have built in this
27 location but for the availability of the tax deferral under this
28 chapter;
29 (2) The applicant must verify the application by oath or
30 affirmation; and
31 (3) The application must be accompanied by the application fee,
32 if any, required under this chapter. The duly authorized
33 administrative official or committee of the city may permit the
34 applicant to revise an application before final action by the duly
35 authorized administrative official or committee of the city.
36 NEW SECTION. Sec. 6. The duly authorized administrative
37 official or committee of the city may approve the application and
38 grant a conditional certificate of program approval if it finds that:
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 1 (1)(a) The investment project is set aside primarily for
2 multifamily housing units and the applicant commits to renting or
3 selling at least 10 percent of the units as affordable housing to
4 low-income households. In a mixed use project, only the ground floor
5 of a building may be used for commercial purposes with the remainder
6 dedicated to multifamily housing units; and
7 (b) The applicant commits to any additional affordability and
8 income eligibility conditions adopted by the local government under
9 this chapter not otherwise inconsistent with this chapter;
10 (2) The investment project is, or will be, at the time of
11 completion, in conformance with all local plans and regulations that
12 apply at the time the application is approved;
13 (3) The investment project will occur on land that constitutes,
14 at the time of application, underutilized commercial property;
15 (4) The area where the investment project will occur is located
16 within an area zoned for residential or mixed uses;
17 (5) The terms and conditions of the implementation of the
18 development meets the requirements of this chapter and any
19 requirements of the city that are not otherwise inconsistent with
20 this chapter;
21 (6) The land where the investment project will occur was not
22 acquired through a condemnation proceeding under Title 8 RCW; and
23 (7) All other requirements of this chapter have been satisfied as
24 well as any other requirements of the city that are not otherwise
25 inconsistent with this chapter.
26 NEW SECTION. Sec. 7. (1) The duly authorized administrative
27 official or committee of the city must approve or deny an application
28 filed under this chapter within 90 days after receipt of the
29 application.
30 (2) If the application is approved, the city must issue the
31 applicant a conditional certificate of program approval. The
32 certificate must contain a statement by a duly authorized
33 administrative official of the governing authority that the
34 investment project as described in the application will comply with
35 the required criteria of this chapter.
36 (3) If the application is denied by the city, the city must state
37 in writing the reasons for denial and send the notice to the
38 applicant at the applicant's last known address within 10 days of the
39 denial.
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1 (4) Upon denial by the city, an applicant may appeal the denial
2 to the city's governing authority or a city official designated by
3 the city to hear such appeals within 30 days after receipt of the
4 denial. The appeal before the city's governing authority or
5 designated city official must be based upon the record made before
6 the city with the burden of proof on the applicant to show that there
7 was no substantial evidence to support the city's decision. The
8 decision of the city on the appeal is final.
9 NEW SECTION. Sec. 8. The governing authority may establish an
10 application fee. This fee may not exceed an amount determined to be
11 required to cover the cost to be incurred by the governing authority
12 in administering the program under this chapter. The application fee
13 must be paid at the time the application for program approval is
14 filed.
15 NEW SECTION. Sec. 9. (1) Within 30 days of the issuance of a
16 certificate of occupancy for an eligible investment project, the
17 conditional recipient must file with the city the following:
18 (a) A description of the work that has been completed and a
19 statement that the eligible investment project qualifies the property
20 for a sales and use tax deferral under this chapter;
21 (b) A statement of the new affordable housing to be offered as a
22 result of the conversion of underutilized commercial property to
23 multifamily housing; and
24 (c) A statement that the work has been completed within three
25 years of the issuance of the conditional certificate of program
26 approval.
27 (2) Within 30 days after receipt of the statements required under
28 subsection (1) of this section, the city must determine and notify
29 the conditional recipient as to whether the work completed and the
30 affordable housing to be offered are consistent with the application
31 and the contract approved by the city, and the investment project
32 continues to qualify for a tax deferral under this chapter. The
33 conditional recipient must notify the department within 30 days from
34 receiv