A group representing downtown Olympia residents is asking the city to bar properties that get tax benefits from hosting short-term rentals.
Olympia offers tax exemptions to multifamily housing developments downtown and in certain parts of the east and west sides. The exemption is good for eight years for market-rate housing and 12 years for affordable housing.
For that time, the owner does not pay taxes on the residential construction value of the property but does pay taxes on the land and any non-residential development.
The Olympia Downtown Neighborhood Association has proposed forbidding properties that currently get the exemption from allowing short-term rentals. In a recent letter, the group called out the 123 4th building, which has a tax exemption until 2024 and had five units listed on Airbnb this week.
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“I think it would have changed my feelings about living there,” Stephanie Jollie, who lives in the building, said of the short-term rentals. “Dealing with strangers in my space is not an expectation that I had.”
The units are listed by the building’s owner; tenants are not allowed to list their apartments on sites like Airbnb under the terms of their leases, according to the property manager. Jollie, Olympia DNA’s vice president, said she would rather those units be rented to long-term residents given the city’s low vacancy rate.
City staff plans to study the issue of short-term rental regulations later this year. Olympia DNA’s letter said this first step would set the tone for that conversation.
“I think it’s enough of a problem now that we need to start discussing it,” said Kento Azegami, the group’s president and vice chairman of the city’s planning commission, meaning he could have a role in drafting the city’s regulations.
Azegami called a tax exemption meant to create housing and short-term rentals “incompatible.”
City leaders also are looking at possible changes to the tax exemption program.
In the past decade, Olympia has given exemptions to four properties and is considering applications for two more. None of those are affordable housing.
This week, the City Council approved expanding the exemption area along Martin Way East to Lilly Road. That would include an affordable housing development under construction on the former Bailey Motor Inn site.
During a public hearing on the change, some urged the council to do away with exemptions for market-rate housing.
“It amounts to paying bribes to builders to do what the builders do anyhow,” said Bob Jacobs, who formerly served as Olympia mayor, arguing the city is losing out on tax revenue.
The council’s land use and environment committee will take up possible changes to the program later this month. Those might include a cap on the rent or value of eligible market-rate developments or further expanding the area for eligible properties.