During the City Council Work Study Meeting held on September 16, 2025, in Port Orchard, significant discussions centered around the proposed multifamily tax exemption (MfTE) ordinance aimed at addressing the city's housing challenges. This meeting served as a continuation of previous discussions, with council members and city officials focusing on strategies to encourage the development of higher-value residential buildings while also addressing affordability concerns.

The proposed ordinance seeks to reinstate a multifamily tax exemption framework that had been repealed in 2023. The new plan includes two options for tax exemptions: an 8-year and a more aggressive 12-year exemption. The latter requires that at least 20% of the units in a development be rented at least 25% below fair market value, a significant increase from the previous requirement of 10%. This change aims to provide greater rent relief and support the development of affordable housing in the community.

City officials emphasized the importance of attracting higher-value buildings to enhance long-term tax revenues. The ordinance outlines specific criteria for eligibility, including the construction of mixed-use buildings, projects with a minimum height of four stories, or developments that incorporate middle housing. These criteria are designed to incentivize developers to create more valuable properties, which would ultimately benefit the city's tax base.

The council also discussed the potential financial implications of the MfTE program. A preliminary analysis indicated that the average cost to existing taxpayers could be approximately $10.36 per year for the first 8 to 12 years, depending on whether affordable housing units are included. This cost reflects the tax shift that would occur as new developments come online, providing additional revenue to the city and its taxing districts.

Concerns were raised by members of the Kitsap Home Builders Association regarding the viability of the proposed affordability targets, suggesting that the 25% below market rate might deter developers. However, city officials expressed a commitment to pursuing more aggressive affordability measures to meet community needs.

In conclusion, the discussions at the Port Orchard City Council meeting highlighted a proactive approach to addressing housing shortages and affordability issues through the proposed multifamily tax exemption ordinance. As the council prepares for further public hearings and input from stakeholders, the outcomes of these discussions could significantly shape the future of housing development in Port Orchard.