Developers searching for available land to build on in the city of Spokane should take note of an existing economic incentive designed to stimulate the redevelopment of underutilized properties.

The Parking 2 People initiative is an innovative approach aimed at transforming parking lots into land for housing.

As reported in the Journal's Aug. 28 issue, some Spokane developers are taking advantage of the city's sales and use tax deferral certificate that eliminates those taxes for property owners who take on the construction of at least two affordable residential units in a multifamily housing project.

The Underdeveloped Urban Land Sales and Use Tax Deferral, also known as Parking 2 People, is designed to help the city increase the affordable housing stock here and support construction employment. The incentive can significantly reduce the overall project costs, and developers can expect to save $900 for every $10,000 spent on taxed goods and services, according to the city's Economic Development webpage.

The tax deferral covers a broad range of project expenses including labor, services, construction materials and supplies, maintenance items, and common-area amenities, such as gyms or playgrounds, and the savings can help make otherwise unfeasible projects viable, according to some developers.  

Other nonresidential improvements, such as the commercial space in a mixed-use building, will still be taxed.

Real-world examples include Urbin Developments LLC's Linc Lofts and Broadway Apartments projects, which are already leveraging the incentive to convert underused parking lots in the downtown area into residential housing.

These projects highlight the immediate applicability and impact of the incentive.

The incentive also will help the city meet its Comprehensive Plan goals regarding affordable housing stock. Projects that use Parking 2 People are required to set aside at least 50% of the units for affordable rental units. This requirement will address the city's need for affordable workforce housing for those earning 80% to 120% of the area median income — one of the greatest housing needs in the community.

Downtown Spokane specifically is in need of thousands of new housing units and is capable of accommodating up to 6,000 new units from a density standpoint. Developing a robust residential population that lives downtown also is expected to benefit the city in times of economic uncertainty amid continued concerns over public safety.

Parking lot conversions are one tool to boost housing inventory here. Developers are encouraged to connect with the city's Economic Development team early on in the planning process to verify site eligibility and explore other city or state incentives, such as the Multifamily Tax Exemption or the Underutilized Commercial Sales and Use Tax Deferral. Layering incentives, however, requires accommodating additional affordable units.

Although inflated construction costs, high interest rates, and supply chain disruptions are contributing factors to the area's complex and expensive development conditions, incentives such as Parking 2 People can make a difference by helping to spur development by making the financials work for developers. 

The incentive isn't meant to penalize property owners, but aims to help create better conditions for builders through a predictable economic tool while addressing financial challenges, aligning with housing goals, and supporting a growing demand for residential development here.

Developers need to consider the advantages of Parking 2 People as a path to meet the housing demand in our community.