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D.C. Council Passes $15.5B Budget With CRE Tax Hikes To Fund Affordable Housing

The D.C. Council at a March 2018 hearing on the Comprehensive Plan.

Mayor Muriel Bowser's plan to increase taxes on commercial property to build new affordable housing has passed the D.C. Council, despite opposition from the development community and the council chairman. 

The D.C. Council voted unanimously Tuesday to approve the $15.5B budget for the next fiscal year, making some changes to Bowser's funding proposal. 

The approved plan increases the funding for multiple affordable housing programs based on tax increases on commercial real estate properties and transactions that are expected to generate $114M in revenue, the Washington Business Journal reports.

Several developers at Bisnow's D.C. State of the Market this month criticized the city's leaders for the tax increases, which they said unfairly punished the real estate industry and would likely be passed onto small businesses. D.C. Council Chair Phil Mendelson said he opposed the tax hikes but did not expect the rest of the council to agree with him. 

With the additional tax revenue, the D.C. Council increased the city's Housing Production Trust Fund to $116M, a $16M bump up from its previous level but less than the $130M Bowser had proposed in March. 

The council also directed $11.5M to the Housing Preservation Fund and $8.5M to a voucher program for low-income residents. 

The D.C. Housing Authority will receive an additional $25.5M in the budget to repair the District's public housing stock as it aims to renovate at least 2,400 units over a two-year period. The increased DCHA funding is largely being pulled from Events D.C.'s reserve funds, a plan that has garnered some criticism from D.C.'s chief financial officer. 

The council is also setting aside $1M for public housing from a tax abatement that had been planned for The Line D.C. hotel project, after city officials determined the project failed to meet local hiring requirements in the agreement, the Washington Post reports

Bowser had proposed a $20M Workforce Housing Fund, but the council instead approved $16.8M in tax abatements for workforce housing over the next four years. 

In another change that could impact commercial real estate, the council reduced funding for a tax incentive program for technology companies. The program has been used by companies that expand their office footprints in D.C., and at least one such company — FiscalNote — testified in opposition to the program's reduction.