Tacoma Increases Sales Tax to Fund Affordable Housing

March 31, 2021

Tacoma City Council on Tuesday voted unanimously to approve a one tenth of 1 percent sales tax increase to fund affordable housing projects.

The action increases sales tax from 10.2 percent to 10.3 percent, adding a dime to every $100 purchase, not including groceries. The increase is estimated to net the city an annual revenue of $5 million.

The increase of 1/10 will begin on July 1, 2021. Washington state House Bill 1590, passed in 2020, gives city and county councils authority to vote to raise local sales taxes for housing and does not require them to ask voters for approval.

The funds would target populations making at or below 60 percent of Pierce County’s Area Median Income (AMI), or roughly $51,900 a year for a family of four. The city also can set parameters to target populations below 60 percent AMI. Populations that can be served under the statute include veterans, senior citizens, people without homes, unaccompanied homeless youth and young adults, people with disabilities or domestic violence survivors.

At least 33,000 households, or 40 percent of renter households in Tacoma, are considered “cost-burdened,” or pay at least 30 percent of their income on housing costs each month, and 16 percent of those households pay more than 50 percent of their income on housing costs, according to city data.