Washington Commercial, Apartment Landlords Could Get Coronavirus Relief on Tax Bills Under New Assessor Proposal

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As pandemic-stricken business tenants fall behind on rent, the King County assessor has a new proposal that could help commercial and multifamily landlords get some much-desired relief on their property tax bills.

Assessor John Wilson asked the state Legislature Thursday to allow counties to move more quickly to lower the taxable value of commercial properties whose owners have been unable to collect rent since the statewide stay-at-home order shuttered most storefronts.

If the proposal passes in a special legislative session later this year, it could reduce King County property tax collections by 2.5%, or nearly $155 million.

The reductions would apply to the second half of 2020 property taxes, due in October. The specific impact on individual properties would depend on how much rent they've missed out on.

The values on which commercial buildings are taxed are in part tied to rent collections. But many business tenants, Wilson said, are "precariously hanging by the edge" due to the coronavirus and have stopped paying rent, with retail and short-term lodging hit the hardest.

Homeowners, though, wouldn't get any relief under the new plan. Wilson said his reasoning is that residential property values have stayed more or less flat from 2019. He added he's required to assess home values based on the sale of comparable properties.

Nationally, landlords only collected 59% of rent from retail tenants in May, according to research from commercial real estate analytics firm Datex. Some major national chains, including 24 Hour Fitness, AMC Theaters, Bed Bath and Beyond, Old Navy and H&M, didn't pay a cent in May. Lynnwood-based retailer Zumiez said early during the lockdown it would stop paying rent on more than 700 locations in order to negotiate with landlords.

At Harvard Market, a small shopping center on the corner of Pike Street and Broadway on Capitol Hill, rent collections have fallen by roughly 30% from 2019, said owner Morris Groberman.

"My property, because I'm not getting my rents, is not as valuable," he said. "But I'm still responsible for paying all my taxes, all my [maintenance costs] and my mortgage."



The assessor's plan, he said, could help him offer more flexible payment plans to tenants like nail salons and hairdressers that have been closed since mid-March.

The economic pain of the pandemic, though, hasn't been equally distributed. Industrial, multifamily and office properties have largely been spared, according to data on commercial mortgage delinquencies from research firm Trepp. The assessor said his plan accounts for that, and that he wouldn't give freebies to businesses that weren't impacted -- or to those already underwater before the pandemic hit.

Commercial property owners who've seen a 20% or greater drop in rent collections since the start of the coronavirus emergency could petition for a reduction in their tax bill, according to the proposed legislation. The amount of the reduction would be based on how long businesses in the space were closed due to the state's "Stay Home, Stay Healthy" order.

At the Ben Lomond building on Capitol Hill, some tenants participated in a rent strike in April and May, and it's been hard to rent empty units because of the pandemic, said owner Matt Bolin. Property taxes jumped by 16% in 2020, and he estimated rent collection is down 25%.

"I'd surely pass through any savings I could to these tenants who are hurting," he said. "It's a mess for all of us."

Bolin may be one of the few apartment building owners to qualify for the tax exemptions, though. Residential rent collections have stayed relatively high. Only 4.3% of Washington households paid no rent in April, according to the state Multifamily Housing Association.

The Legislature is currently recessed; Wilson asked that his proposal be considered in a special legislative session later this year.

Lawmakers and Gov. Jay Inslee have acknowledged a special session could be necessary to address the economic fallout of the virus. Republicans are pushing for a session as early as possible, but Democrats haven't yet committed.

Seattle Times reporter Joseph O'Sullivan contributed reporting.