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Thread: Using tax abatement and/or TIF for housing rehab

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    Cyburbian Hawkeye66's avatar
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    Using tax abatement and/or TIF for housing rehab

    We have been kicking the idea around of offering a full tax abatement to houses that undergo a major rehab by the owner, either as a rental or owner-occupant.

    Does anyone have experience with an ordinance like this? Did you find it successful?

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    Cyburbian Cardinal's avatar
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    I know that in a number of places the city, and sometimes by state act, offers a property tax abatement on the value of improvements to a home. Sometimes this is directed at older housing stock. For example, North Dakota provides a tax abatement on improvements to a house over 25 yesrs old. The intention is to provide an incentive for people to maintain and modernize their properties. The problem I see with a blanket incentive is that it benefits people who would have doen the improvement regardless, rather than targeting it to specific areas in need of attention or to households that may need the financial incentive. I'm not saying this is wrong, but wondering if the cost of the incentive has been considered in the context of other budget expenses where the additional revenue could have gone.
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    Corn Burning Fool giff57's avatar
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    What is your goal for the program?
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    Cyburbian Hawkeye66's avatar
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    We have a Neighborhood Improvement Committee made up of citizens who has been meeting for the past 6 months with the goal of a set of recommendations to the council for improvement. We have identified some geographic areas and are working on finalizing our other recommendations. One of the things we are considering is this type of an incentive.

    The goal are better neighborhoods from the physical sense, which you hope somewhat leads to better neighborhoods in general. One other idea we are looking at is the effect on an area when the city redoes a street or replaces other infrastructure. We will be doing a lot of that in the coming 20 years as part of our Long Term Control Plan Consent Order with the EPA. If there is a upside to this large unfunded mandate, its that perhaps the infrastructure replacement of sewers, storm sewers, and streets helps the health of the neighborhoods and the individual properties within them.

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    Cyburbian wahday's avatar
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    I am not aware of any cities that provide tax abatement or other tax incentives for rehab (which is not to say they aren't out there) but many provide grants for this kind of rehabilitation, especially in hard hit areas. There are also "urban homesteading" programs that provide incentives/grants to people to acquire and rehab vacant properties (usually ones the City has acquired because they have been abandoned or owe too much in back taxes) A little different than what you are talking about, but there may be some language/ideas in there that are useful. My big Q would be where the money from these grants comes from. Here are a few links with info on programs in different cities:

    http://www.ehow.com/list_6945853_hou...nsylvania.html
    http://www.motherearthnews.com/Moder...-Programs.aspx

    I would be wary of extending the program to rentals, personally. I know a lot of cities for the above-cited programs require occupancy for a minimum of, say, 5 years to have loans forgiven or realize the true benefits of the programs. I'm not sure all the reasons why, but in general, owner-occupied is much more stable in a neighborhood than absentee landlord arrangements. So if the goal is stabilization and improvement, you may want to find ways to increase ownership. And if the landlord is out of state, that benefit is potentially leaving the muni (though the tax strategy helps mitigate that concern).

    Lastly, you mentioned TIFs in the thread title but then didn't mention in the post. What were you envisioning it could be used for? I don't see how TIFs would help this situation. Usually, the tax increment is rededicated to a specific geographic area for improvements that benefit all residents like infrastruture improvement. To funnel any of that money to individual owners might be a hard sell to the council, IMO, and possibly not legal.

    Still, enacting the abatement (or similar rehab program) in a Metropolitan Redevelopment Area and also activating Tax Increment Financing for infrastructure improvements in that same area could be an effective strategy for revitalization. You will still lose some taxation revenue in the general coffer from the abatement (and you will need to decide how much abatement and for how long) but given this will likely be incremental and not an army of residents rushing to rehab all at once, it probably will not be significant. Remember that TIFs do not increase your revenue base - everyone still pays what they otherwise would. You are just skimming off a percentage of an area's taxes and dedicating them to improvements within that same area (the percentage captured locally being the expected rise in property values over some given period of time)
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    Cyburbian Hawkeye66's avatar
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    Well we are not looking at it as an investment for future taxes. We are seeing it more from the overall health of the city. I don't think we care if the taxes fall off a bit for a while in those areas if they improve.

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    Cyburbian Brocktoon's avatar
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    Quote Originally posted by Hawkeye66 View post
    We have a Neighborhood Improvement Committee made up of citizens who has been meeting for the past 6 months with the goal of a set of recommendations to the council for improvement. We have identified some geographic areas and are working on finalizing our other recommendations. One of the things we are considering is this type of an incentive.

    The goal are better neighborhoods from the physical sense, which you hope somewhat leads to better neighborhoods in general. One other idea we are looking at is the effect on an area when the city redoes a street or replaces other infrastructure. We will be doing a lot of that in the coming 20 years as part of our Long Term Control Plan Consent Order with the EPA. If there is a upside to this large unfunded mandate, its that perhaps the infrastructure replacement of sewers, storm sewers, and streets helps the health of the neighborhoods and the individual properties within them.
    HAve you considered using CDBG or other housing redevelopment programs offered by HUD or the state?
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    Our community has used TIF from within our CRA to promote home rehab, hurricane mitigation, and facade improvements with moderate success. The program is only a couple years old, we've not been able to promote it much and we've used about half the funds allocated last fiscal year. The program is a GRANT program where the community will match 50% up to $3,000. It has helped get some places looking better and made safer. There is just a reluctance locally to increase the funding level or to "invest" in private property. It's successful, but until the economy turns I don't beleive that the local situation will change.

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