We have been interested in how cities and towns use incentives to spur downtown housing development. It’s not often you see a single tool that both addresses the housing issue and also helps with downtown invigoration. We understand some folks are hesitant to spend public money to incentivize market-rate housing (which this usually turns out to be), but we think – and apparently so do a good number of local governments – it’s well within your power, especially when tied to the additional goal of downtown improvement.
We reviewed the program descriptions from several localities, and have talked about this with others interested in the topic. Here are some note-worthy choices that local governments have made in establishing their programs:
*These are usually matching grants in various percentages, such as 20% or 50% of the total renovation or construction costs, and are usually aimed at renovations to existing buildings to create housing opportunities (although some cover new construction as well).
*Some provide grants for the lower of the stated match percentage or some percentage of the assessed value increase.
*Grants are not available to buildings with code violations, or to fix code violations. Work must be completed by licensed contractors (with some exceptions for owner’s own work) and permits pulled, and public money doesn’t get paid until all inspections are done at the end of the process.
*Housing grants have no tie to job creation.
*Housing grants are not tied to rent, sales price or income limits.
*Some programs are administered by the local government; some are funded by the local government but administered by some other group – which could be something like the local Main Street organization. Some localities may feel this provides an extra layer of legal protection about the use of public money for this kind of economic development. Others may feel that this arrangement takes some politics out of the process, and some burden off the public officials.
One interesting alternative we saw was to treat these housing incentives as you would any other economic development incentive – this program was designed around performance grants based solely on additions to tax value. This essentially produces a limitless budget for the program, as you theoretically shouldn’t care how many people take advantage of the program in any year, at least until you get your desired level of downtown housing.
We also heard a separate, important point: No matter what you do about incentives, no one wants to live in a downtown that feels unsafe and is full of ramshackle buildings. We see once again how economic development has to start with basic government effectiveness before incentives can make a difference.
We’d love to talk to you about putting together a program like this for your community, or to talk about downtown or housing in general. Click here to send us a message, click here for our disclaimer and click here to read more about our housing practice.