Let Them Build What (and Who) is Stopping Affordable Housing Developers in Chattanooga?
Published April 4, 2016
The over-taxation of Housing Tax Credits is killing Affordable Housing development in Chattanooga and the Assessor of Property can stop it right now.
Who cares about the Assessor of Property election? It is a small county position. It is bureaucratic. Can it be that important? It is not President of the United States... it isn't even Mayor of Chattanooga. Why should we care? In a city with an incredible affordable housing crisis and tremendous social and economic disparity, the office of the Assessor of Property may be the single greatest opposition faced by affordable housing developers.
Low-Income Housing Tax Credits (LIHTCs) Under Attack
The LIHTC program was created as part of the Tax Reform Act of 1986 and it allows individual and corporate investors to invest in the creation and rehabilitation of affordable rental housing. It is, in short, a federal subsidy that finances low-income and affordable housing. According to Chattanooga's Regional Planning Agency, there are over 5,000 families in Chattanooga who are being overburdened by the rising cost of market rate housing. In other major cities in Tennessee, the LIHTC program is being utilized by developers to create moderate to low-income housing. While we have a dire need for this housing to be produced, it is simply not being produced. The image below shows just how far behind that Chattanooga is:
Why don't we have a similar affordable housing production rate in comparison to these cities? Right now in Chattanooga, there are very few meaningful programs to encourage private developers to build housing for Chattanooga's enormous working class. While there are significant city programs to give tax-breaks to developers building housing for the wealthy, LIHTC programs are barely ever used. This is because the use of LIHTCs are actively being punished and taxed more than other properties. On a basic and fundamental level, housing tax credits are used to assist developers in providing housing for the people who need it. In Chattanooga, developers are prevented from using those credits. The county will compensate their tax rate to seize a very large portion of those funds. This means that, across Chattanooga, much of the funding from the federal tax credit allocation will be taxed away by Hamilton County through the Assessor of Property.
In Hamilton County, We Are Taxing the Poor and Giving to the Rich
In a 2014 report, The Tennessee Housing Development Agency (THDA) voiced concern about the growing number of different local Assessors of Property who were imposing excessive tax burdens on properties that used LIHTCs. After a 2001 Tennessee Court of Appeals ruling, local Assessors of Property were able to include the value of LIHTCs toward a property's appraised value. Thereafter, TN Assessors of Property have been able to tax LIHTC properties more greatly than they would if the developers had not used the program. Some cities, such as Memphis, have used their city tax abatement programs in order to subvert this practice by their own Assessor of Property. In Chattanooga, this does not happen. In most cities, the Assessor of Property simply does not overtax LIHTC properties. In Chattanooga, we are one of the most severe examples of over-taxation come awry. THDA named three major concerns for the over-taxation of LIHTC properties:
1. LIHTCs are the only federal program available to stimulate private developers to build affordable housing. The excessive property tax burden results in fewer and fewer units being produced or preserved.
2. Because the additional tax burden cannot be passed of as an expense to the working tenants, the additional cost results in deferred maintenance of the property. This means our affordable housing stock becomes more dilapidated.
3. Taxing the value of LIHTCs is comparable to a local Assessor of Property deciding to tax the value of economic development incentives provided by the state to relocate or expand their businesses in Chattanooga.
The use of incentive programs in Chattanooga is well-documented. Across the board, these programs benefit the wealthy. This ranges from the city's broken affordable housing program which produces housing in the form of expensive downtown housing to the extraordinary tax breaks giving to massive international corporations such as Volkswagen. However, when the same tax breaks are being given to stimulate the production of low-income housing, the Assessor of Property taxes the property more greatly to compensate.
What's happened in Chattanooga? When THDA looked at properties across Tennessee to find examples for how Assessors of Property are exploiting federal programs to help the working poor, they looked directly at Chattanooga. Their research demonstrated that LIHTC properties in Chattanooga are actually taxed at a higher rate than Market Rate housing. The Alton Place apartment building, for example, is taxed twice as much as comparable Market Rate housing. The graphic below reflects a comparison between Market Rate housing, the City of Chattanooga's Payment-In-Lieu-Of-Taxes ((PILOT) system, and LIHTC properties in Chattanooga.
Will you ask the Assessor of Property Candidates to let Affordable Housing developers build for our city?
The increased taxation of LIHTC properties is stopping the construction of affordable housing in Chattanooga. Chattanooga's political players are taxing the housing of working class Chattanoogans while they are giving tremendous tax breaks to the wealthy. The over-taxation of LIHTC properties is one of the greatest factors named by housing developers when they discuss the lack of affordable housing in our city. For the good of housing in our city and for the good of working Chattanoogans, we need to let affordable housing developers build. We can change the city to make this happen. The first step can be demanding accountability in our local officials.
The upcoming race for Assessor of Property has been a silent election in our city. The people of Chattanooga who care about affordable housing need to ask every candidate about their position on the increased taxation of the Assessor of Property position.