NMHC Report: Tax Incentives that Work to Promote Housing Growth
February 26, 2025
HFO Investment Real Estate

NMHC Report: Tax Incentives that Work to Promote Housing Growth

NMHC’s Research Foundation commissioned RCLCO to perform a thorough analysis that looked extensively at how property tax-based incentive schemes affected housing growth in the US. The main conclusions are as follows:

Summary of Key Findings

Increased Housing Supply:

  • To overcome the concerns of affordability in different markets, tax-based incentives are vital in increasing the supply of housing.
  • Thousands of housing units have been built or renovated thanks to these initiatives.

Improvement in Affordability:

  • By establishing deed-restricted affordable apartments, incentive programs effectively promote affordability.
  • By expanding the total housing supply, several communities have surpassed the number of affordable housing units needed.

Good Return on Investment:

  • Municipalities gain between $1.83 and $39.82 in increased tax revenues each year for every dollar they spend on tax incentives.
  • This return is mostly driven by higher resident expenditure and operating tax income.
  • Variety in Programs:

Incentive schemes consist of:

  • Abatements: Direct tax reduction.
  • Exemptions: Reduced assessed values.
  • Tax Credits: Financial incentives to offset tax liabilities.
  • PILOTs: Payments in lieu of traditional taxes.

Case Study Cities:

  • Eight cities were analyzed to demonstrate various incentive program strategies and results:
    • Minneapolis
    • Portland
    • Louis
    • Buffalo
    • Seattle
    • Los Angeles
    • Manhattan
    • San Antonio.

Prominent Initiatives:

  • Minneapolis’ 4d Program: Achieved 68% affordable housing units with only a 20% requirement.
  • Portland’s MULTE Program: Resulted in more affordable units than required through tax exemptions on improvements.

 

  • Louis’ Tax Abatement Program: This program experienced new and rehabilitated multifamily units due to its flexible approach.
  • Buffalo’s PILOT Program: Buffalo alleviated property tax liability while creating affordable housing.
  • Seattle’s MFTE Program: Seattle’s tax exemptions significantly impacted the housing supply.
  • Los Angeles’ Mills Act Program: This program focuses on historic preservation with a unique, although limited, impact on the housing supply.
  • Manhattan’s 421-a Exemption Program: The program incentivized multifamily developments but faced scrutiny over affordability standards.
  • San Antonio Housing Trust: San Antonio utilized a public facility corporation model to increase affordable units.

Approach:

  • The impact analysis considered the balance between reduced property tax revenue and increased resident spending.
  • Without these incentives, it was assumed that many projects would not have moved forward.

 

Conclusion

One efficient way to increase the supply and affordability of housing is through tax-based incentive programs. The study demonstrates an overall positive fiscal impact for communities, together with significant intangible advantages–despite early worries about income losses. These initiatives provide communities looking to effectively address the housing crisis with a workable road map.

Strategic tax incentives are enabling housing affordability and growth! This comprehensive study shows how property tax-based initiatives generate thousands of much-needed housing units, including a sizable quantity of affordable housing, while also providing communities with a substantial return on investment. Find out how these creative initiatives are changing housing markets around the country.

Download the full report here: https://www.nmhc.org/research-insight/research-report/building-blocks-how-tax-incentives-lay-the-foundation-for-housing-growth/

 

#EconomicDevelopment #HousingCrisis #PropertyTax #MunicipalFinance #HousingAffordability #TaxIncentives #HousingDevelopment #RealEstate #UrbanPlanning

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