Housing affordability is a critical issue in communities across the country. Local tax incentives to spur new housing development generate significant numbers of places for people to live and, at the same time, create additional long-term revenue for municipalities to support community services.

RCLCO’s Charlie Hewlett, Caroline Flax Ganz and Jackson Browning found that, when structured effectively, property tax-based incentives can reduce housing shortages and lead to a strong return on investment for municipalities, resulting in more affordable housing and increased economic activity.

However, despite the clear benefits, some cities remain hesitant to adopt these incentives due to concerns about the timing and magnitude of budgetary impacts.

“With the nation facing a shortage of housing of all types, this work clearly demonstrates that tax incentive programs offer a real solution to the building of badly needed housing in communities across the country,” said NMHC President Sharon Wilson Géno. “Not only do these programs directly lead to the creation of new affordable and market rate housing and improve housing affordability, they also directly benefit communities in a variety of ways. This research should encourage lawmakers to support legislative proposals to incentivize the broader use of these tools that will lead to lower housing costs and greater housing opportunity.”

Key Findings

• Evaluations across multiple U.S. cities show that tax abatement programs positively impact housing affordability both directly through creating new deed-restricted affordable housing and indirectly by increasing the supply of market-rate housing.
• Tax-based programs help developers by filling financing gaps, especially in markets with affordability constraints. Municipalities benefit with new housing, new residents and additional resident spending.
• In cities with affordable housing requirements, the programs often result in more affordable housing than the minimum required, highlighting the effectiveness of tax-based incentives in creating affordable housing options.

This work was supported by the Douglas M. Bibby NMHC Research Foundation. Find the full study here.

Based in Washington, D.C., the National Multifamily Housing Council (NMHC) is where rental housers and suppliers come together to help meet America’s housing needs by creating inclusive and resilient communities where people build their lives. We bring together the owners, managers, developers and suppliers who provide rental homes for 40 million Americans from every walk of life—including seniors, teachers, firefighters, healthcare workers, families with children and many others. NMHC provides a forum for leadership and advocacy that promotes thriving rental housing communities for all. For more information, contact NMHC at 202/974-2300, email the Council at info@nmhc.org, or visit NMHC's website at nmhc.org.

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