Is the City’s Tax Abatement Policy Meeting Affordable Housing Need?
In the summer of 2018, the Columbus City Council passed legislation that would change the way the city used tax abatements to incentivize development projects moving forward.
At the time, council members and city officials described the new policy as a way to both encourage the building of more affordable housing and to target the incentives toward neighborhoods that were most in need of investment.
For those neighborhoods where development was deemed likely to happen without any incentives – the Short North being the prime example – the city would require developers to build up at least five stories, and to include some lower-priced apartments in their project in order to get a 15-year property tax abatement.
Some of the first developments to be awarded abatements since those changes went into effect are now hitting the market, and it is becoming clear that the small number of somewhat-affordable units spurred by the new incentive policy is not coming anywhere close to meeting the growing need for affordable housing in the region.
How Affordable Are They?
The number of affordable units required by the policy breaks down like this – 10% of units need to be “affordable and rented to” households making up to 80% of the area median income (AMI), and another 10% of units are reserved for households making up to 100% of the AMI. The current AMI for Columbus is $84,600 for a family of four, according to this mapping tool from Fannie Mae.
Those numbers are translated into actual rents for the Columbus area using a formula that is set by the HOME program, which is administered by the U.S. Department of Housing and Urban Development. The current rent limitations, based on information provided by the city:
|80% AMI rent||100% AMI rent|
Those rents include utilities (like gas, electric and water), so the numbers above represent the total amount that is paid by the tenant. Even factoring that in, though, “affordable” is probably not the first word that comes to mind for most people when they see those prices.
The 60-unit second phase of The Broadview apartment complex, near Grandview, is one of the developments that received abatements under the new policy. The project is now complete and leasing up, with prices that start at $1,195 for a small, one-bedroom unit (although larger one-bedrooms rent for over $2,000). Two-bedroom units in the complex are available for between $2,125 and $3,995 (not including utilities).
So in this case, the market rate that has been set by the developer for a small, one-bedroom in the complex is actually less than both the 100% AMI and 80% AMI affordable rents ($1,580 and $1,264 respectively).
Rita Parise, the Housing Administrator for the City of Columbus, said that it’s important to remember a few key points when measuring the impact of the city’s abatement policy.
For one, the requirement is not just that there are apartments offered below a certain price, but that the units are “rented to a household whose income does not exceed the 80% and 100% income rent limits,” she said, which is important because it prevents those lower-priced units from being snapped up by higher-income renters.
Also, “when an apartment complex is leasing up, owners often offer incentives to get the unit leased initially and then increase rents on tenants as leases renew,” Parise added, stressing that the affordability and occupancy requirements of the city’s program remain in place for the full 15-year period of the abatement.
How Many Units Are Being Built?
The incentive policy so far is not spurring significant numbers of affordable units, at least not compared to the need, according to housing advocates.
The Affordable Housing Alliance of Central Ohio (AHACO) has estimated that 54,000 low- and moderate-income households in Franklin County pay more than half of their income towards housing costs.
And, despite what seems like constant construction activity in Columbus and its surrounding suburbs, there is not enough housing being built to meet the overall demand – that means that renters and buyers of every income are competing for a smaller and smaller slice of available product.
Central Ohio’s population over the last ten years grew by an average of 65 new residents every day, and a 2018 study released by the Building Industry Association of Central Ohio estimated that, while about 8,000 new housing units are added to the market every year, 14,000 units are actually needed to keep up with demand.
According to the city, from 2019 through the end of 2020, a total of eight new-build, multifamily development projects were awarded tax abatements under the new incentive policy (because of a transition period after the legislation was passed, the program effectively started in 2019). Most of those projects are either still under construction or have yet to break ground, but when complete they will bring a total of 830 new residential units to seven different neighborhoods, 197 of which will be affordable at either the 80% AMI or 100% AMI level.
|Project Name||Developer||Total # Units||Total # @ 80%||Total # at 100%||Total Affordable Units||Neighborhood|
|Luxe 88||Preferred Living||440||22||22||44||Kenny and Henderson|
|Five On Fifth||Five on Fifth LLC||140||14||14||28||Short North|
|Northland Gate||National Church Residences||94||94||0||94||Northland|
|Essex Park||Preferred Living||78||8||8||16||Fifth by Northwest|
|Broadview Two||Avenue Partners||60||6||6||12||Fifth by Northwest|
|1296 Parsons Ave||Opportunity Columbus , LLC||10||0||0||0||Southside|
|165-171 Belvidere||Dana Smoot||4||0||1||1||Hill Top|
|383-330 St Clair Ave||Michael Kelly||4||1||1||2||Near East|
Advocates Say Bolder Action Needed
“Creating an affordable housing incentive program was the right move for Columbus three years ago,” said Carlie Boos, AHACO Executive Director. “But we’re three years older, three years smarter, and we know the policy needs to evolve. This program has the potential to create safe homes for our essential workers, our aging parents, and families escaping homelessness, but it’s not there yet.”
City officials have said that the details of the incentive program will be reassessed every three years, so there may be an opportunity to make changes to it in the near future. And housing advocates are hopeful that the city’s plan to update the zoning code will offer another chance to implement new policies that will lead to more affordable housing being built.
“We need to bring down construction costs by eliminating red tape and modernizing zoning rules,” Boos said, emphasizing that improving the city’s abatement policy is just one element of what should be a larger effort. “We need our housing infrastructure investments, like the incentive program, to be scaled up to meet the need at all income levels. We need to have a flexible, permanent safety net to catch families in crisis. And we need to make the path to homeownership straighter and smoother.”
Mayor Andrew Ginther has made affordable housing a cornerstone of his agenda, supporting a $50 million bond package that voters approved in 2019, and helping to establish a $100 million housing loan fund later that year.
However, the Regional Housing Strategy report released last fall by the Mid-Ohio Regional Planning Commission laid out a strong case that those programs alone are not enough to address the growing affordable housing shortage. The report also stressed how important it is for the region’s suburbs to start stepping up with more proactive policies – something they have generally been slow to do.
Boos said that the events of the last year have only highlighted the need for bolder action.
“The housing crisis in Central Ohio is at the point of no return,” she said. “The pandemic is proof that allowing 54,000 households to live on the brink every single day isn’t sustainable for those families, and it isn’t sustainable for our region.”