Affordable housing incentive bill is passed
Chattanooga leaders could have another way to stimulate construction of affordable housing under a bill approved Thursday by the Tennessee House of Representatives.
Under voluntary incentive programs created by local governments, developers may, for example, be able to add more units to a housing project in exchange for charging more affordable rents. The legislation cleared the Tennessee Senate on March 18 and now awaits Gov. Bill Lee’s signature. State Sen. Todd Gardenhire, R-Chattanooga, sponsored the bill.
“It doesn’t require any city or developer to do anything,” Gardenhire said in a phone call. “It’s strictly a voluntary housing incentive. It doesn’t say what those incentives need to be. It leads it up to the local planning agencies or commissions to do what makes sense for their communities. It opens up a wide range of things.”
Chattanooga City Council Vice Chair Jenny Hill, of North Chattanooga, said incentives possible through this legislation would give Chattanooga new tools to encourage the development of affordable housing. Hill chairs the council’s affordable housing committee.
“It helps make the numbers work on development deals,” she said in a phone call. “Using a tool like this, we would potentially be able to offer a developer more stories in a building than they would able to get typically, which allows the cost average to be adjusted to make the development of affordable units feasible.”
Mayor Tim Kelly and members of his administration have championed the legislation. City officials anticipate Chattanooga will have a deficit of 7,000 affordable housing units by 2030. Mortgage denial rates for Black Chattanoogans are also three times higher than they are for White Chattanoogans.
“The reality is that no builder or developer can afford to build new homes in a comfortable
price range for Tennesseans with modest incomes, given the rising cost of labor, materials and red tape,” Kelly said in a February news release about the bill. “Without voluntary incentives to either decrease construction costs or increase the project’s overall revenue, new homes will remain out of reach for too many, including many paramedics, teachers and bus drivers.”
In February, city officials said the bill would give towns and cities the option to offer no-cost incentives to builders who want to create or preserve housing at affordable prices. The incentives could defray the cost of construction by allowing developers to construct more units than normally allowed on a piece of land, requiring fewer parking spaces for every attainable home or reducing mandatory setbacks for buildings.
“I really want to thank Mayor Kelly and his staff for working with me on this,” Gardenhire said.
Beyond this bill, Chattanooga officials are trying to tackle affordable housing problems on a few different fronts. Last year, the city unveiled an affordable housing action plan that outlines recommendations for preserving and creating affordable housing.
In a February interview, Chattanooga Chief Housing Officer Nicole Heyman said that, although the city does receive federal money for affordable housing, it can be limited and come with significant restrictions. Officials have indicated they want to create dedicated sources of local funding Heyman said could be used, for example, to repair or update substandard rental housing.
Hill said officials are still determining how to create that funding source, and she doesn’t expect council members will discuss that during budget planning over the next couple months.
In March, the City Council approved a more flexible type of tax cut for affordable housing projects, allowing developers to receive incentives for each affordable unit created. Under previous, more rigid rules, half of the units in a development had to charge rent affordable for people making at most 80% of the area median income in order to qualify for a tax abatement. Officials hope this will encourage builders to add some level of affordability in their housing projects.