Strategy HC6.4: Consider tax abatements and exemption policies that limit real estate tax liability in targeted areas to stimulate construction and rehabilitation of housing stock.
Communities that offer tax abatements or exemptions agree to eliminate tax increases or otherwise reduce property taxes for specific properties for a designated period of time in order to stimulate a specified public benefit. In the housing sector, real estate tax abatements or exemptions are most commonly used to provide a financial incentive for the construction or rehabilitation of rental homes. Some communities also offer some form of tax abatement or exemption to developers and buyers of homes in designated revitalization zones and/or rental property owners who participate in housing subsidy programs.
Abatements or exemptions can be structured in a variety of ways, including freezing or reducing the property’s taxable assessed value, reducing the rate at which a property is assessed, or reducing overall property taxes owed. Communities with budgetary constraints should properly structure any tax abatement program to leverage and maximize the desired public benefit in order to minimize the overall fiscal impact. Tax abatements can create incentives for new development to spur additional revenue-producing, market-rate development, thereby countering any loss in tax revenues and meeting the broader revitalization goals of a community.