Cleveland Mayor Justin Bibb and city council are embarking on an overhaul of the city’s tax break program for new and renovated housing.
The city has long offered 15-year full property tax abatements for newly built or substantially renovated housing. By forgoing millions of dollars in property tax revenue each year, the city hoped to encourage development that could be taxed in the future.
Now, in an effort to direct development toward struggling neighborhoods, Bibb is proposing to pare back new tax abatement offerings in the city’s hotter real estate markets.
Under the new proposal, the city would abate taxes only on the first $350,000 of a home's value. Additional rules would direct more abatement to weaker real estate markets, with incentives for affordable housing.
“The goal of this is to continue growth, but to add a layer of equity on to how we think about our abatement policy, to try to incentivize development in neighborhoods that have not seen investment,” Jeff Epstein, the city’s chief of integrated development, told Ideastream Public Media.
The legislation classifies city blocks in one of three categories, based on the strength of the local real estate market: market-rate, middle-market and “opportunity.”
In areas designated as market-rate, owners could receive an 85% abatement on property taxes. In middle-market areas, the abatement would be 90%. In opportunity neighborhoods, property owners could receive a 100% abatement. The $350,000 cap would apply in all areas.
Affordable one-, two- and three-family properties would be eligible for a 100% abatement – up to the cap – anywhere in the city. To be eligible, a rental property would charge at most $806 per month for a studio or one-bedroom apartment, $971 for a two-bedroom and $1,116 for a three-bedroom, Epstein said.
The owners of new or renovated larger apartment buildings could also apply for tax abatements, provided that they set aside affordable units as part of a community benefits agreement with the city. Cleveland could also waive the affordable housing requirement for apartment buildings if owners pay into a housing trust fund, Epstein said. The $350,000 cap would not apply to these buildings of four units or more, he said.
The proposal incorporates the major proposals floated by a coalition of neighborhood development nonprofits, including Cleveland Neighborhood Progress. Edward Stockhausen, CNP’s senior vice president of advocacy and external relations, said the abatement policy would be helpful for homeowners looking to rehabilitate their properties.
“We have so many homes in Cleveland that need some love and attention, and the tax abatement policy is one tool that can help homeowners invest in their homes,” he said.
If passed, the tax abatement program would not go into effect until June 2023. The legislation is cosponsored by Council President Blaine Griffin and Ward 10 Councilman Anthony Hairston, the chair of the development, planning and sustainability committee.
The city is up against a deadline. Council must pass abatement legislation by June 4, when the current tax abatement program expires.
