Finance Tools for Housing Choices

Local policies alone are often not sufficient to bring land and home prices within reach for many residents. It is important to understand how to use local public financing tools to facilitate private development as well as to leverage state, county, regional and non-profit financial resources.

Utilize Tax Increment Financing to Fund a Mix of Housing

Municipalities increasingly use tax increment financing to fund community development initiatives, including production of affordable homes. Improvements are paid for by borrowing against the anticipated increase in property tax revenue or rebating the increment to the developer.

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Stimulate Construction or Rehab through Tax Abatements

Tax abatements involve freezing or lowering property taxes on a specified lot for a designated period of time. Abatements can be offered to encourage construction or rehab of rental homes, or to help homeowners stay in their homes.

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Adopt Tax Levies in Support of Housing Strategies

Cities and Counties have the local authority to establish a Housing and Redevelopment Authority with the ability to levy a special tax specifically in support of providing affordable, safe and decent housing as well as to remove community blight.

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Create or Expand Dedicated Housing Trust Funds

Housing trust funds are flexible sources of financing for affordable homes, and work best when supported by a stable, dedicated funding source. Trust funds can be a useful tool for supplementing other housing programs.

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Expand and Support Use of the Low-Income Housing Tax Credit

The Low-Income Housing Tax Credit program helps developers access capital for the construction and rehabilitation of homes for working families. Greater use of this resource can help communities expand the amount of federal dollars available for affordable homes.

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Provide Pre-Development and Acquisition Financing

Up-front expenses, including the costs associated with purchasing land, can present a barrier to small, community- based nonprofits and other developers of affordable homes. Pre-development and acquisition financing helps organizations obtain the resources to keep development on track.

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Support Housing Bond Issues

Tax exempt housing revenue bonds or general obligation bonds may be issued by local or state governments to support affordable housing. They may be repaid by project revenues or through tax levies or appropriations authorized by the legislature.

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Encourage Employers’ Commitment to Affordable Homes for Workers

In communities lacking an adequate supply of homes affordable to working families, employers can have difficulty maintaining a qualified workforce. Growing numbers of employers are getting involved in efforts to increase the availability of homes for their workers and the broader community.

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Use Cross-Subsidies to Support Mixed-Income Communities

In strong housing markets, non-profit or mission-driven developers can use profits from the sale or rental of market-rate homes to subsidize the development cost of affordable homes.

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