Here's your first look at proposed major changes to Cincinnati's commercial tax abatements
Cincinnati’s program for giving housing and commercial developments a break on property taxes could see major changes soon. City administration is proposing an overhaul aimed at better incentivizing new jobs, economic growth, and — for the first time ever — housing.
Director of Community and Economic Development (DCED) Markiea Carter presented the idea to the Housing Advisory Board Thursday. (Editor's note: a full audio recording of the Housing Advisory Board meeting on August 4, 2022 is available at the end of this post.)
Carter says the proposal is based on priorities of the new council and administration.
“We really have understood these priorities to be housing and housing affordability; new jobs and economic growth; hospitality; and then retail projects that serve a neighborhood need,” Carter said. “This is our first formal presentation of what we are proposing, but we are eager to seek feedback, hear suggestions and hear comments.”
What abatements we are — and aren’t — talking about
First, some definitions. The proposed changes are to the commercial tax abatement system. These are for developments of:
- multi-family housing with five or more units
- mixed-use projects with both residential and commercial
- commercial projects like hospitality, hotel and retail.
Developers apply to the city for a property tax abatement; DCED staff evaluate the application and recommend an abatement; then Cincinnati Council votes on the abatement.
A separate program for residential tax abatements could also see major changes in the future, but those are not part of this particular proposal. Residential tax abatements are for housing with up to four units and are most commonly used by homeowners for single-family homes. They have eligibility requirements and don’t require Council approval. The Housing Advisory Board will also make recommendations to Council on changes to this program, but has yet to have an extensive discussion about it.
Commercial tax abatement changes
The current system allows an abatement for up to 15 years. The amount and length is decided by reaching certain environmental benchmarks through LEED certification and — outside of the Downtown/street car area — showing financial need.
The new policy would require every project to prove it wouldn’t be financially possible without an incentive (this is often called a “but/for” analysis). A scorecard would assign points for each development based on a wider variety of goals:
- Geography (max 12 points)
- Preservation/reuse and environmental (max 16 points)
- Affordable* housing (max 18 points)
- Additional policy objectives (max 22 points)
*Some of the income levels included in this category are market-rate (sometimes called workforce) not low-income, and therefore would not be considered “affordable” by most standards. See the full proposed scorecard below.
A project would need a minimum 20 points to qualify for an abatement, out of a total 68 available points. The policy would have some flexibility for projects that can’t get enough points but would still benefit the neighborhood.
“The points are not clearly delineated to a term or a percentage, but it really is the baseline minimum so that the city will entertain the application to move it forward,” Carter said. “And then ultimately … the city manager will make a recommendation to city council for an abatement amount and term.”
The Housing Advisory Board will continue discussing the proposal before making a recommendation to Council. It’s not clear how soon legislation could be up for a vote.
You can see a copy of the full draft scorecard at the end of this article.
Affordable housing incentives
Housing has never been an explicit priority in determining commercial tax abatements. The closest Council has come to that kind of policy was establishing a “priorities rubric” last year. The legislation, led by Council Member Greg Landsman, asked DCED staff to consider a long list of goals when negotiating development incentives.
Although DCED has been using that for several months, they still have to use the Council-established policies in place for commercial abatements.
See the current policy below (story continues after):
The proposed new scorecard awards points for including “affordable” housing units:
- Eight points (toward the 20-point minimum) for pricing at least 80% of residential units as affordable to households earning 120% of the AMI (area median income) or less, and will be maintained as affordable for the term of the abatement
- Eight points (toward the 20-point minimum) for pricing at least 20% of residential units as affordable to households earning 80% of the AMI or less, and will be maintained as affordable for the term of the abatement
- Two points (toward the 20-point minimum) if at least 25% of residential units are 2-3 bedrooms
In addition to scoring points toward the 20-point minimum, meeting either of the first two affordable housing goals will qualify a project for a longer abatement term: up to 15 years instead of six to 12 years.
According to HUD’s income calculations, 80% of AMI in the Cincinnati area is $76,400 for a family of four.
Greg Johnson is CEO of the Cincinnati Metropolitan Housing Authority and a member of the Housing Advisory Board. He says the new policy should also include units affordable to much lower incomes.
“Because if not … 10 years from now we're going to wake up and say, 'We rehabbed, we brought on the same thing that we did before,' ” Johnson said. “And we know that the people that we're seeing coming through shelters every day, or come in through [Job and Family Services] every day — it's never going to change.”
Fellow Board Member Arlene Nolan, executive director of Shelterhouse, agreed: “Because the project could concentrate on people in the upper echelon of the AMI without ever serving people that are truly, truly low income.”
Board chair Roxanne Qualls said another consideration is creating mixed-income housing to avoid concentrating wealth or poverty in certain neighborhoods: “And so I'm just interested in terms of why we've never had the discussion about that? Like, we've never been able to do it, is there some barrier to it?”
See the full proposal for changes below: