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Cincinnati's residential tax abatement program could get an overhaul under new proposal

A street in Lower Price Hill
Becca Costello
/
WVXU
A street in Lower Price Hill.

Cincinnati officials are proposing significant changes to the city’s residential tax abatement program. Mayor Aftab Pureval and Council Member Reggie Harris announced their plan for a more equitable system Thursday.

These tax breaks are for housing with up to four units and are most commonly used for single-family homes. (A separate program regulates commercial tax abatements.)

Currently the requirements and awards are the same for the entire city.

"Right now the vast majority of these incentives go to our wealthiest neighborhoods," Pureval said, citing an external report commissioned by the city. "Many residents, particularly lower income residents, aren't aware of the opportunity of abatements. And because of this an important city tool to support our residents, promote sustainability and improve aging housing hasn't worked as well as it could."

Pureval and Harris are proposing a three-tier approach based on the recommendations of the report.

"Neighborhoods will fall into those tiers based on six criteria related to income levels, poverty rates, home values, and measures of market activity and new construction," Pureval said.

The plan uses research from the external report to divide the city’s 52 neighborhoods.

The SUSTAIN tier includes neighborhoods determined to be least in need of incentives:

  • Columbia Tusculum
  • Hyde Park
  • Linwood
  • Mt. Adams
  • Mt. Lookout
  • Oakley

The EXPAND tier is in the middle and would get slightly higher abatement values than SUSTAIN. It includes 10 neighborhoods:

  • California
  • Clifton
  • Downtown
  • East End
  • East Walnut Hills
  • Madisonville
  • Northside
  • Over-the-Rhine
  • Pendleton
  • Pleasant Ridge

The LIFT tier includes the city’s 36 remaining neighborhoods.

The ordinance says neighborhoods should be re-evaluated every three years to determine which tier is appropriate.

"The three year program review allows us to track to see if the program is actually working as it is intended, and to see if we need to make adjustments," Harris said. "And then to adapt to those changing market, changing neighborhood needs in real time."

City officials have been considering a tiered approach for years. A Property Tax Working Group recommended it in 2020 after more than a year of meetings and research. The Housing Advisory Board studied the external report during the summer of 2022 and sent feedback to the mayor and administration. Pureval says after getting that feedback, he met with stakeholders like realtors, home builders and community development corporations before proposing this ordinance.

The ordinance requires City Council approval.

If passed, it would go into effect Sept. 1. If a construction permit is submitted before that date, it would qualify for the current abatement program, as long as construction begins within one year of the permit application.

City Manager Sheryl Long also announced administrative changes aimed at making residential abatements easier to apply for, including an online portal integrated with buildings and inspections and the ability to make online fee payments.

"This is a significant workflow improvement internally while simultaneously eliminating big hurdles to the public," Long said. "The city is also addressing a critical piece of communication to make sure all residents know how this program can benefit them."

A class action federal lawsuit is challenging the disparate impacts of the current program. City Solicitor Emily Woerner says that lawsuit could end in a settlement.

"While we continue to disagree with the legal substance of the lawsuits claims. I think what this shows is that we have a common goal with the plaintiffs, which is to have a more equitable tax incentive program," Woerner said. "And so it's my hope that this will resolve the lawsuit, but we'll have those discussions now that this proposed legislation is public."

Proposed changes

A residential tax abatement eliminates property tax on new value added to a property for a set amount of time.

Here's a hypothetical example of how it works: an empty lot is worth $100,000. Someone builds a new home worth $450,000 on the lot; that entire amount is considered new market value and is eligible for a tax abatement. The home meets the sustainability standards for LEED Gold.

Under the current system, this homeowner will continue to pay property taxes on the lot's original value ($100,000). For the next 15 years, the homeowner won't pay any additional property taxes because the $450,000 home value is below the maximum value allowed.

Under the proposed changes, the same homeowner would get a different abatement depending on the neighborhood (all would still be required to pay taxes on the $100,000 of the lot):

  • In a LIFT neighborhood, this property would pay no new taxes for 15 years
  • In an EXPAND neighborhood, this property would pay no new taxes for 10 years
  • In a SUSTAIN neighborhood, this property would pay no new taxes for five years

The tables below show how much new value can be abated and for how long under the proposed three-tier system. (Keep scrolling to compare this to the current system.)

LIFT (0-2 Criteria) NeighborhoodsAbatement Term LengthMax Abated New Value
Remodeling15 years$350,000
New Construction15 years$300,000
EXPAND (3-4 Criteria)Abatement Term LengthMax Abated New Value
Remodeling12 years$350,000
New Construction10 years$300,000
SUSTAIN (5-6 Criteria)Abatement Term LengthMax Abated New Value
Remodeling8 years$250,000
New Construction5 years$200,000

Bonuses are available for sustainability, visitability (i.e., better access for people with mobility issues) and historic renovations. All abatements are eligible for the same amount regardless of neighborhood tier.

Bonus IncentiveAdditional Abated Value
LEED Silver
HERS Qualified
Certified Environmental Programs
$200,000
LEED Gold or Platinum
LBC Qualified Net Zero, Full, or Petal
(must include "Energy Petal")
$300,000
Meets the Cincinnati Visitability and Universal Design Standards$50,000
Historic Restoration (remodeling only)$50,000

Full ordinance:

Current system

RemodelAbatement Term LengthMax Abated New Value
Non-LEED12 years$200,000
HERS Qualified15 years$300,000
LEED Silver15 years$500,000
LEED Gold or LBC Nez Zero15 years$650,000
LEED Platinum or LBC Full or LBC Petal15 years$800,000

New ConstructionAbatement Term LengthMax Abated New Value
Non-LEED10 years$200,000
LEED Silver15 years$400,000
LEED Gold or LBC Net Zero15 years$500,000
LEED Platinum or LBC Full or LBC Petal15 years$650,000

Other bonuses: remodels are eligible for a historic restoration bonus of $100,000 OR a visitability bonus of $100,000. New construction are only eligible for the visitability bonus.

External report and recommendations

Becca Costello grew up in Williamsburg and Batavia (in Clermont County) listening to WVXU. Before joining the WVXU newsroom, she worked in public radio & TV journalism in Bloomington, Indiana and Lincoln, Nebraska. Becca has earned numerous awards for her reporting, including from local chapters of the Associated Press and Society of Professional Journalists, and contributed to regional and national Murrow Award winners. Becca has a master's degree in journalism from Indiana University and a bachelor's degree from Cincinnati Christian University. Becca's dog Cincy (named for the city they once again call home) is even more anxious than she is.