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Cleveland - Cleveland City Council proposed a new tax abatement based on a three-tiered design focused on growth and equity rather than the current “one-size-fits-all” plan.
Tuesday, May 10, 2022 - Cleveland, OH — The Bibb Administration introduced new tax abatement legislation at the Cleveland City Council meeting on Monday, proposing a tailored approach to tax abatements moving forward as part of a broader plan for equitable housing policy in the city.
The legislation is focused on growth and equity instead of the “one-size-fits-all” plan currently in place, which does not account for market realities, and promoting affordable housing while helping to pay for needed City and Cleveland Metropolitan School District services.
“Residential tax abatement is just one of many tools we will be using to incentivize equitable development in all corners of our city,” said Mayor Justin M. Bibb. “These changes recognize that our policy must promote growth while addressing growing inequity in our neighborhoods.”
Research on residential tax abatement in Cleveland dating back to 2018 clearly shows that while abatement is still needed—Cleveland’s housing market has not fully recovered, and new construction still lags peer cities—abatements are increasingly concentrated in higher pressure, higher price markets.
The new plan takes a geographically differentiated approach. Market Rate Neighborhoods will receive a 15-year, 85% tax abatement, Middle Neighborhoods will receive a 15-year, 90% tax abatement and Opportunity Neighborhoods will stay the same at a 15-year, 100% tax abatement.
Following yesterday’s introduction, the legislation will go to directors of Community Development, Finance, and Law; then to the Development Planning & Sustainability and the Finance, Diversity, Equity & Inclusion committees before going to the full council for a vote. If passed, the new policy will take effect June 1, 2023.
“City Council is not in favor of a one-size-fits-all program and other cities are changing their policies similarly,” said Council President Blane Griffin. “Most importantly, residential tax abatement should promote equity and push investment into neighborhoods that haven’t seen much development but also ensure the city remains competitive, both with the suburbs and peer cities.”
In addition to the three-tiered design, the legislation places a cap on for-sale housing (the first $350,000 of sale value will be abated), includes community benefit agreements for multi-family developments, continues the existing green building standard and enforces tax abatement termination for neglected or delinquent properties.
The policy will also require developers of apartment buildings to either set aside affordable units or contribute to a housing trust fund which will be used to incentivize equitable housing in other projects. The legislation includes a one-year grandfathering period, to June 2023, for developers who relied on the current abatement rules to make investments and plan projects.
“Tax abatement reform won’t and can’t solve our affordable housing crisis, but without reform Cleveland will continue to fall further away from housing stability and equity,” said Ayonna Blue Donald, Vice President and Ohio Market Leader at Enterprise Community Partners, co-convener of the Equitable Community Development Working Group. “It’s time for Cleveland to more strategically tailor their tax abatement to the needs of their residents and neighborhoods.” Along with Residential Tax Abatement the administration is preparing other initiatives to protect renters, hold irresponsible property owners accountable, preserve and invest in existing housing stock, incentivize housing in underinvested and middle neighborhoods and support long-time homeowners.
The Bibb administration is working closely with City Council on a plan to move forward, the current tax abatement expires on June 4, 2022.