Study Finds Tax-Based Incentives Can Spur Development, Improve Affordability
Washington, D.C. – A new study by RCLCO (formerly Robert Charles Lesser and Co.) researchers Charlie Hewlett, Caroline Flax Ganz, and Jackson Browning sheds light on how property tax incentives can play a crucial role in addressing the nation’s housing shortage. The findings reveal that well-structured tax incentive programs not only drive new housing development but also provide long-term revenue benefits to municipalities, helping fund essential community services.
As communities across the U.S. struggle with housing affordability and supply shortages, the research highlights how local tax abatement programs can encourage the construction of both market-rate and affordable housing. These programs help developers close financing gaps, particularly in high-cost or affordability-constrained markets, making it easier to launch new projects.
According to Sharon Wilson Géno, President of the National Multifamily Housing Council (NMHC), “With the nation facing a shortage of housing of all types, this work clearly demonstrates that tax incentive programs offer a real solution to the building of badly needed housing. Not only do these programs directly lead to the creation of new affordable and market-rate housing, but they also directly benefit communities in a variety of ways.”
The research, supported by the Douglas M. Bibby NMHC Research Foundation, examined tax incentive programs across multiple cities and found clear economic and social benefits:
Housing Supply & Affordability: Tax abatement programs increase both market-rate and deed-restricted affordable housing, helping ease shortages.
Economic Benefits for Municipalities: While cities may initially see short-term revenue losses, the long-term impact includes increased tax revenue, population growth, and additional consumer spending.
Exceeding Affordable Housing Requirements: In cities with inclusionary housing policies, tax incentives often lead to more affordable units than the minimum required, showing their effectiveness in expanding affordability.
Despite these benefits, some municipalities remain hesitant to embrace tax incentives due to concerns about budget impacts and timing. City officials worry about short-term revenue reductions, even though the study finds that the long-term return on investment is positive.
The research aims to inform lawmakers and policymakers on how tax incentives can be a powerful tool for addressing the housing crisis. The NMHC encourages leaders to support legislation that expands the use of tax-based incentives, ultimately leading to lower housing costs and greater economic opportunities for communities nationwide.
Read the Full Report
For a deeper dive into the research findings, visit the National Multifamily Housing Council’s full study:
Building Blocks: How Tax Incentives Lay the Foundation for Housing Growth
