A market rate developer in Chattanooga, Tennessee wants to build 42 affordable units in one of the city’s most dynamic zip codes.
Washington wants to know how Chattanooga incentivized them to do it.
Chattanooga is about the same size as Spokane, and feels a similar urgency around housing. It started what it calls a first-in-the-nation program for housing last year.
One year later, a developer is on his way to building 278 units near downtown Chattanooga, and about 15% of them will be rented for less than market rate.
“It’ll be Chattanooga’s first real mixed income project of its kind, so we’re thrilled," said the city’s director of housing finance Hanneke Van Deursen, speaking to members of the Washington Senate Housing Committee.
She explained that this project not only pencils, but it’s beneficial to the developer, because of Chattanooga’s PILOT program, or “payment in lieu of taxes.”
The program gives a tax abatement that’s a little bit more than the money a developer loses by offering below-market rent.
A developer can mix and match which apartments are offered at which subsidized rate and customize their tax abatement up to a certain threshold.
“So what's really exciting about this is we're engaging the private sector … who frankly in this capital markets environment are having a really hard time getting their deals to pencil," Van Deursen said.
This is way more fine tuned than Washington’s current Multi Family Tax Exemption program.
Washington lawmakers are wondering if they can learn from Tennessee to do a better job incentivizing private developers to build below market rate housing.
