Regional Tool Kit: Services

Low-Income Housing Tax Credit

The Low-Income Housing Tax Credit was created by the Tax Reform Act of 1986 in response to the loss of incentives for the creation of low-income housing.  The program incentivizes developers to competitively seek tax credits, which are granted to each state on a per capita basis.  Once the developer has obtained the tax credits, they are sold to large corporations and effectively take care of equity requirements.  Housing development is designed and constructed just as any other project the developer would produce, but the developer is able to lease units at a lower cost because of the large amount of equity that was put toward the project’s financing.  Housing units are rented to those with earnings at or below 80% of median income of the county they live in (Professional Real Estate Development, 130, 195).

The Parker at Cone apartment complex in Greenville County was recently completed with the assistance of the Low Incoming Housing Tax Credit.  These highly attractive units are a stark contrast to the public housing towers that people often think of when subsidized housing is mentioned. 

Transfer of Development Rights

TDR is a development tool used to preserve open space, farmland, water resources, or vistas in one area and to direct development to more suitable areas, primarily already developed areas of cities (Development Definitions, 411).  An owner of rural properties under development pressure may sell their development rights to a developer, allowing the developer to build at higher densities within the city.  The end result is the rural area is preserved in its natural state and the city is developed at a higher density closer to what the market demands.  Example: New Jersey has implemented Transfer of Development Rights as a key tool in its smart growth policy.  It allows towns to preserve the land they want to keep open and build housing in areas the town wants to grow.  This is a great way for towns to preserve lands without paying for the high cost of the land themselves  (N.J. smart-growth plan flourishes, 2004).

Rural Area is Preserved                                 Denser Development within City                        

Tax Incentive Programs

When infill projects have obstacles that make development prospects undesirable for developers and lenders, tax credits and other incentives are used to encourage economic investment in blighted, under-invested sections of cities and towns.  Tax-Increment Financing (TIF) is one example of a tax incentive that cities use to spur development in historically blighted and under-utilized areas.  TIF allows the city to provide updated infrastructure, public improvements and land underwriting that will make new development possible.  The new development generates much higher property taxes than the previous run-down development.  This increased tax yield is first used to pay off the bonds that the city used for the initial measures.