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Affordable housing tax increment financing (TIF)

Health Factors: Housing & Transit
Decision Makers: Community Development Professionals Community Members Local Government State Government
Evidence Rating: Expert Opinion
Population Reach: 50-99% of WI's population
Impact on Disparities: Likely to decrease disparities

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Description

Tax increment financing (TIF) districts define a district's tax "base" by local property values before improvements are made and designate some or all tax revenue above the base rate to support affordable housing, sidewalk improvements, utility upgrades, and other infrastructure investments in the TIF district (Skidmore 2010). Revenue from the tax base rate continues to support local school districts and local governments. Many states stipulate that TIF districts must be in blighted areas without prospects for growth in property values (Dye 2000). TIFs are often implemented with other programs that support affordable housing and economic development and are often considered tools to support privately and publicly funded development (Bland 2016, CDFA-TIF). Affordable housing reinvestments are most common in urban and suburban TIFs.

Expected Beneficial Outcomes

Increased access to quality housing
Increased access to affordable housing
Improved neighborhood quality
Reduced blight
Increased economic development

Evidence of Effectiveness

Tax increment financing (TIF) is a suggested strategy to increase access to quality, affordable housing (NNC-Arigoni 2001, CHP-Lubell 2007). Available evidence suggests that TIF districts may contribute to increased economic development through increased property values (Hicks 2015, Bland 2016, Carroll 2008, Byrne 2006) and tax revenue (Skidmore 2010, Hicks 2015, Bland 2016). Additional evidence is needed to confirm effects.

Partnerships between public entities and private developers or investors may increase TIF districts’ likelihood of raising property values and generating community benefits (Bland 2016). A Chicago-based study suggests that property values of surrounding buildings may increase when TIFs are located in mixed-use development areas and property values may decrease when TIFs are located in industrial TIF districts (Weber 2007).

TIFs that are not specifically designed to increase affordable housing can still reserve a percentage of revenue for affordable housing development; for example, in Portland, the minimum TIF reserve is set at 30% (Portland-TIF). 

Implementation

United States

As of 2014, TIF programs are possible in 48 states and the District of Columbia; Arizona and California do not allow TIF districts (Greenbaum 2014).  

TIF programs may also be implemented on the county level, for example in Cook County, IL (Cook County-TIF) or by cities, as in Chicago, IL and San Antonio, TX (Chicago-TIF, San Antonio-TIF). Implementation and affordable housing-specific components vary by area. 

Wisconsin

There are numerous TIF programs that support affordable housing in Wisconsin. For example, Madison’s TIF policy designates funds for affordable housing development (WI DOR-TIF).

Implementation Resources

CDFA-TIF - Council of Development Finance Agencies (CDFA), International Council of Shopping Centers (ICSC). Tax increment finance best practices reference guide. Columbus: Council of Development Finance Agencies (CDFA), International Council of Shopping Center (ICSC); 2007. Accessed on October 24, 2016
ChangeLab-Housing toolkit 2015 - ChangeLab Solutions. Preserving, protecting, and expanding affordable housing: A policy toolkit for public health. 2015. Accessed on August 4, 2017
LISC-Affordable housing - Local Initiatives Support Corporation (LISC). Helping neighbors build communities: Affordable housing. Accessed on August 4, 2017
MO DOR-TIF - Missouri Department of Revenue (MO DOR). Local Tax Increment Financing (TIF). Accessed on February 16, 2017
Montana-TIF - Montana.gov. Montana Transportation and Land Use: Development Exactions and Incentives-Tax Increment Financing (TIF) resources. Accessed on October 24, 2016
Vermont-TIF - Vermont Agency of Commerce and Community Development. Tax Increment Financing (TIF). General information on TIFS and program explanations for current districts. Accessed on October 24, 2016

Citations - Description

Bland 2016* - Bland RL, Overton M. Assessing the contributions of collaborators in public-private partnerships: Evidence from Tax Increment Financing. The American Review of Public Administration. 2016:1-18. Accessed on October 24, 2016
CDFA-TIF - Council of Development Finance Agencies (CDFA), International Council of Shopping Centers (ICSC). Tax increment finance best practices reference guide. Columbus: Council of Development Finance Agencies (CDFA), International Council of Shopping Center (ICSC); 2007. Accessed on October 24, 2016
Dye 2000* - Dye RF, Merriman DF. The effects of tax increment financing on economic development. Journal of Urban Economics. 2000;47(2):306-328. Accessed on October 28, 2016
Skidmore 2010* - Skidmore M, Kashian R. On the relationship between tax increment finance and property taxation. Regional Science and Urban Economics. 2010;40(6):407-414. Accessed on October 28, 2016

Citations - Evidence

Bland 2016* - Bland RL, Overton M. Assessing the contributions of collaborators in public-private partnerships: Evidence from Tax Increment Financing. The American Review of Public Administration. 2016:1-18. Accessed on October 24, 2016
Byrne 2006* - Byrne PF. Determinants of property value growth for tax increment financing districts. Economic Development Quarterly. 2006;20(4):317-329. Accessed on October 28, 2016
Carroll 2008* - Carroll DA. Tax increment financing and property value: An examination of business property using panel data. Urban Affairs Review. 2008;43(4):520-552. Accessed on October 28, 2016
CHP-Lubell 2007 - Lubell J. Increasing the availability of affordable homes: A handbook of high-impact state and local solutions. Washington, DC: Homes for Working Families, Center for Housing Policy (CHP); 2007. Accessed on October 24, 2016
Hicks 2015 - Hicks MJ, Faulk D, Quirin P. Some economic effects of tax increment financing in Indiana. Muncie: Ball State University Center for Business and Economic Research; 2015. Accessed on October 24, 2016
NNC-Arigoni 2001 - Arigoni D. Affordable housing and Smart Growth: Making the connection. Washington, DC: National Neighborhood Coalition (NNC); 2001. Accessed on October 24, 2016
Portland-TIF - Portland Housing Bureau. Tax Increment Financing (TIF) set-aside policy for affordable housing. Accessed on October 24, 2016
Skidmore 2010* - Skidmore M, Kashian R. On the relationship between tax increment finance and property taxation. Regional Science and Urban Economics. 2010;40(6):407-414. Accessed on October 28, 2016
Weber 2007* - Weber R, Bhatta SD, Merriman D. Spillovers from tax increment financing districts: Implications for housing price appreciation. Regional Science and Urban Economics. 2007;37(2):259-281. Accessed on October 28, 2016

Citations - Implementation

Chicago-TIF - City of Chicago. What we do: Tax Increment Financing (TIF). Information on individual TIF districts, including plans, annual reports, redevelopment agreements, and recent news. Accessed on October 24, 2016
Cook County-TIF - Cook County Clerk. Tax Increment Financing Districts (TIF) resources. Accessed on October 24, 2016
Greenbaum 2014* - Greenbaum RT, Landers J. The tiff over TIF: A review of the literature examining the effectiveness of the Tax Increment Financing. National Tax Journal. 2014;67(3):655-674. Accessed on October 24, 2016
San Antonio-TIF - City of San Antonio. Department of Planning and Community Development: Tax Increment Financing (TIF). Program policies, FAQ's, and Tax Increment Reinvestment Zones (TIRZ). Accessed on October 24, 2016
WI DOR-TIF - Wisconsin Department of Revenue (WI DOR). Tax Incremental Financing (TIF) Information. 2015 Active Tax Incremental Districts (TIDs): A report listing active TIDs in the state of Wisconsin. Accessed on February 16, 2017

Page Last Updated

November 16, 2016

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