Nashville Mayor Megan Barry recently proposed a new incentive program for developers to offer affordable and workforce housing within existing and new construction. The proposal may provide significant economic benefits to some developers.
Under the proposal, “affordable housing” is housing offered to households making 60% of Median Household Income (MHI) or less. “Workforce housing” is housing for households making 61-120% of MHI. According to the latest U.S. Census figures from 2014, the MHI for Davidson County for a family of four is $60,074.
The incentive will be offered to developers who provide affordable or workforce housing at a rate equal to or less than 30% of the qualified household’s income. For example, utilizing the 2014 figures, the maximum monthly rental for affordable housing (a family of four making 60% of MHI) would be $901, and $1,802 for workforce housing (120% of MHI).
Developers who offer affordable and workforce housing may receive the greater of (1) the difference between the market rent and the discounted rent, or (2) 50% of the difference between the property’s pre-development and post-development annual property tax. For example, a developer who has market-rate apartments at $1,500 a month and offers comparable workforce-level affordable units for $1,200 would receive either $300 per unit, or 50% of the post-development increase in the annual property tax.
The program will be launched with a 24 months sunset provision and a cap of $2,000,000 for FY17-18. This will give the Metropolitan Government and developers and rental managers time to collect data about the plan’s efficacy.
The proposal also has options for owner-occupied units and existing rental. Grants for owner-occupied units outside of the Urban Zone Overlay will be capped at $10,000, and $20,000 for properties within the Urban Zone Overlay or along a multimodal corridor. Owners of existing rental properties can also apply for grants in the event that increases in market demand displace current residents, subject to rules and limitations.
As a developer, this program will benefit you if you want to contribute to efforts in ending homelessness in Nashville. The program will also benefit you if you have less than 100% occupancy, or you offer units that rent at a level where the grant would put you at or close to market rate.
For more information about Mayor Barry’s new proposal, you may contact the Mayor’s Office of Economic Opportunity and Empowerment.