As the June 4, 2022 deadline for reauthorizing Cleveland’s residential tax abatement program approaches, Enterprise and a coalition of advocates released a report offering recommendations for reforming the policy.
The coalition, co-convened by Enterprise Community Partners and Cleveland Neighborhood Progress since 2018, is called the Equitable Community Development Working Group. The Working Group comprises over 20 partners that include community development corporations, affordable housing organizations, researchers, philanthropy and Cleveland residents.
In publishing these recommendations, we shared a common goal: instilling more equity into the City’s housing and community development policies.
While some Cleveland neighborhoods have witnessed unprecedented levels of market development in recent decades, others remain disinvested. Cleveland’s success is linked to the success of its neighborhoods – all of its neighborhoods.
Cleveland’s current tax abatement policy, last renewed in 2017 without any changes or public dialogue, is a one-size-fits-all policy. In high level terms, it provides a 15-year, 100% abatement to new construction and certain home renovations that meet green building standards.
Even before 2017, but certainly since, residents as well as housing, community and equity advocates asked whether this one-size-fits-all policy still made sense for Cleveland. This is the same question organizations were asking when we formed the Equitable Community Development Working Group.
Since 2018, we’ve spent countless hours studying Cleveland’s tax abatement. For example, in 2020, the Cleveland Department of Community Development and the Equitable Community Development Working Group published the City of Cleveland Tax Abatement Study. The following year, the Department published Cleveland 2030: A Housing Equity Plan, a 10-year plan to guide preservation of, investment in and new construction for the city’s housing stock. Both studies analyzed tax abatement, collected feedback from the community and recommended reform. In other words, any changes to the City of Cleveland’s tax abatement policy in 2022 will come after years of research, convening and community conversations.
Informed by this robust data, extensive research, community feedback and years of lived experience in our neighborhoods, the report underscores the following:
National best practices reflect more strategic tax abatement policies. For example, Cincinnati and Lakewood offer a range of tax abatement lengths. Columbus offers a range of tax abatement percentages according to neighborhood. St. Louis, Cleveland Heights and Pittsburgh offers a range of tax abatement lengths and percentages according to neighborhood.
Tax abatement is not a panacea for creating more equitable neighborhoods or more affordable housing. Tax abatement cannot solve every problem, but it is important piece of a much bigger puzzle. Advocates and policymakers must dedicate themselves to building the full suite of tools necessary for equitable neighborhood revitalization, beginning with tax abatement. Those tools must include preserving existing affordable housing, addressing deferred maintenance and repairs, protecting low-income homeowners and renters and cracking down on predatory investing.
This moment is an opportunity for Cleveland to address an antiquated, one-size-fits-all tax abatement policy. With that in mind, the Working Group developed the following consensus-based recommendations:
1. Tax abatements for single-family housing should be capped.
An example: If cap is set at $300,000, then a home will be abated up until that point and the owner would pay taxes on any value above $300,000.
2. Tax abatement should be geographically targeted based on the health of neighborhood housing markets, as summarized in the map developed by the Department of Community Development.
The Department of Community Development already developed a strategy map that reflects our neighborhoods are not one and the same. Some are market ready, some are middle, and some are underinvested.
3. Tax abatement policy should include exceptions to the cap for certain policy priorities.
If the tax abatement policy caps itself, then strategic exceptions can be made when we're achieving priorities like historic renovation, transit-oriented development and affordability.
4. Tax abatement should maintain the current green building standards.
Climate resiliency in housing is a key priority for Enterprise. You can learn more about how Enterprise promotes resiliency in affordable housing through Green Communities.
5. Tax abatement should further incentivize affordable housing; rehabilitation and renovation; transit-oriented development; first-time homebuyers; multi-family workforce housing; and single-family workforce housing.
Similar to recommendation #3, if the tax abatement policy limits itself, then strategic exceptions can be made for development priorities. Today these types of development priorities are impossible to incentivize because our tax abatement policy is already as generous as possible under state law.
6. Tax abatements for multi-family, market rate housing should require Community Benefits Agreements (CBAs) that address minority hiring goals, workforce development goals and other neighborhood-specific hiring goals; and include a claw back provision that would rescind the tax abatement for non-compliance.
Today, the City of Cleveland has a patchwork of CBAs. If a developer receives a tax abatement, there should be a uniform way to discuss community benefits like minority hiring, community investments and affordability.
7. Changes made to tax abatement should be phased in, rather than immediately implemented.
Policy changes overnight would disrupt the current development pipeline and leave no time for the Administration to plan for an appropriate implementation process. That said, this phase-in should be swift, no more than one or two years.
8. The Department of Community Development should annually monitor and report on tax abatement.
9. The Department of Community Development should implement a digital application process for tax abatements.
10. The Department of Community Development should submit a report to the Mayor and to City Council 18 months after reauthorization of the tax abatement policy, outlining all process improvements made and those that are still in progress.
With any major policy change, Administration processes should transparently and publicly monitor that new policy’s impact. Further, if that new policy results in unintended consequences, strong monitoring allows us to adjust if needed.
The report underscores the power of coalition building. Tax abatement is a complicated, controversial issue, and yet our Working Group was able to able to build consensus recommendations among 20 organizations.
That said, ongoing dialogue on tax abatement policy is important. Despite our consensus, every Working Group member organization and, undoubtedly, other organizations across Cleveland carry their own perspectives and opinions. Even Enterprise differs from the Working Group on some of the report recommendations. For example, Enterprise believes that the CBA recommendation should require affordable housing considerations in market ready neighborhoods, particularly in the form of set aside or in-lieu-of fees.
We are proud of the hard work already put in by the Equitable Community Development Working Group. With the June 4, 2022 reauthorization deadline on the horizon, more hard work still lies ahead. We encourage Clevelanders to join the dialogue today.