South Carolina counties with growing populations have housing affordability problems, and to get more affordable units built, some have been repurposing tax incentives typically used to attract manufacturers.
Charleston County is now exploring that option, which Greenville, Spartanburg and Richland counties have already embraced.
The bottom line is that for-profit companies could get property tax breaks if they include homes that people with moderate to low incomes could afford when they develop new housing. The idea is that a multi-year tax reduction would make up for accepting lower rent or sale prices on some units.
“We would basically be backing off of the property taxation on an affordable development to help close that (financial) gap,” Steve Dykes, Charleston County’s director of economic development told County Council members at a July 18 meeting.
Governments have taken different approaches to encourage such things. The city of Charleston uses zoning requirements and incentives, such as allowing more height or density, to get “workforce housing” apartments created.
Workforce housing apartments are meant for people who have full-time jobs but don’t earn enough to afford market-rate rent.
Greenville and Spartanburg counties offer property tax breaks, and the details can be a bit complicated. They involve including proposed developments in what are known as multi-county industrial parks and then giving them a “special source revenue credit.”
In Charleston County, where rents have soared by more than 30 percent in just two years, the county is researching that option.
“I think, overall, it sounds like a win,” Councilman Kylon Middleton said. “It’s a crisis, and we’re not going to solve it overnight, but (this) is a good start.”
Here’s how it works: First, a multi-county industrial park is not an actual place or industrial park, but a designation assigned to properties. It’s called a “multi-county” park because it pairs affluent counties with neighboring less-affluent ones, and they get a small piece of the action.
Say a manufacturer plans to set up shop in Charleston County and create some jobs. The county can designate the manufacturer’s property as part of the multi-county industrial park, which cuts the property assessment rate for tax purposes to 6 percent, and then instead of property tax bills the owner pays a set fee.
The money from that fee gets divided up as a county decides. In Charleston County, the economic development arm of the county gets 7.5 percent of the money, Colleton County gets 1.5 percent (because, multi-county park), while the rest is divided up as property taxes would have otherwise been.
But wait, there’s more.
Multi-county industrial park designations are often paired with the special source revenue credit. So after the property’s taxable value is trimmed and property tax bills are swapped for set fees, a tax credit can be applied against those fees to reduce them.
“Let’s say they pay $1.5 million in taxes, and we give them back a half-million dollars,” said Corine Altenhein, Charleston County’s finance director. “All of that is negotiated deal by deal.”
Some counties negotiate tax credit deals one by one. Others have if/then rules — if developers do X, they get Y.
Greenville’s affordable housing tax credit rules are like that. The county’s ordinance lists different amounts of tax relief based on various percentages of affordable housing units, minimum project costs and the mix of income levels the affordable units must accommodate.
Not every Charleston County Council member likes the idea of tax breaks for affordable housing. Councilman Larry Kobrovsky, a past chairman of the county Republican Party, said that wouldn’t be fair to those who can afford housing created without tax breaks.
“Is it our job?” he said. “And at whose expense do we ensure the profits of contractors and developers?”
Kobrovsky cast the lone vote against adopting Charleston County’s “Housing Our Future” plan in May. How to fund the plan aimed at spurring more housing people can afford has remained an open question.
Spartanburg County offers tax credits for housing that are negotiated case-by-case, as Charleston does with manufacturers. The multi-county industrial park and special source revenue credit arrangements must by approved at the county level, but the city of Spartanburg has been the main user of those deals in Spartanburg County.
“All it is, in its simplest form, is a credit that reduces that amount of tax paid,” said Alverson Cole, Spartanburg County administrator.
Spartanburg City Manager Chris Story said several affordable housing deals have resulted.
“I think it’s working for us,” he said. “It just fits where we are in the evolution of our community.”
“We’ve been worried, like all communities are, about significant increases in rents that are associated with increases in demand,” said Story.
Charleston County Council in July directed the county staff to research the potential for tax incentives to support affordable housing development. Doing so would require the county to create a new multi-county industrial park scenario devoted to affordable housing.
Source : ThePostAndCourier