Testimony of Jenny Reed, Policy Analyst, DC Fiscal Policy Institute, At the Public Hearing on Bill 18-198, the “Allen Chapel A.M.E. Senior Residential Rental Project Property Tax Exemption and Equitable Real Property Tax Relief Act of 2009,” Bill 18-505, the “Wayne Place Senior Living Limited Partnership Real Property Tax Exemption Act of 2009,” Bill 18-628, the “2300 Pennsylvania Avenue Southeast Redevelopment Project Real Property Limited Tax Exemption Act of 2009,” Bill 18-696 the “Israel Baptist Church Senior Residential Rental Project Property Tax Exemption and Equitable Real Property Relief Act of 2010,” and Bill 18-828, the “800 Kenilworth Avenue Northeast Redevelopment Project Real Property Limited Tax Abatement Assistance Act of 2010,”| June 24th, 2010 | PDF of this report
Chairman Evans and members of the Committee, thank you for the opportunity to speak today. My name is Jenny Reed, and I am a Policy Analyst with the DC Fiscal Policy Institute. DCFPI engages in research and public education on the fiscal and economic health of the District of Columbia, with a particular emphasis on policies that affect low- and moderate-income residents.
I am here today to testify about the growing use of tax abatements for housing development projects and want to specifically focus on the use of tax abatements for affordable housing in my testimony today. Tax abatements can be a useful tool for affordable housing development. However, the current piecemeal approach that is taken to award these abatements doesn’t evaluate if the abatement is needed or not, if other types of financial assistance would be better suited, and it is often done on first-come, first-serve basis. Moreover, with DC’s revenues still hurting from the recession, abatements passed by the DC Council can take years to take effect and this can limit their usefulness to projects that are ready to move forward.
There has to be a better way.
Part of the issue has to do with which groups are entitled to an automatic exemption under DC law. For example, project-based section 8 housing has a standing exemption, as do charitable non-profits that provide housing and services to the disabled or terminally ill. Yet some charitable non-profits that provide housing and seem like they would also likely be exempt have to seek separate legislation because under the code it’s unclear if they will qualify. This is probably the case with many of the Church groups requesting exemptions in the bills before you today.
In other instances, requests come from for-profit developers seeking property tax abatements for projects that vary significantly in the percentage of the housing that is affordable, and the income levels used to define low-income. In addition, some developers seek abatements after the development has been planned and the financing secured, raising questions as to why additional financial aid from the city is needed.
A property tax abatement is a financing tool for affordable housing, and thus it should be treated like any other housing financing program. Affordable housing developers have to apply for a limited pool of financing for the Housing Production Trust Fund and Low-Income Housing Tax Credits, why should property tax abatements or exemptions be any different? It would be reasonable then to set aside a capped amount of financing in the budget to provide for an affordable housing tax abatement financing tool. This is similar to a suggestion made by the Coalition for Non-Profit Housing and Economic Development (CNHED) earlier this year. The program could be run by DHCD, who is best equipped to evaluate affordable housing projects and make determinations of what is the best use of the set financing tools they have to move projects forward. This would allow tax abatements to be built into the overall financing plan, helping ensure that the abatements are used most appropriately.
Specifically related to many of the bills today, an affordable housing tax abatement program run by DHCD could have the benefit of answering some of the questions and concerns that arise from the bills being considered today:
- While the majority of the bills mention that they will be for low-income or affordable housing, none have listed what the affordability level of those units would be;
- The majority of bills do not restrict the use of the tax abatement to affordable housing;
- In two of the bills, projects at 800 Kenilworth Avenue and 2300 Pennsylvania Avenue, which are developed by for-profit developers, the projects are already developed and have at least some occupants. It isn’t clear why these projects now need a tax abatement. Moreover, the project at 2300 Pennsylvania Avenue has already received over $10 million in subsidies from the District and its newly leased supermarket will receive property tax exemption under DC’s existing neighborhood supermarket tax incentive legislation.
I’d also like to point out that Bill 18-400, the “Exemptions and Abatements Information Act of 2009” that was introduced by Councilmember Michael Brown and had a hearing before this committee in April would also help answer these important questions. DCFPI strongly supports this legislation.
Tax abatements can be an important financing tool for developing affordable housing. Yet it is also important that the District have a robust tax base to support all of the critical programs and services it provides. As tax abatements become a more popular financing tool for affordable housing, having a capped program that allows DHCD greater flexibility for financing affordable housing projects, and a means to evaluate the needs of each project for an abatement, would be a good compromise.
Thank you for the opportunity to testify. I am happy to answer any questions.