A New Affordable Housing Strategy Is Headed To Council, Without A Tax Break For Developers

Apr 26, 2019

For a long time, Pittsburgh’s approach to development was to open the lid of the subsidy jar and throw out tax abatements like hard candies at a Halloween parade; new buildings eventually meant more tax revenue. Now, as interest in building in Pittsburgh continues to grow, the city wants to find a way to capitalize on it. That’s where inclusionary zoning comes in.

Like a lot of revelatory ideas in government, inclusionary zoning is a sleep-inducing name, but the trial run proposed for Lawrenceville would be a dramatic shift. Developers who create 20 or more units of housing would be required to make 10 percent of those units affordable, just for the privilege of being in Lawrenceville. While the zoning code offers incentives to developers who create affordable housing in other neighborhoods, this would be the city’s first foray into mandating it.

At a hearing before the Planning Commission, speakers called on the city to find any way it can to address the estimated shortage of more than 20,000 affordable units. Other neighborhoods will watch the progress of the pilot closely, said Joanna Deming, who heads the Fineview and Perry Hilltop Citizens’ councils.

“We want to get ahead of this issue,” she said. “We’ve missed so many opportunities and every minute that we wait we are losing affordable homes, and we’re not building them.”

The Planning Commission unanimously, eagerly, supported the pilot. One commissioner joked members would have to fight one another to make a motion to approve.

But as the maxim goes, you don’t get something for nothing. When inclusionary zoning made its first substantive appearance on the city scene, an exploratory committee charged with crafting recommendations suggested offering a tax abatement to all affected developers. To require people to charge lower rents on some units means they make less money to pay back the bank or invest somewhere else. The committee said the city should plan to offer abatements, in other words, to lower the tax bill of those developers for 10 years.

But the trouble is, the city’s tax abatement systems are a mess. And that's a pretty big deal, because property taxes pay for almost everything the city and county do.

“We've got to do as much as we possibly can to maximize our revenues coming out of property taxes,” said City Controller Michael Lamb.

December 2018 audit from Lamb’s office revealed communication issues and missing information in the data maintained by the various offices who come in touch with tax abatements. The lack of basic data means the city may be losing taxes it could collect from increased property values. Without even a comprehensive list of current and expired abatements, it’s difficult to determine if subsidized development is even benefitting residents.

“If we are doing shoddy paperwork or processes then that's that's on us,” said Lamb. “We've got to clean that up, right? We've got to make sure that we're getting our full complement of property tax revenues as properly assessed.”

Just two of the city’s nine lawmakers attended a recent hearing meant to address some of the problems identified by Lamb’s audit. Councilor Deb Gross, who called the meeting, said they need to be overhauled. The invited experts, Lamb, and Councilor Anthony Coghill agreed. However, they diverged sharply in their opinions of what problems those overhauled tax abatements should be used to address.

“You’ll have to excuse my ignorance on some of this stuff because I pay attention to things that concern my district,” said Coghill. “Affordable housing isn’t one of them.”

A need for affordable housing exists across the city, said Bob Damewood, a lawyer for Regional Housing Legal Services. Increased housing development hiked up rents while incomes remained relatively flat, he said.

“Twenty-three thousand households pay more than half of their income in housing costs. That can create an increased risk of health hazards, increased risk of eviction and foreclosure and homelessness,” he said. “We pay for those things with our public dollars.”

Both Coghill and Lamb said population loss presents a bigger problem, and suggested tax abatements could be used to help long-time homeowners make major repairs or pay rising property taxes in order to stay in their homes.

It may not be necessary to unsnarl the city’s seven tax abatement programs in order to implement the inclusionary zoning pilot, said Gross.

“I feel like in some cases there are some developers who are able to just fold in the cost of the affordable units,” she said, but added that it’s hard to know without good data.

Many cities, such as Washington, D.C. and San Francisco, offer some kind of offset to developers. A literature review from the University of Wisconsin suggests inclusionary zoning is more effective when incentives are provided. However, those vary considerably from city to city, and depend on the goals of each program.

For now, Pittsburgh's inclusionary zoning pilot will go to city council without a tax abatement attached. Further action on cleaning up the city’s tax abatement programs has yet to be determined.