How Chattanooga hopes to encourage developers to build more affordable housing

Staff Photo by Robin Rudd / Activist Michael Gilliland, right, leads a cheer of "affordable housing now" as Chattanoogans In Action for Love, Equality & Benevolence held a news conference Feb. 22 on the Chattanooga City Hall steps.

One of the tools Chattanooga officials use to encourage developers to build affordable housing may have broken down.

"Our current policy doesn't work especially well for anyone, neither the city, taxpayers nor private developers," Chattanooga City Council Vice Chair Jenny Hill, of North Chattanooga, said in a phone call. "It's a pretty inflexible program."

As is, housing developers in Chattanooga can receive a tax break from the city if they ensure at least half the units in a project are affordable for people making at most 80% of the area median income, which city officials estimate is nearly $51,000. Additionally, the total value of construction must be $5 million.

"It's really hard to make that work," Chief Housing Officer Nicole Heyman said in a phone call, which means few developers take advantage of it.

The incentive reduces the property taxes developers must pay on a new project for a period of time in exchange for them meeting those specific conditions.

Hoping to forgo the one-size-fits-all approach, the mayor's office is now proposing a new system under which tax breaks would be directly tied to the number of affordable units developers include in their projects. The Chattanooga City Council is set to vote on the changes in the coming weeks and heard a presentation of the plan Tuesday.

​Rather than requiring developers to meet strict prerequisites, the city would allow builders to receive a tax break based on the individual number of affordable units they want to include in a housing development. There would need to be at least 10 units in the building for it to qualify.

​The city would relieve at most $2 million in taxes per year across all projects. Additionally, property owners would be required to submit rents and income verification to the city annually, and Chattanooga would be able to conduct interior inspections of those units with violations resulting in a $5,000 fine per noncompliant apartment.

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