Wednesday, October 24, 2001
City considers tax breaks for new homes
By Ken Alltucker
The Cincinnati Enquirer
Cincinnati wants to waive property taxes for 15 years for new-home buyers to encourage home ownership in the city.
The proposal would save new-home buyers thousands of dollars each year, potentially allowing them to buy more expensive homes in the city than in the suburbs.
Although the city has offered tax breaks on new-home purchases in selected areas for years, the current proposal is the first attempt to create a standard for all city neighborhoods.
It also aims to attract middle-class homeowners by targeting moderate-priced homes and extending tax breaks from the current period of 10 years to 15 years.
We want to find ways to increase home ownership opportunities, Peg Moertl, director of neighborhood services, said. We think this is a rational approach.
City Council today is expected to consider approval of the policy, part of a handful of programs created to boost the city's dismal 38 percent home ownership rate, one of the lowest in the nation.
Though the program is geared toward home buyers, it's also an attempt to persuade developers to build new homes in the city. It's an incentive they can offer home buyers hesitant to move to a city that lost 9 percent of its population in the 1990s.
It can be an incentive for developers, said Rick Williams, president of the Home Ownership Center of Greater Cincinnati. It is difficult to compete with all the suburban areas, both in and outside of Hamilton County.
The owner of a $150,000 Anderson Township home can expect to pay $2,395 a year in total property taxes. A similar home in Cincinnati would generate an annual tax bill of $2,677 an amount that would be sharply reduced under the current proposal.
The proposal would eliminate most but not all property taxes. Homeowners are charged taxes based on the value of the home and land.
The city's proposal would abate taxes stemming from the home's value, not the land value, according to Martha Hilliard, who administers tax-abatement programs for the city.
So new-home owners in Hyde Park would expect a higher tax bill than buyers in Over-the-Rhine, where land is less valuable.
The city had no estimate on how much the program would cost. Typically, fewer than 200 new single-family homes and condos are built each year in the city.
The costs of all city residential and commercial property tax breaks are covered in an agreement between the city, Hamilton County and Cincinnati schools. Cincinnati must pay Cincinnati Public Schools, which relies on property taxes, $5 million a year for 20 years.
The new-home tax breaks are geared toward moderate-priced homes. The program would eliminate taxes for up to $212,000 of a home's appraised value, so more-expensive homes would be eligible only for a partial tax break.
Some developers want the city to offer breaks for more expensive homes as well.
We'd like to see the cap expanded, said Dutch Cambruzzi, chief executive officer of Camden Homes, which is developing more than a dozen luxury homes in Columbia Tusculum. That's the kind of thing that can serve as a wonderful incentive to contribute to the income mix.
Ms. Moertl said the policy isn't meant to discourage development of more lucrative homes, but the cap was established to address the city's most pressing need the loss of middle-class home owners.
The city's previous tax-break program was a hodgepodge of 26 taxing districts that confused both city workers and potential home buyers, Ms. Moertl said.
The new policy crystallizes the tax-break process, erasing the perception that you need to know someone in order to access this, Mr. Williams said.
Ms. Moertl hopes by extending tax abatements from 10 to 15 years that more middle-class homeowners and developers will choose to live and build in the city.
The proposal is meant to complement another recent program passed by City Council that encourages smaller developments. That program offers developers who build three or fewer homes up to $30,000 for each home.
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