Any regular peruser of this column will know that Great Barrington’s lack of affordable housing is oft discussed, much decried, and sadly unresolved. So much for the power of the pen, as our housing crisis remains unresolved. Let me tell you then, Great Barrington, about a thoughtful stride the town can make to motivate the creation of additional affordable-housing units at an exceedingly small cost.
As recently reported in The Berkshire Edge, the Affordable Housing Trust Fund (AHTF) considered at its December meeting the state’s newly enacted Affordable Housing Property Tax Exemption (the Act). Subject to the requirements described below, the Act permits municipalities to exempt some or all of a homeowner applicant’s property taxes for renting affordable-housing units. While the tax exemption is likely insufficient to stimulate costly new construction, it is designed to motivate homeowners with an affordable-housing unit to get off the sidelines to add existing housing to the rental market.
The tax exemption is intended to encourage homeowners with a rentable home, duplex, triplex, or accessory dwelling unit (ADU) to rent one or all of the units. Poof, in exchange for a tax exemption perhaps as small as $4,000, the town can entice a homeowner to create a home. It does not get better than that.
Relative to the state and local investment in recent and ongoing housing efforts, the AHTF proposal delivers exceptional value and a lightning-fast impact for practically no cost. Consider in comparison, as The Berkshire Edge reported last July, that the state and New Marlborough together invested $3.3 million for 11 affordable-housing units in Construct’s Cassilis Farm development at a cost of $300,000 per unit (with additional private investment, the entire 13-unit project will cost about $570,000 per unit). Earlier, the 49-unit Windrush Commons in Great Barrington was constructed by the Community Development Corporation (CDC) of South Berkshire with state and town dollars for about $388,000 per unit. Consider then that for perhaps as little as $4,000 per unit—a fraction of the cost of $300,000 to $388,000 per unit of other recent projects—the proposed tax exemption can create affordable-housing opportunities in July if approved at Town Meeting in May.
The obvious question for the town to ask is, “At $4,000 per new rental home, where do I sign?” That was certainly Egremont’s reaction, which adopted the tax exemption at its recent Special Town Meeting. It is not said often enough that as goes Egremont, so should Great Barrington.
The Act sets forth the criteria a homeowner applicant needs to qualify for the exemption and permits a municipality to include additional restrictions or regulations consistent with the intent of the Act. At a minimum, the Act requires in pertinent part that:
- The dwelling be rented at an affordable rate, as determined by the Department of Housing and Urban Development (HUD);
- The dwelling be rented on a yearly basis;
- The dwelling be occupied by a person or persons whose income does not exceed 200 percent of the area median income (AMI);
- The renters shall pay in rent no more than 30 percent of their monthly household income; and
- Applicants submit documentation the town deems necessary, including, but not limited to, a signed lease and proof of the occupying person or persons’ household income, to confirm the eligibility of the property for exemption.
Determining the amount of the property owner’s exemption is straightforward. Consider the total tax due on the property, multiplied by the square footage of the qualifying housing unit(s) divided by the total square footage of the structure(s) on the parcel. For example, if the tax obligation on a parcel’s duplex is $8,000 where each of the units is 1,250 square feet and one of the units qualifies for the exemption, the property owner would receive an exemption equal to one half (1,250/2,500) of the property tax otherwise due. In this example, the exemption would be $4,000 for the newly created housing unit (or about $384,000 less than a Windrush Commons rental unit). What’s not to like?
The Act gives the town latitude in determining which housing population to target for the program. The AHTF voted to recommend to the Selectboard that, at least for the first year, the dwelling should be rented to a person earning no more than 100 percent AMI (see here). But what happens if the renter’s income grows after the first year (as we would certainly hope occurs)?
Consider that if the program did not account for income growth, a dwelling owner would avoid renting to individuals nearing income at 100 percent AMI for fear of being kicked out of the program. Or if the dwelling owner rented to an individual whose income later exceeded 100 percent AMI, would the owner evict the renter to find someone else income qualified? It is unlikely that the AHTF’s Mission Statement includes “promote evictions.”
To avoid penalizing renters whose incomes grow—call it the “rising-income conundrum”—the AHTF wisely proposed a solution: As long as renters meet income limits in year one, the dwelling may remain in the program for up to three years, even if their incomes rise to no more than 200 percent AMI in following years. This prevents unnecessary evictions and supports stability for families.
Once a municipality has approved the tax exemption program, it must remain in effect for at least three years. The drafters must have considered that dwelling owners will incur costs in preparing rental housing, providing for three-year recoupment period. At the end of the initial three-year term, the program would need to be reapproved at Town Meeting.
The AHTF considered another thorny question: how to incentivize dwelling owners to bring new units to the housing market while not permitting dwelling owners currently renting affordable units to apply to the program. This issue was referred to, tongue-in-cheek, as the “Richard Stanley Problem.” The program aims to encourage new affordable housing, not to subsidize those already renting affordably—such as Mr. Stanley, who does the right thing by renting 27 units affordably at below market rates.
Mr. Stanley recently submitted documentation to the Community Preservation Committee, found here, reflecting that he rents the apartments at 284 Main Street for a combined total of $23,726 per month, less than half 100 percent AMI of $58,403 per month. The town does not need to encourage Mr. Stanley, through a tax exemption, to do what he is already doing. You might say the tax exemption program is intended to grow our town’s population of Richard Stanleys by encouraging property owners to rent affordably at or below 100 percent AMI. I will wait while you dwell on that for a moment.
The AHTF’s recommendation to the Selectboard includes one additional provision intended to prevent gaming of the system. Since the exemption is intended to promote the availability of new affordable housing, rental units currently rented on an affordable basis may not apply for the exemption earlier than three years following the departure of the current qualifying rental occupants. Again, the exemption is not intended to entice a dwelling owner to evict a current tenant in order to obtain the tax benefit.
Although the proposed tax exemption is fiscally conservative compared to all other local housing projects, it is nonetheless the case that exempting tax dollars has the same revenue impact to the town’s coffers as writing a check for housing. Mindful that the town is facing financial challenges (no need to mention the Brookside Road Bridge, renovation of Monument Mountain Regional High School, or the purchase of Housatonic Water Works here), the AHTF recommended to the Selectboard that the program be implemented with an approved exemption of no less than $150,000. Of course, the Selectboard and Finance Committee will need to consider all of the town’s financial needs in setting the program’s parameters, but hopefully the Selectboard and Finance Committee will recognize the economic value of the proposal as compared to earlier affordable-housing expenditures. And then the AHTF proposed that applications be approved on a first-come, first-served basis until the amount set aside for the program is exhausted.
It is perplexing that housing initiatives are often challenged as being insufficiently curative. Folks, there is not now nor will there ever be a singular solution to our chronic housing problem. Absent a panacea, we should embrace measured steps. Keep in mind that while this program will not solve the overall housing crisis, to those newly housed as a result of the AHTF’s proposal, it will surely feel like a cure.
Great Barrington has a chance to take a fiscally sound, practical step toward addressing our housing needs. Let us hope that the Selectboard will agree—and that you agree at Town Meeting—that given our town’s financial constraints, it is wise to attack our housing crisis one affordable unit at a time.
NOTE: Peter J. Most is a member of the Affordable Housing Trust Fund. The opinions expressed are solely his own, not those of the Affordable Housing Trust Fund or any other member.
Survey Monkey Question
Here is a link to the following Survey Monkey poll: “Do you support the Affordable Housing Trust Fund’s proposal to the Selectboard that property taxes should be exempted in whole or in part for a property owner’s creation of new affordable-housing units to help alleviate Great Barrington’s housing shortage?”
Survey Monkey Results
Here is the result of the following recent survey question: “Do you believe South County will be able to pull together to purchase, preserve, and enhance Simon’s Rock for the benefit of the community?”
As of publication, 62.5 percent of respondents said “yes.”
Days Great Barrington has wrongfully withheld Community Access Fees: 302
