Tax Subsidies for Market-Rate Housing is a “Go”
On Friday, April 19, 2019, the Minneapolis City Council approved the use of tax subsidies for Seward Commons, a large housing complex off the Blue Line’s Franklin Avenue light-rail stop. The divided council voted 8-4 to provide the developer with tax-increment financing (TIF). TIF is a method of financing real estate development costs to promote development or redevelopment in areas where it would most likely not occur without incentives. TIF “captures” the incremental property taxes generated by the value of the new development. Essentially, TIF encourages developers to invest in new projects where they otherwise may not do so.
The TIF vote was for two proposed buildings at Seward Commons: a 128-unit market-rate building and a 32-unit affordable housing building. The developer had requested $3.7 million for the market-rate building and $600,000 for the affordable units. The current complex already has one affordable building for seniors and another for individuals suffering from mental illnesses.
Council members who voted against the use of TIF had concerns about allowing tax subsidies to be given to market-rate housing. Members who voted for the use of TIF stated that it allows the developers to create a myriad of places for people to live—the proposed market-rate building is the first rental housing without income limits developed in this area in over 35 years.
Before developing a project, it is important to understand the various financing options available to developers. Consulting with an attorney is an important step when beginning to develop a project, or even when in the middle of a development. The attorneys at Wilkerson & Hegna are ready to aid in your real estate development journey, from the land acquisition, building contracts, and even to the financing.