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Salem’s Single Property Tax Increment Financing District: A Boon for Affordable Housing Development

Written by Wyatt Jones on Oct. 15th, 2023
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Exploring the impact of the tax incentive on Salem’s local economy and the benefits for developers and residents

As the need for affordable housing continues to grow in Salem, Oregon, the city has introduced a tax incentive aimed at encouraging the development of new construction affordable housing projects. The Single Property Tax Increment Financing (TIF) District offers a financial incentive in the form of a property tax rebate for developers who undertake projects that meet specific criteria. The first Single Property TIF, Jory, was approved by the City of Salem in 2020, and since then, the program has established objectives to guide future projects.

The Single Property TIF District program’s objectives require that a proposed project must incorporate affordable housing, with at least 15% of the total units or 20 units being designated as affordable, whichever is greater. Affordable housing, in this context, is defined as rent at 80% Area Median Income (AMI) or less, with annual rent increase caps less than the statutory requirement. Additionally, the project must be located within the City of Salem municipal boundaries, have a development concept, and not utilize additional property tax exemption benefits.

This tax incentive can have a significant positive impact on Salem’s local economy. By providing a financial incentive for the development of affordable housing, the Single Property TIF District program can help to increase the supply of affordable homes in the city, addressing a critical need for many residents. This, in turn, can contribute to a more stable, vibrant, and diverse community, which is essential for the long-term health of the local economy.

Developers can also benefit from the Single Property TIF District program through a reduction in System Development Charges (SDCs). Affordable housing projects are either fully or partially exempted from paying SDCs, whereas market-rate projects typically pay SDCs in the range of $8,000 per unit. This financial benefit can help to make affordable housing projects more financially viable for developers, encouraging the construction of more affordable homes in Salem.

To take advantage of the Single Property TIF District program and the associated SDC exemptions, developers must follow a series of steps. These include confirming that the project meets the affordable housing definition outlined in Salem Revised Code 41.150(a)(5), providing a draft deed restriction for review by the City Attorney’s office, submitting development plans for building permit review, and providing a recorded deed restriction before development permit plan approval.

It is important to note that property owners and development teams are responsible for certain costs associated with the Single Property TIF District program, including current property surveys and legal descriptions, as well as the super notice required by ORS 457.085.

The Single Property Tax Increment Financing District for Affordable Housing presents a valuable opportunity for developers and residents of Salem, Oregon. By offering financial incentives in the form of property tax rebates and reduced SDCs, the program encourages the construction of much-needed affordable housing, fostering a more stable and diverse local economy. As more developers take advantage of this tax incentive, Salem can look forward to a brighter future with increased access to affordable homes for its residents.

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