From the Editor: Raleigh’s TIG Policy Won’t Make a Dent in the City’s Affordable Housing Crisis

Last week, Raleigh’s city council OK’d construction of nearly 300 units of affordable housing. One multi-family development, Thrive at the Renaissance located at the intersection of Chapanoke and Ileagnes Roads, will add 90 units to the city’s stock. The other, New Bern Crossings located close to where New Bern Avenue hits Interstate 440, will add 192 units. 

This is good news.

But, also last week, the city council adopted the Tax Increment Grant (TIG) policy in a 7 to 1 vote. While the TIG is being sold as an economic development tool that will secure public benefits for Raleigh residents, affordable housing as a public benefit is not a priority in the policy.

Essentially, the TIG promises to reimburse developers with property tax revenues for a period of time upon the developer’s execution of a set of agreed-upon “community benefits” for the applicable project. Although TIGs are capped at 2 percent of the city’s annual property tax levy, projects as large as the $2 billion Downtown South could receive annual reimbursements that exceed annual property tax revenue growth, according to an N.C. Budget and Tax Center analysis; at minimum, that’s several million dollars a year for a period of 10 or 15 years. 

According to the policy, the TIG’s community benefits must fall into an investment category called Infrastructure/Facilities whereby developers build new infrastructure and facilities (such as, say, a soccer stadium). An additional investment category, Public Benefits, says the developer may provide benefits—job creation commitments, workforce development, or affordable housing—but only in conjunction with the Infrastructure/Facilities category. 

In other words, providing community benefits such as affordable housing and jobs is completely optional for developers who will be repaid millions in public dollars upon the completion of their projects. 

That’s not ideal. 

Raleigh’s affordable housing crisis is well documented.  

In the city in 2019, there were 43,823 extremely low-income renter households—those who make zero to 30 percent of the area median income (AMI), which, for an individual, is currently $19,800 and for a family of four is $28,250—according to the National Low Income Housing Coalition.

For those 43,823 households, there were only 14,978 affordable and available rental homes, so we’re already at a deficit of 28,845 units; the city has added 2,900 units since 2015, a spokesperson said.

An $80 million affordable housing bond plus other money the city has in federal and local funds, federal grants, and CARES Act funds—a total of $143 million—will go toward the city’s stated goal of constructing 5,700 units by 2026. 

That doesn’t seem like it will be enough money. It certainly won’t be enough units. 

That’s why city leaders should incentivize developers to build affordable housing to the extent that North Carolina law allows instead of adopting a mechanism that would reimburse developers with city property taxes. So far, this council has failed to persuade developers to take the construction of affordable housing seriously. The TIG does little to do so either, though it pretends to. 

A section on the city’s website describes how “affordable housing can be leveraged” through the TIG: “As part of a project qualifying for a TIG, a developer may obligate itself to construct a certain percentage of affordable housing units within the project.”

The developer of Downtown South has obligated itself to construct a very limited supply of affordable housing and does nothing to help the most cost-burdened households. As part of the rezoning conditions the city granted the project’s developers in December, the Downtown South project reserves 10 percent of its first 999 dwelling units for households making less than 80 percent of the AMI—$52,570 or less for an individual or $75,300 or less for a family of four—for at least five years.   

With the TIG, developers can get a good deal, and they know it. But the public should look critically at the opportunity costs of a policy that will give property tax revenues back to developers who aren’t asked to provide the types of housing the city needs most right now. 

What else could those property tax revenues pay for? 

Helping to finance small-scale projects such as Thrive at Renaissance and New Bern Crossing. Acquiring properties located along transit lines and in other areas to keep housing affordable. Providing low- or no-interest loans to first-time or low-income homebuyers for down payment assistance or repairs. These are just a few options.

Right now, we need to keep the context of what is happening top of mind. We’re still in a pandemic and an economic downturn. The recovery is uncertain and people are struggling. Jobs haven’t returned. Wages aren’t increasing. Evictions are leaving families houseless and, in the Triangle, the influx of large tech companies like Apple will continue to push up home prices. 

Instead of focusing on ways to subsidize large development projects, the city’s leaders should focus on growing the city sustainably and inclusively. Raleigh’s strategic documents already call for that. The council now needs to ensure that the city’s policy processes align with investment in the broader public good.

Follow Editor-in-Chief Jane Porter on Twitter or send an email to [email protected]. 

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