Financial Incentives

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Financial incentives are one method that jurisdictions can use to encourage the production, preservation, and accessibility of affordable housing units. Such incentives provide subsidies to improve the economics of affordable housing. Generally, housing relies on residents to pay rent or purchase units as the primary source of income to construct and operate housing over time. When rent or the purchase price of housing is set at a lower amount to remain affordable to households with lower incomes, this generated income is typically not enough to fund the construction and operation of the housing. Financial incentives are one way to fill the resulting gap between income and expenses in affordable housing projects or make home ownership more attainable.

Financial incentives can both reduce expenses and offer additional income to affordable homes and larger housing developments. These incentives can take the form of one-time assistance or over time, and may be used to fund construction, acquisition/preservation, operations, or maintenance/repair of affordable units. Incentives or assistance are offered to property owners, including non-profit and for-profit developers, housing authorities, and individual homeowners. Like all incentives, calibrating the affordability requirements, including the term of affordability and income qualifications of the residents, to the value of the incentive is critical so that the incentive is effective.

Where Are Financial Incentives Being Used?

The map illustrates financial incentives currently utilized by jurisdictions with populations greater than 20,000 people in the Portland metro area. Financial incentives that may be permitted through policies unrelated to affordable housing, but that may be used to encourage affordable housing, are not included on the map, but are captured in the For More Information section below.

More Information
A summary of financial incentives currently utilized by metro area jurisdictions is illustrated on the map below. To view a summary of the financial incentives available in each jurisdiction, click on the Comparative Matrix button below. For complete information, please contact the appropriate jurisdiction.

Property taxes can be a substantial expense for housing when rental income or sales prices are depressed. Reducing the property’s taxes can improve its cash flow and make it more financially feasible. These cost savings can enable lower rents to tenants or reduced sales prices to home buyers. Property taxes can be reduced through either exemptions or abatements. Exemptions reduce the property’s assessed value for the purposes of calculating property taxes. Abatements reduce the amount of taxes owed without impacting the assessed value. These reductions can apply to multi-family housing and single-family housing and both rental units and ownership units. Specific requirements of property tax reductions, like the term of affordability and income eligibility of residents, will vary.
Offering loans with more favorable or flexible terms than available on the market can make affordable housing development more feasible. Often, gaps exist between the sources of funding, including other loans, available for an affordable housing project and the expenses that must be paid. Substantial predevelopment expenses may also be incurred to prepare a site for development. Loans that have lower interest rates, deferred payments, long amortization periods, or that are paid back from cash flow can help fill these gaps. Loans can be used for acquisition, construction, rehabilitation, and predevelopment, and may be issued to affordable housing providers or directly to homebuyers. Specific requirements, like the term of affordability and income eligibility of residents, will vary.
Offering grants with favorable terms can make affordable housing development more feasible. Grants generally do not accrue interest and do not have to be repaid if requirements are fulfilled. They can assist with acquisition, construction, rehabilitation, operation, and predevelopment, and may be issued to affordable housing providers or directly to homebuyers. Specific requirements, like the term of affordability, income eligibility of residents, and when repayment could be required, will vary.
Tax Increment Financing (TIF) funding generated in urban renewal districts from an increase in property values may be used as a source of funding for affordable housing. TIF can be used to fund grants and loans to encourage equitable housing opportunities in redeveloping areas. Land may also be acquired or banked for future development and offered at a potentially reduced land price.
Providing assistance to lower income or disabled homeowners is one method to preserve homeownership. This assistance can help a resident stay in their home by maintaining its safety and viability. This financial assistance can take the form of a loan or grant, and specific financial terms and resident requirements will vary.
Employers are able to contribute to the accessibility of housing for their employees through employer-assisted housing. Housing is a crucial component of economic competitiveness, and the availability of affordable options is important to attract and retain employees. Employers can often partner with financial institutions to offer favorable financing for homebuyers or provide supplemental funds to employees towards the up-front cost of purchasing a home. Large employers have partnered with other sectors to create housing specifically for employees or increase housing supply in other ways, but such supply-side mechanisms are less common.