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Tax incentives for new construction and substantial rehabilitation overview

Local jurisdictions interested in boosting the overall supply of housing (or the supply of a particular type of housing, such as rental housing) can create tax incentives to encourage the creation of new homes.

Some jurisdictions stimulate new residential development by offering property tax abatementReduction or elimination of taxes granted to property owners by the government in order to stimulate publicly beneficial activities, such as investment in capital equipment.s that lower the amount of taxes owed for a specified period of time. Alternatively, property tax incentives can be structured to exempt, for some period of time, increases in the assessed valueDollar value assigned to a property against which is applied the local tax rate for determining a property’s tax liability. A property’s assessed value is generally the same as the appraisal of the market value of the property or a uniform fraction of the amount. of a property that would otherwise result from new construction. Both abatements and exemptions can also be used to support the rehabilitation of older homes that have fallen into disrepair, providing a reduction in taxes or simply reducing or eliminating incremental taxes that would otherwise result from improving the property.

Additional Resources

Administering agencies

Local department of housing or community development – responsible for policy design and ongoing monitoring and program administration.

Local tax office or board of assessors—responsible for administering the abatement or exemption.

Policy objectives

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