Affordable housing tax increment financing (TIF)

Tax increment financing (TIF) districts define a district’s tax "base" by local property values before improvements are made and designate some or all tax revenue above the base rate to support affordable housing, sidewalk improvements, utility upgrades, and other infrastructure investments in the TIF district (Skidmore 2010*). Revenue from the tax base rate continues to support local school districts and local governments. Many states stipulate that TIF districts must be in blighted areas without prospects for growth in property values (Dye 2000*). TIFs are often implemented with other programs that support affordable housing and economic development and are often considered tools to support privately and publicly funded development (Bland 2016*, CDFA-TIF). Affordable housing reinvestments are most common in urban and suburban TIFs.

Expected Beneficial Outcomes (Rated)

  • Increased access to quality housing

  • Increased access to affordable housing

Other Potential Beneficial Outcomes

  • Improved neighborhood quality

  • Reduced blight

  • Increased economic development

Evidence of Effectiveness

Tax increment financing (TIF) is a suggested strategy to increase access to quality, affordable housing (NNC-Arigoni 2001, CHP-Lubell 2007). Available evidence suggests that TIF districts may contribute to increased economic development through increased property values (Hicks 2015, Bland 2016*, Carroll 2008*, Byrne 2006*) and tax revenue (Skidmore 2010*, Hicks 2015, Bland 2016*). Additional evidence is needed to confirm effects.

Partnerships between public entities and private developers or investors may increase TIF districts’ likelihood of raising property values and generating community benefits (Bland 2016*). A Chicago-based study suggests that property values of surrounding buildings may increase when TIFs are located in mixed-use development areas and property values may decrease when TIFs are located in industrial TIF districts (Weber 2007*).

TIFs that are not specifically designed to increase affordable housing can still reserve a percentage of revenue for affordable housing development; for example, in Portland, the minimum TIF reserve is set at 45% (Portland-TIF). 

Impact on Disparities

Likely to decrease disparities

Implementation Examples

As of 2014, TIF programs are possible in 48 states and the District of Columbia; Arizona and California do not allow TIF districts (Greenbaum 2014*).  

TIF programs may also be implemented on the county level, for example in Cook County, IL (Cook County-TIF) or by cities, as in Chicago, IL and San Antonio, TX (Chicago-TIF, San Antonio-TIF). Implementation and affordable housing-specific components vary by area. 

Implementation Resources

CDFA-TIF - Council of Development Finance Agencies (CDFA), International Council of Shopping Centers (ICSC). Tax increment finance best practices reference guide. Columbus: Council of Development Finance Agencies (CDFA), International Council of Shopping Center (ICSC); 2007.

ChangeLab-Housing toolkit - ChangeLab Solutions. Preserving, protecting, and expanding affordable housing: A policy toolkit for public health. 2015.

MO DOR-TIF - Missouri Department of Revenue (MO DOR). Local Tax Increment Financing (TIF).

Montana-TIF - Montana Transportation and Land Use: Development Exactions and Incentives-Tax Increment Financing (TIF) resources.

Vermont-TIF - Vermont Agency of Commerce and Community Development. Tax Increment Financing (TIF). General information on TIFS and program explanations for current districts.

LISC-Affordable housing - Local Initiatives Support Corporation (LISC). Helping neighbors build communities: Affordable housing.

LHS - Local Housing Solutions (LHS). To enhance local affordability and foster inclusive communities. New York University, Furman Center and Abt Associates, Inc.

LHS-COVID-19 response - Local Housing Solutions (LHS), NYU Furman Center, Abt Associates. COVID-19 Housing response plans.

Citations - Evidence

* Journal subscription may be required for access.

NNC-Arigoni 2001 - Arigoni D. Affordable housing and Smart Growth: Making the connection. Washington, DC: National Neighborhood Coalition (NNC); 2001.

CHP-Lubell 2007 - Lubell J. Increasing the availability of affordable homes: A handbook of high-impact state and local solutions. Washington, DC: Homes for Working Families, Center for Housing Policy (CHP); 2007.

Hicks 2015 - Hicks MJ, Faulk D, Quirin P. Some economic effects of tax increment financing in Indiana. Muncie: Ball State University Center for Business and Economic Research; 2015.

Bland 2016* - Bland RL, Overton M. Assessing the contributions of collaborators in public-private partnerships: Evidence from Tax Increment Financing. The American Review of Public Administration. 2016:1-18.

Carroll 2008* - Carroll DA. Tax increment financing and property value: An examination of business property using panel data. Urban Affairs Review. 2008;43(4):520-552.

Byrne 2006* - Byrne PF. Determinants of property value growth for tax increment financing districts. Economic Development Quarterly. 2006;20(4):317-329.

Skidmore 2010* - Skidmore M, Kashian R. On the relationship between tax increment finance and property taxation. Regional Science and Urban Economics. 2010;40(6):407-414.

Weber 2007* - Weber R, Bhatta SD, Merriman D. Spillovers from tax increment financing districts: Implications for housing price appreciation. Regional Science and Urban Economics. 2007;37(2):259-281.

Portland-TIF - Portland Housing Bureau. Tax Increment Financing (TIF) set-aside policy for affordable housing.

Citations - Implementation Examples

* Journal subscription may be required for access.

Greenbaum 2014* - Greenbaum RT, Landers J. The tiff over TIF: A review of the literature examining the effectiveness of the Tax Increment Financing. National Tax Journal. 2014;67(3):655-674.

Cook County-TIF - Cook County Clerk. Tax Increment Financing Districts (TIF) resources.

Chicago-TIF - City of Chicago. What we do: Tax Increment Financing (TIF). Information on individual TIF districts, including plans, annual reports, redevelopment agreements, and recent news.

San Antonio-TIF - City of San Antonio. Department of Planning and Community Development: Tax Increment Financing (TIF). Program policies, FAQ's, and Tax Increment Reinvestment Zones (TIRZ).

Date Last Updated