Cleveland City Council passes new tax abatement legislation

Plain Press, July 20220                             At a special meeting held on Wednesday, May 25, 2022, Cleveland City Council passed legislation that will restructure the City of Cleveland’s tax abatement policy. 

     A press release immediately following the meeting from Cleveland City Council Chief of Communications Joan Mazzolini explains the new policy.

     According to the information in the release, the new abatement policy is scheduled to be in place starting December 31, 2023. Projects with start dates prior to that will be grandfathered in under the current tax abatement policy.

     Under the new policy, the City of Cleveland will still be granting 15-year residential tax abatements for single family new construction and renovations, and multi-family new construction and renovations.  The abatement deals offered are different depending on where a residential structure is located and whether the structure is market rate or affordable (defined as affordable to a person with income at 80% of the Area Median Income – the area being the Cleveland-Elyria-Mentor metropolitan area)

Single Family New Construction

     In areas of Cleveland classified as Market Rate, the 15-year tax abatement for market rate for single family new construction (3 units or less) will be for 85 percent of the property taxes assessed. (This includes market rate areas that are designated in neighborhoods such as Tremont, Ohio City and Detroit Shoreway.) The abatement will be capped at $350,000. So, property owners will be tax exempt on 85 percent of the property tax and will pay 15 percent of the property tax for the value of the new construction up to $350,000. If their property is appraised at over $350,000, the owner will pay the full rate of property tax on the dollar value that is above $350,000. 

     In areas of Cleveland determined to be Middle Markets or Opportunity Markets, residential single family new construction will receive 100 percent fifteen-year tax abatements. In the Middle Market areas, the tax abatements will be capped at $400,000. In the Opportunity Markets the abatements will be capped at $450,000.

     One hundred percent fifteen-year tax abatements will be offered to single family new construction that is affordable to people with income at 80 percent of the Area Medium Income throughout Cleveland. There is no cap on the abatements in this category.

     For people wishing to build a new house in their neighborhood to age in place, Cleveland City Council created a 15-year 100 percent tax abatement throughout the city that is capped at $450,000.

Single Family Renovation

     Single Family market rate homes being renovated anywhere in Cleveland are eligible for 100 percent 15-year tax abatement on the value added by the rehabilitation. The abatements are capped at $450,000. For home renovations that are deemed affordable to families with income at 80 percent or the Area Median Income, the same 15-year 100 percent abatement applies. There is no cap for affordable home renovations.

Multi-Family New Construction

     New construction of multi-family units (four units or more) in areas determined to be Market Rate would receive an 85 percent fifteen-year tax abatement and would be required to set aside 25 percent of the units as affordable to persons making 80 percent of the Area Medium Income.

     New construction of multi-family units in areas determined to be Middle Market would receive a 90 percent fifteen-year tax abatement and would be required to set aside 15 percent of their units as affordable to persons making 80 percent of the Area Median Income.

     New construction of multi-family units in areas determined to be Opportunity Markets would receive an 85 percent fifteen-year tax abatement and would be required to set aside 5 percent of their units as affordable to persons making 80 percent of the Area Median Income (AMI).

     New construction of multi-family units that have made all their units affordable to people making 80 percent of AMI would be eligible for 100 percent fifteen-year tax abatements citywide.

Multi-family Renovation

     All rehabilitation or remodeled multi-family buildings citywide would be eligible for 100 percent fifteen-year tax abatements on the value of the improvements in the property. Rehabilitated or remodeled buildings in Market areas would be required to set aside 25 percent of the units as affordable to persons making 80 percent of AMI. Those rehabilitated or remodeled buildings in Middle Market areas would be required to set aside 15 percent of the units as affordable to persons making 80 percent of the AMI. Rehabilitated or remodeled buildings in Opportunity Market areas would be required to set aside 5 percent of units as affordable to persons making 80 percent of AMI.

     Rehabilitated or remodeled multi-family units that have all of their apartments affordable to persons making 80 percent of AMI would be eligible for the 100 percent fifteen-year tax abatement citywide with no additional set asides required.

General rules

     To qualify for tax abatements all new and rehabilitated residences would be required to meet City of Cleveland green building standards. Owners of all the multi-family residential buildings are also required to enter into Community Benefits agreements with the City of Cleveland Community Development Department. The Community Benefits Agreement may waive the affordable housing set asides in the event the owner makes a voluntary payment into an affordable housing fund in accordance to a table set by City ordinance. Any use of rental properties for limited lodging or short-term rental would make the owner in violation of the Community Benefits Agreement.

                  The complete ordinance – number 482-2022 — was passed at a Special Meeting on May 25th according to the City Record (May 27^th City Record) as “an emergency ordinance establishing three areas encompassing the entire City of Cleveland as Community Reinvestment Areas under Section 3735.65 et seq. of the Ohio Revised Code, and making certain findings and determinations in connection with Community.”

     The ordinance also calls for the Department of Community Development to provide a report on the tax abatement policy 18 months after January 1, 2024. The Director of Community Development is also required to “track the demographics of the applicants and occupants of housing developments that utilize the residential tax abatement.”

     The new tax abatement policy passed by a vote of 15-0. Councilpersons Jasmin Santana and Brian Kazy were absent.