Housing Challenges

Key Strategies

Existing Tools & Resources

State & Federal Programs

There are existing state and federal resources that are available to help finance new or renovate existing homes. One of the best resources is the Illinois Housing Development Authority who provide resources that meet the needs of low-to-moderate income households as well as those at or right above the median household incomes. It should be noted, middle-class income households who earn between 80 and 120 percent of the area median income may not be eligible for these programs, but still face considerable barriers to housing. The local revolving loan fund (RLF) program would allow a community flexibility to set its own eligibility requirements and could help address this middle-class income challenge.

Providing both the public and local financial institutions with these funding opportunities has the potential to create new opportunities for property renovations and homeownership.   

Residential TIF

Tax Increment Financing or TIF is the creation of a district where property tax revenues are frozen at a certain rate, which is set on a base assessed property value for a period of 23 years. Any taxes generated above that level can go back into redevelopment, either as rebates to developers or to the city for improvement of infrastructure within the designated TIF district. Residential TIF is a tool that can be used to direct these the increment funds towards new housing or the renovation of existing homes.

Marion, IL is an example of a community that recently created a residential TIF district. Their program focuses on revitalizing existing neighborhoods:

• 50% to 75% reimbursement on eligible rehabilitation projects, such as replacement of windows and siding and roof repairs, the addition of porches, ramps or stairs, demolition of crumbling outbuildings, and removal of dead trees and other landscaping needs;
• Forgivable down-payment assistance for first-time homebuyers;
• Development incentives for owner-occupied homes on vacant or dilapidated lots; and
• City would use funds to update water and sewer lines, sidewalks, streetlights and signage

For more details on the process of creating a Residential TIF district click HERE. 

Community Stabilization Assessment Freeze

The state legislature passed the Community Stabilization Assessment Freeze Pilot Program in 2015. The program allows a county assessment officer the ability to reduce the assessed value of improvements to residential property for up to 10 years. The intent of the program is to help support renovations of owner-occupied homes in low- and moderate-income communities through deferring property taxes on the improved portion.

For example, a homeowner currently pays a property tax bill of $1,500 per year and the improvements increased the annual property tax bill by $1,000, for a total of $2,500. The program would pay for up to 90% of that increased value – i.e. $900 of the $1,000 – for a period of 10 years.

To enact this program locally, the city and county would have to adopt specific language outlining how the program would be implemented. For more information, see the full details of the program HERE.

For more details on the process of creating a Residential TIF district click HERE. 

Create Your Own Land Bank

Though relatively new in Illinois, land banks are quickly gaining momentum as a critical tool to efficiently fight blight and revitalize communities. The most useful tool a land bank offers against blight is the ability to provide a clear title to new purchasers. These properties, which could be abandoned houses or foreclosed properties held by local banks, are typically those with unpaid back-taxes or other liens and liabilities which prevent it from being sold on the private market. Through a judicial deed process, the land bank may acquire abandoned property, leverage its legal ability to clear the title, and then find a qualified buyer to purchase and redevelop the property. 

Some of the key benefits of a land bank include:  

• Assists with community revitalization, particularly in community areas with low- and moderate-income households
• Stabilizes housing market while reducing the likelihood properties cycle through the tax sale process
• Allows municipalities and counties to come together using existing authority via intergovernmental agreement for greater efficiency 
• Uses existing tools more effectively such as fast-tracking the disposition of abandoned properties 
• Preserves property values and reduces municipal costs by intervening to save properties before they deteriorate and require demolition. 

The land bank could be a part of or serve as the economic development role to support the revitalization of Jackson County with an emphasis on Murphysboro. The Illinois Housing Development Authority has created a program called the Land Bank Capacity Program (LBCP) and Technical Assistance (TA) Network to provide financial resources that can be used to help create a land bank. The TA Network funds would be used to help build capacity and get organized while the LBCP funds help provide the start-up capital to begin the work of a land bank.  

For more details, review the Illinois Housing Development Authority’s program guide linked HERE.

Create your own local housing fund: Revolving Loan Fund 

What is clear from the community visioning sessions and stakeholder meetings is that developers remain cautious when pursuing housing activities in Murphysboro. This is due, in part, to the issue of recouping their investment – the cost to build does not match the return on investment. A revolving loan fund would provide a vehicle for employers and public sector partners to have “skin in the game” to address local housing challenges and reduce the financial risk to developers. Once the initial loans are repaid, funds could be reinvested into new housing and improvements of existing homes. 

The goal of this fund is three-fold: 

• Incentivize builders and developers to invest in Murphysboro; 
• Build and renovate housing that is desirable and attainable for a majority of residents; and 
• Create a self-sustaining fund.  

Subsidy Calculations

Property Tax Revenue Comparison – Vacant Lot vs New Housing 

A return on investment of ten years for property tax revenue would be an acceptable timeframe for repayment back to the RLF program. As a result, the subsidy would be $20,000 for an infill lot or home renovation and $30,000 for a new housing product valued at $175,000 – $250,000. Should a lot be provided as part of the local incentive, the available RLF subsidy would be reduced to $10,000 for to construct on an infill lot and $20,000 for a new housing product. 

Recommended Subsidy Per Unit – Single Family

When comparing single family development to multi-family housing, there are greater property tax benefits to be realized on less amount of land. For example, consider a new 12-unit apartment complex with a proposed cost of construction at $1,000,000 (i.e. assessed value of $33,000 or $2,750 per unit). The developer requested incentives through tax abatement and infrastructure improvements which equates to a subsidy of $280,000 or $24,000 per unit. The total annual tax revenue from this complex would be $35,695.84. At this rate of return, it would take nearly eight years to recoup this subsidy investment.  

Property Tax Comparison – 12-Unit Apartment vs Per Unit

Recommended Subsidy Per Unit – Multifamily Family

Lot Analysis

PILOT PROJECT AREA: HISTORIC BUNGALOW DISTRICT

Property Tax Assessment Freeze 

The Illinois Historic Preservation Division has a program that support the rehabilitation of historic homes through a property tax assessment freeze. The program freezes the assessed value of historic owner-occupied, principal residences for eight years, followed by a four-year period during which the property’s assessed value steps up until the 12th year, when it will be at its then-current level. This program is administered free of charge to Illinois homeowners who sensitively rehabilitate their historic homes. 

To qualify for the program, the residence must first be owner-occupied and the owner’s principal residence. The following housing types can qualify: 

• Single-family house 
• Residential building with up to six units as long as the building owner resides in one of the units 
• Condominium building 
• Cooperative 

Second, the building must be registered as historic either individually or as part of a historic district, such as the proposed Longfellow Bungalow District. The designation could be through the National Register of Historic Places, a designated local landmark or contributing property to historic district identified through a local preservation ordinance. Third, the residence must be rehabilitated in accordance with the Secretary of the Interior’s Standards for Rehabilitation (linked HERE). Lastly, the rehabilitation must have eligible expenses equal to or exceeding 25% of the property’s fair cash value, as determined by the local assessor, for the year the rehabilitation started.  

While this program would be beneficial to residents in the proposed Longfellow Bungalow District, there are still several barriers to apply for these funds. First, the district would need to be designated as historic, either locally or through the National Register of Historic Places. Once approved, these homeowners would then need to either have enough savings or be able to apply for financing to make these improvements. This tool could be paired with one of the many previously mentioned existing financing resources or the RLF program for greater savings to the homeowner, although, this would extend the payback period for the forgivable loan portion of the RLF program. It might be a good option to allow participants in this program to repay the full amount of the RLF loan, including the forgivable portion, and then participate in the 12-year Property Tax Assessment Freeze Program.