Financing Affordability

Abstract

Abstract Reinvestment in declining or poor areas is necessary to attract new middle-class residents, reduce concentrated poverty, and improve housing conditions for the poor. Private-sector housing and commercial real estate developers consistently argue that, without assistance from the public sector, projects are not economically feasible. However, fiscal and political constraints make local governments hesitant to provide direct subsidies to developers. Tax increment financing (TIF) is often offered as a politically attractive solution to this complicated development scenario. The expedited nature of TIF allows communities to fund projects and generate development investment through a highly decentralized process, potentially avoiding public involvement. This fiscalization of the development process raises key questions. Are the communities most in need of redevelopment benefiting from TIF, or do they compete for development? How does TIF’s “creative” financing strategy influence political fragmentation? This chapter illustrates these challenges and explores ways the tool can be used to promote inclusionary development practices and support creative affordable-housing strategies.