A New Formula for Growth
The City of Chattanooga, Tennessee’s Affordable Housing Payment In Lieu of Taxes (PILOT) program is an innovative tax abatement model designed to incentivize private developers to build mixed-income housing without requiring direct public subsidies.
Traditional PILOTs are tax abatements that reduce property taxes in exchange for affordable housing commitments. Typically, tax abatement programs require a fixed number of units to be built at a set Area Median Income restriction, which doesn’t always calibrate to market conditions and needs. Chattanooga’s PILOT program uses a flexible and transparent per-unit formula in which developers receive an abatement equal to the difference between a market-rate unit’s rent and an affordable unit’s rent, plus 10%. This means developers are able to recoup costs more easily while units remain affordable.
About Chattanooga
In mid-size cities like Chattanooga, housing development profit margins tend to be thinner than in larger cities. With limited resources available to subsidize affordable housing, this PILOT program directly abates taxes proportional to the lost revenue from offering affordable units, plus an additional 10% to cover additional expenses, such as application costs. Chattanooga’s PILOT shows how local governments can lead on housing solutions that align with community needs and overcome constraints.
First of its kind
tax abatement program
278 units
in first PILOT development, including 42 affordable homes
Just four years ago, Chattanooga hired its first Chief Housing Officer to take a comprehensive look at our housing ecosystem. Winning the Ivory Prize for our tax abatement program affirms that even mid-sized cities with limited resources and a challenging policy environment can move the needle by using the tools they have creatively and strategically.
Nicole Heyman
Chief Policy Officer, Former Chief Housing Officer