Staff proposes tax‑increment performance grant to incentivize workforce housing in Virginia Beach

City staff presented a proposed grant program to the Virginia Beach Development Authority on March 11 that would use a share of incremental real‑estate tax revenues produced by a new development to subsidize construction of workforce and affordable rental housing.

Ruthie (staff presenter) and subject matter expert Sharon Shiff described the proposed program, to be called the Attainable Workforce Housing Performance Grant, and said it is being developed under an amendment to Virginia’s Industrial Development and Revenue Bond Act enacted by the General Assembly in 2022. Ruthie told the authority the grant would pay a developer a percentage of incremental real estate taxes levied on improvements above a baseline, subject to project eligibility and performance requirements.

The program would apply to new construction of affordable rental units (not to acquisition/rehabilitation projects or projects that have already started construction). Eligible projects must show a pro forma gap and may be fully affordable or mixed‑income; units rented at or below 80% of area median income (AMI) would qualify, with enhanced incentives for units at or below 50% AMI. The grant payment would begin on July 1 following project completion and end after a 15‑ or 30‑year performance period. Payments would be capped at the incremental real‑estate taxes generated by the improvements and prorated by the share of residential and affordable units in the project. Staff said payments would be made only after timely tax payment is demonstrated.

Staff cited Richmond’s 2023 program as a model: Richmond charges a small administrative fee and reported 26 projects and roughly 3,400 rental units under construction or in the pipeline under that program, which staff said demonstrates feasibility. Ruthie recommended that each Virginia Beach project apply individually and that approvals require both VBDA and city council action, plus the standard planning and zoning processes.

Staff said an ordinance creating the program would be presented to city council in April 2025 and that the department and VBDA would return with program materials and an evaluation after two to three years. During discussion, commissioners asked whether grants would transfer with property sales (staff noted the regulatory agreement would be site‑specific and that the affordability covenants would typically run with the land) and whether the program would increase demand on city services; staff said impacts on schools and services would be assessed through the normal planning and zoning review when required.

No formal board action was taken; staff requested guidance to continue drafting the program and to proceed to council for ordinance consideration.