Council hears proposal for affordable housing performance grant; staff to draft ordinance for April

Ruthie Hill, director of housing and neighborhood preservation, presented a proposed affordable housing performance grant to City Council on March 3 that would use incremental real-estate tax revenue to subsidize new affordable rental development.

Hill said the program—authorized by a 2022 amendment to the Industrial Development and Revenue Bond Act (referenced by HB 1194)—would let a local development authority, working with the city, grant to a for-profit developer a portion of the incremental real-estate taxes generated by a new, completed affordable rental project. The incremental tax is defined as taxes on the land and completed improvements minus the base tax on the land prior to development. The grant would be payable only if the developer met program requirements and paid property taxes in full and on time.

Key proposed terms Hill outlined: eligible projects must be new-construction multifamily rental developments (not purchases or rehab projects), at least some units must be affordable to households at or below 80% of area median income (AMI), and projects that demolish existing affordable units would be required to add at least 20% more affordable units. The grant would be sized as a percentage of the incremental real-estate tax collected on the site, capped at the incremental amount, and payable over 15 years (with an option for an additional 15 years if the owner reinvests capital improvements before year 15). Hill said grants would not rely on existing annual general-fund appropriations.

Hill provided a worked example: for a site with $4 million land value and $84.2 million in improvements, the 15-year cumulative incremental tax (with a 3% annual growth assumption) is roughly $15.35 million; Hill modeled a $15 million maximum grant for the sample project. She also showed rent-revenue scenarios comparing fully market-rate vs. partially affordable rent levels and the resulting reductions in potential owner income, illustrating how the grant and other tools (such as 4% low-income housing tax credits) could close financing gaps.

Councilmembers asked whether the development authority must be the grant vehicle (Hill: state law authorizes development authorities to make such grants); whether a project must complete discretionary approvals (rezoning, permits) before seeking the grant (Hill: Richmond's model and developer expectations indicate approvals come first); and whether the tool would apply to for-sale housing (Hill: the proposal targets multifamily rental units).

Several councilmembers, including Worth and Amelia, expressed support for pursuing the program as a “tool in the toolbox.” Councilmember discussion also included a request to consider a program name change; several members suggested "Attainable Workforce Housing" as a label to emphasize local workforce needs. Hill said staff would prepare program documents, return an ordinance for council consideration in April 2025, and provide annual reporting and a 2-to-3-year program evaluation after operations begin. HB 1194 (2022) and the Virginia Beach Development Authority (VBDA) structure would govern program implementation and approvals.