Tax Abatements Are Set To Begin Expiring In The Short North. Then What?
The Jackson on High sits near the northern edge of the Short North. It’s seven stories of glass bounded by red and sand brick. On Instagram, one person compared the facade to the gates in Jurassic Park.
The building went up in 2010, and at the end of last year, property tax abatements for those condos ran out.
"What I really see when I look at the Short North is a great example of the successful use of incentives," says Michael Stevens. "And how to strategically drive investment not only for job growth but residential growth."
Stevens is Columbus’ interim director of development. He’s right that the Short North has become one of the most desirable swaths of real estate in the region, and that property tax breaks have played a significant role in that growth.
In the Short North, boutiques crowd next to restaurants below high end condos, a vibrant scene that developed thanks in part to a concerted effort by city officials to incentivize investment. But now, the first wave of property tax abatements are beginning to expire.
John Royer has worked in real estate for the past three decades, with a front row seat to the area's growth. We met up in a bustling café on High Street just before the after-work rush.
"It’s changed dramatically in 32 years, rest assured," he says, cracking a grin.
Royer is a big believer in tax incentives, but he cautions overplaying their direct impact.
"A tax abatement is a financial tool, and certainly it helped this area grow," Royer explains. "But I don’t think people were doing projects just because they were tax abated."
Royer says because of the location, development would have come to the neighborhood eventually. But he says abatements helped more marginal projects get off the ground, and gave others the ability to add amenities like structured parking.
The tax agreements let property owners avoid paying most, if not all, of the property taxes associated with improvements for 10-15 years. Normally those dollars would flow to local services—most notably public schools.
The arrangement irks teachers and others who argue the deals shortchange the district.
When the deals do expire, monthly mortgage payments jump, but Royer is skeptical of the real estate market slowing from new buyers having to pay full freight.
"If values have significantly gone up during that 15-year period, it may not be as big a hit as it might be on a commercial deal where people can pick up and move," Royer says. "Residential is different."
Stevens agrees those worries aren't founded.
"I don’t think the abatements have propped up the real estate market in the last five years in the Short North, so I don’t believe there will be a drag just based on the abatements rolling off," Stevens says. "I believe that as the economy continues to grow in Columbus and the region, we’ll continue to see that market staying strong."
But the strength of that market—the attractiveness of the neighborhood for commercial and residential development—have some wondering if it’s time for abatements in general to go away.
Hannah Halbert from Policy Matters Ohio argues that continued tax relief in the Short North could deter investment in less attractive neighborhoods.
“The purpose of these policies isn’t just to keep the economic engine chugging along where it’s doing great and going gangbusters. It’s really to identify those places that need the extra help,” Halbert says. "So, if we’re spending in the Short North, what are missing out? What neighborhoods are being left out?"
A new policy adopted by Columbus City Council two years ago limits abatements in thriving neighborhoods like the Short North. It requires developers set aside a fifth of a building’s units for families near the area median income, although developers can buy their way out of those demands.
Halbert commends the city’s steps, but says those affordability requirements should be much more aggressive.
"So if we’re talking about a studio apartment of $1,100 a month, in some of these communities, median income looks more like $12,000 a year—so that’s a big old gap," Halbert says.
The latest report from the Franklin County Auditor shows more than 300 outstanding abatements in the Short North. But even with a noticeable chunk of those incentives expiring in 2019, the bulk won’t begin rolling off until 2029.
In the meantime, the city continues handing out new abatements in the area. None of the 447 units-worth of new, multi-family development pursuing tax breaks last year are subject to the city's affordability requirements. That’s because the restrictions only apply to projects starting after Sept. 30, 2018. Most of the projects opening up in 2019 began work back in 2016, thus avoiding the rules.
So far, the city has yet to receive an abatement application for a development that would have to comply with its new affordability requirements.