By Melissa Brewer
Mayor Lovely Warren recently announced a new effort to promote homeownership in the city of Rochester. She wants to expand the homeownership tax breaks that the city currently offers in downtown Rochester to all city neighborhoods.
That program, called Core Housing Owner Incentive Exemption (CHOICE), has been successful in recent years at turning the once-desolate downtown Rochester into an area where people actually live. According to Gary Kirkmire of Neighborhood and Business Development, CHOICE offers a significant tax incentive to people who build homes and live in them, encouraging growth through owner-occupancies and construction in residential neighborhoods.
The incentive is a nine-year declining tax exemption on city, school, and county property taxes. In year one the exemption starts at 90% and is 10% by year nine. There are no discounts thereafter, but this steep cut on property taxes could be very helpful for new homeowners. Although the vast majority of American employees pay income taxes, which account for about half of federal revenue, the additional burden of property taxes is often what disrupts the dream of homeownership for many. Interested participants can claim the exemptions for new owner-occupied, market-rate housing construction or renovation.
For 24% of recent home buyers, the primary reason for the recent home purchase was a desire to own a home, while 9% purchased due to a job-related relocation or move, and 8% bought for the desire to be in a better area or a change in family situation. Warren hopes that the structure of this new incentive will help close the gap between the assessed property values in various city neighborhoods and the cost of new construction.
“We have people who want to live, work and play in our city and we want to give them that opportunity and giving them that opportunity to actually build and design their home the way that they want, to design it on some of the land that we have available in many of our neighborhoods,” said Warren.
Imagine Monroe, a local industrial development agency, administers the tax agreement. The city is still seeking approval from Imagine Monroe to expand CHOICE to other neighborhoods in Rochester. If approved, the program would allow for single-family homes — the median of which is about 2,386 square feet — and two-family homes that are owner-occupied. Homeowners can even combine CHOICE with other incentive programs. According to Kirkmire, developers such as Habitat for Humanity and Greater Rochester Housing Partnership can take advantage of the program as well.
It’s important to note that studies show that the average amount it takes to sell a house in the U.S. is around $15,200. The city’s plan could also open the door to new housing options, including tiny houses. Down state, specially in Suffolk County, the median home price is $415,000. Records show that these homes would likely be most appealing to empty nesters and millennials. While empty nesters may see the draw in tiny houses in their ability to downsize, millennials are looking to grow financially, with about 96% of millennial investors interested in making a real estate investment. A tiny house offers an affordable option while still giving millennial investors a viable piece of real estate.
Despite the city’s insistence that CHOICE is a successful program, some critics think otherwise. Democratic City Council candidate Mary Lupien has seen CHOICE’s impact and believes that it favors the wealthy. Lupien says that the focus on middle and high-income neighborhoods is a focus on development that doesn’t need financial support. She instead points to the many vacant lots in Rochester that need investment.
“If it is not targeted, the CHOICE program will further gentrification and increase inequality,” Lupien said in a joint statement released by her and Rachel Barnhart, Democratic nominee for Monroe County legislator.
Barnhart has said that the majority of people who will apply for the tax break would have built anyway. According to Barnhardt, the break wouldn’t encourage homeownership for renters who occupy some of the 42.58 million housing units in the United States, but simply help the wealthy build homes they would have built anyways. She points to the new builds on East Avenue and Park Avenue that have happened in the last decade without assistance from CHOICE.
Lupien believes that focusing on other programs in which construction is already subsidized could help more low-income residents get into homeownership. As the United States is the second largest construction market in the world and continues to see growth, the price of new home construction is often beyond the budgets of low-income residents. If a program subsidizes the cost of construction, these residents could more often afford becoming homeowners. Lupien sees this outcome as a huge step for the Rochester community.
In the face of these criticisms, Kirkmire counters that low-income neighborhoods would not be shut out because market-rate prices would be proportionate to the area. He maintains that if the program helps develop all 600 vacant lots in the city, all of the city’s residents would be able to benefit.
City Council still needs to approve the CHOICE expansion proposal before it goes into effect. The public will be able to give input on the proposal as well.