Chapel Hill: Opinion

New housing and our growing tax burden – Terri Buckner

contributed

In last week’s column, Mark Zimmerman stated that “we need to decide if we want to provide new places for people to live or stall our population where it is. If the latter, we don’t need to build a physical wall, a regulatory one will work just as well.”

Mr. Zimmerman was complaining about the Chapel Hill Town Council’s decision to curtail market-rate housing on the American Legion property if they decide to sell it. His conclusion was that after decades of being anti-business it now seems “people are bad; business is good.”

I disagree with his claim that the council believes people are bad, but I agree that there has been a shift in thinking about commercial development. Some basic math explains why.

About 70 percent of the county’s revenue comes from the combination of commercial and residential property taxes. About 89 percent of that revenue comes from taxes on single and multi-family residential. A 90/10 distribution makes it clear that the burden of funding the county falls squarely, and heavily, on homeowners.

In fact, the burden is so heavy that it’s going to take massive commercial development to make any significant shift in the distribution. One cent on the county property tax rate generates roughly $1.7 million in county revenue. That means it would take $190 million in additional commercial tax base to offset $0.01 on the residential county property tax rate.

When the school and affordable housing bonds were placed on the ballot in November, they came with a projected cost of 3 to 4 cents on the property tax rate. To counterbalance that tax increase alone, we need our economic development offices to attract enough new business to generate $665 million in commercial property tax annually over the 20 to 30 years of the bond.

To move from the current 90/10 distribution of property tax revenues to a more acceptable 70/30 distribution (70 percent residential, 30 percent commercial), the county needs to increase its commercial revenues by a multiple of 7.

In Chapel Hill alone there are more than 2,000 new dwelling units under construction and another 400 under review. So not only do we face a seemingly insurmountable economic development goal, but we continue to raise the bar on ourselves by concentrating new growth on residential development. To compound the problem even further, our elected officials in Chapel Hill and Carrboro make decisions like purchasing the Legion property and turning away the development on the Lloyd property.

The community arguments against residential development may include traffic and school impacts as Mr. Zimmerman notes, but the more cogent argument should be that we simply cannot afford more housing without commercial offsets.

Mr. Zimmerman goes on to predict that “Further restricting supply will exacerbate housing price inflation, making us even less affordable.” He may be right, but continuing to increase the residential property tax rate to pay for schools and affordable housing is also going to make us even less affordable. Am I the only one who sees the irony in pushing our low- and middle-income residents out of the community in the name of funding affordable housing?

This is a quagmire that has been created over decades, and it isn’t one that we face alone. Our community is blessed with some very smart people. Last month, I asked for an affordability index, a measure of impact to be used before making significant budget decisions, like spending $8 million to purchase land. This month I propose a county-wide economic development summit. Is a 70/30 distribution a reasonable goal or is there a better target for moving us toward affordability? What is it going to take to move us toward whatever goal is set? What will help us move toward that change; what will stand in our way?

I’m not a policy expert nor an economist, so my suggestions for an affordability index and an economic summit may not be the best approaches. But neither is the status quo. To quote Dr. Louise Banks from “Arrival,” “we need to work together for once.”

Terri Buckner lives outside Carrboro in the town’s planning area. You can reach her at tbuckner306@gmail.com.

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