The New Orleans City Council has backed new rules aimed at enticing developers to build the low-cost housing more residents have demanded as New Orleans continues to grapple with a shortage of affordable places to live.
The rules, pitched by Mayor LaToya Cantrell’s administration, will allow the Finance Authority of New Orleans to give property-tax breaks to developers who build housing for low-income residents.
They will separately allow the mayor and the council, who have lured developers in the past by freezing the taxes those firms pay on their buildings, to freeze those taxes over a longer time frame.
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Councilmember Jay H. Banks, who sponsored the package at Cantrell’s request, said the changes are needed to increase housing for low-wage workers that often support the city’s tourism industry.
“Our entire economy is stacked on the people that make our culture work,” Banks said. “And if those culture bearers cannot be here, then we don’t have anything.”
The council also directed the City Planning Commission to consider boundaries where developers would be required to build low-income units, a largely procedural final piece of a broader package members passed last spring.
The vote Thursday is the latest attempt by city officials to combat the meteoric rise of housing prices in New Orleans’ historic neighborhoods. Home sale prices have risen by nearly a third since 2015, and neighborhoods such as Bayou St. John, Mid-City, and the Irish Channel are most at risk of having residents displaced who can’t keep up, according to a 2018 market study commissioned by the city.
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In other areas, the displacement has already happened. Bywater, for example, was home to many middle- and lower-income black families before Hurricane Katrina. That neighborhood has grown whiter and richer in recent years, according to the Data Center.
City leaders have proposed numerous fixes. State voters last year denied Cantrell’s attempt to give the city special authority to exempt some properties from taxes. A separate plan to use bond money to finance affordable housing and other needs did pass.
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In 2016, Cantrell, who was a member of the City Council at the time, began working with other officials on a city mandate for lower rents in some centrally located apartments. Council members passed a mostly finished set of rules last March that would see the low-rent apartments set up in the Central Business District, French Quarter and other in-demand areas in exchange for a reprieve from density and other restrictions.
But the council still hadn’t approved the maps that clearly spell out where the apartments could be built. They instructed the City Planning Commission on Thursday to consider those maps.
The city also tapped consultants in 2018 to study both the affordability mandate and the effectiveness of its various development incentive programs. One of the firms recommended that the city change its restoration tax abatement program, which freezes the taxes developers pay on renovated buildings for at least five years at the level assessed before the renovations.
The program will freeze those taxes for 10 years under rules the council passed Thursday, and require developers to adhere to city rules that encourage the hiring of local residents at reasonable wages for construction jobs.
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Restoration tax abatements make up the biggest chunk of tax revenue the city voluntarily forgoes each year because of incentives, with the city forfeiting about $51 million in new taxes over a nine-year period ending in 2016.
Another incentive is the payment-in-lieu-of-taxes, or PILOT, program, which allows developers to pay a set amount over several years, rather than the much higher property taxes that would normally be due after their project is built and open.
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The city typically loses more tax revenue than it receives from residential PILOTs, though they are generally seen as critical to achieving local affordable housing goals.
That program has for years been entirely managed by the Industrial Development Board, a public corporation. But the rules passed Thursday task the Finance Authority with managing the PILOTs that will eventually go to developers building apartments in the CBD, French Quarter and other neighborhoods affected by the affordability mandate. The Industrial Development Board will continue to manage the others.
The Finance Authority, a city agency that has long maintained a low profile, has traditionally financed mortgages for lower-income residents.
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The Finance Authority plans to charge lower fees than the Industrial Development Board has charged in the past, as smaller developers have complained that those fees have hurt their wallets, Councilmember Kristin Gisleson Palmer said.
Those and other moves will position affordable housing projects as a viable option for developers, who would otherwise not be able to scrape profit out of those deals, according to Banks, who argued that will help working families.
“All the people who work every day in this city ought to have the right and the ability to live here,” he said.