The Housing Opportunity Tax Incentive Act
HB 2246

The Housing Opportunity Tax Incentive is a new state of Illinois law that makes it easier for Section 8 Voucher families to move to areas of opportunity near jobs and quality schools. The law, effective in 2004, provides a property tax rebate to landlords in targeted opportunity areas who rent apartments to families using the Section 8 program. Protestants for the Common Good developed the program and led the effort to pass the act in 2003.

The Housing Opportunity Tax Incentive provides a property tax abatement to property owners in certain areas who rent to tenants who use Section 8 vouchers provided:

• The unit qualifies under the Housing Choice Voucher program,
• The unit is in a township that has sufficient tax base to qualify for the program and is located in a county with more than 200,000 inhabitants,
• The property is located in a low-poverty census tract (under 10% poverty rate),
• A qualified tenant occupies the unit as of January 1st of the tax year,
• There will be a maximum of 2 or 20% of the units that can qualify for the incentive for any single property, and a municipality may be exempt if more than 2.5% of its housing stock is occupied by voucher tenants.
• The incentive will provide the landlord with an annual per unit tax savings of up to 19% (approximately $500.00 to $900.00/unit), the equivalent of one month’s rent.

What problem does the Housing Opportunity Tax Incentive address?
The Housing Choice Voucher program (also called Section 8 Vouchers) is the major federal program to provide affordable housing for working families. The problem is in areas with tight rental markets – which are also areas with the most economic growth and job creation. Tight rental markets mean landlords have no incentive to participate in the program, so few families are able to use vouchers in places where new job opportunities are being created.

Will this program result in the creation of new units?
This act does not subsidize the creation of new units, but provides an incentive to owners of existing units to welcome tenants using Housing Choice Vouchers.

How will we know whether this program will help solve the problem?
The Housing Opportunity Tax Incentive program will function like other incentive programs, of which Illinois has many. We have anecdotal evidence that landlords would respond positively as well as the support of the realtor community. Since we do not have a track record, it is hard to predict the exact impact. The bill, however, has a 10 year sunset provision (meaning it will need to be re-authorized after ten years). This will allow time to measure the impact of the program.

Who supports the Housing Opportunity Tax Incentive Act?
The bill has broad bi-partisan support, as well as strong support from affordable housing and fair housing advocates. In addition, the bill has the support of the Illinois Board of Realtors legislative committee, the Housing Task Force of the Metropolitan Mayors Caucus, and the South Suburban Mayors and Managers.

How much will this program cost and who will pay for it?
The major impact of the program will be in the metropolitan Chicago region, although it will impact other areas of the state. In 2002 it was estimated that no more than 5,000 units in metropolitan Chicago and 2,000 units elsewhere in the state would be potentially eligible for the tax incentive, with about 400 units added each year. We expect the actual number to be much lower since landlords are limited to 2 units or 20% of the total units in the building. The average annual tax savings is about $750 per unit. The program will result in a reduction in the tax bill of the eligible owners and a resulting shift of local taxes to the other taxpayers in the tax district. The maximum tax shift in Cook County for any municipality is under 1/10 of 1 percent.

What is a Housing Choice Voucher?
Housing Choice Voucher is the new name for a Section 8 tenant-based voucher. This program allows low-income families to pay 30% of their income for rent with the balance paid by HUD. The programs are administered by local housing authorities.

What is a Housing Opportunity Area?
A Housing Opportunity Area is an area with high job growth and a strong economic base. In the proposed Act, such an area is defined both by the strength of the tax-base by township and the poverty rate of the census tract. To qualify, an apartment building must be in both a “Qualified Township” and a “Low-poverty Census Tract.” Because townships are not distinct units of government within the City of Chicago, only census tracts are used to determine eligibility in the city.

What is a “Qualified Township”?
A “Qualified Township” has a higher tax-base relative to the tax-base of the county in which it is located. First we determine the per-capita equalized assessed value (EAV) for both the county and the townships in that county. This is measured by dividing the county’s EAV by its population, and then dividing the EAV of the townships in that county by the population of each township. This is called the “tax capacity” of the county or township. Outside of Cook County, a township is qualified if its tax capacity is more than 100% of the tax capacity of the county. In Cook County, a qualified township must have 115% of the tax capacity of the county.

What is a “Low-poverty Census Tract”?
The bill uses the U.S. Census definition that identifies low-poverty census tracts as having less than 10% of the population living in poverty.

What is the Municipal “opt-out”?
There is a provision in the bill that allows a municipality to be exempt from the program if more than 2.5% of all of the residential units in the municipality are occupied by Housing Choice Voucher tenants. This is to prevent any one municipality from being uniquely burdened by the impact of this tax incentive.