Tennessee Commission proposes zoning reforms and funding strategies to tackle housing affordability crisis

The Tennessee Advisory Commission on Intergovernmental Relations (TACIR) convened on January 26, 2024, to address the pressing issue of housing affordability in the state. The meeting featured a presentation by Dr. Strickland, who introduced a draft report responding to House Joint Resolution 139, which called for a comprehensive study on the factors influencing housing affordability in Tennessee.

Dr. Strickland emphasized that housing affordability has emerged as a critical concern for many residents, driven primarily by an undersupply of homes. The report highlights that while impact fees contribute to the overall cost of new homes, they also fund essential infrastructure improvements. Notably, a survey indicated that government regulations account for nearly 25% of home costs, although this figure encompasses various regulations beyond just impact fees.

The draft report outlines six key recommendations aimed at enhancing housing supply and affordability. Among these, the commission advocates for broader authority for local governments to establish land banks, which could facilitate the acquisition and rehabilitation of properties for affordable housing. Currently, only a limited number of municipalities have this capability.

Another significant recommendation involves improving coordination among state and local property information sources to better market surplus real estate for housing development. Additionally, the commission suggests incentivizing local governments to adopt zoning reforms that support increased housing density, which could alleviate some of the pressures on housing supply.

To address concerns about the potential negative impacts of zoning changes, such as increased traffic and property taxes, the commission proposes a system where property assessments are based on pre-reform zoning classifications. This approach aims to mitigate the financial burden on existing residents while encouraging new development.

The report also discusses the potential use of revenues from the Realty Transfer and Mortgage Taxes to fund affordable housing initiatives. This could include low-interest loans for construction projects and infrastructure improvements to stabilize the housing market during economic downturns.

Lastly, the commission recommends that local governments be empowered to make multi-year funding commitments to affordable housing projects, drawing inspiration from successful models in other states, such as North Carolina.

The discussions at the TACIR meeting underscore the urgency of addressing housing affordability in Tennessee, with the commission's recommendations poised to influence future legislative actions. The final report is expected to be presented at the next commission meeting, where further deliberations will take place on these critical issues.