TACIR draft report urges zoning incentives, land banks and targeted use of recording taxes to boost housing supply

Dr. Michael Strickland presented a draft TACIR report on housing affordability prepared in response to House Joint Resolution 139 (Representative Sparks). Staff said the final report will be presented at the commission’s next meeting and requested member review and comment.

Key finding: undersupply. The report found that while regulatory costs and impact fees contribute to housing prices, no single regulatory factor explains more than a few percentage points of house prices nationally. The strongest common factor across stakeholder interviews and studies is undersupply—the number of homes is not keeping pace with demand.

Recommendations. The draft contains six recommendations, including authorizing all local governments to create land banks, improving state coordination on surplus state property so localities can repurpose it for housing, and offering an incentive for jurisdictions that adopt a menu of zoning reforms by sharing a portion of realty transfer or mortgage tax revenue with participating local governments. Staff proposed this incentive be phased in as state revenue allows and provided example allocation scenarios in the draft.

Financing and THDA: Strickland noted that the Tennessee Housing Development Agency (THDA) currently operates a trust fund financed by mortgage loan program revenues but receives no state appropriation. The report recommends considering directing a share of realty transfer and mortgage recording taxes to bolster either the existing THDA trust or a new fund to provide low‑ or zero‑interest construction loans to affordable housing projects; staff also suggested reserving some revenue to smooth infrastructure funding through economic cycles.

Stakeholders and tradeoffs: Staff emphasized a voluntary, incentive‑based approach to zoning reform rather than mandates, citing examples in other states (Montana, Indiana, New York) where menu or incentive approaches have been tried. Commissioners cautioned that strong local anti‑growth sentiment in parts of Tennessee could limit uptake and flagged the need to mitigate effects on existing residents (options described include reassessing property based on pre‑reform zoning or rollback provisions to recapture tax benefits).

Questions from members and local officials: Mayor Waters queried a 33% vacancy figure for Sevier County that conflicted with local studies showing about 1% vacancy; Strickland explained the top‑line vacancy number derives from ACS 5‑year estimates and can include seasonal and short‑term rental units, while homeowner vacancy rates are much lower (about 1.2% in Sevier County). Commissioners asked whether impact fees exceed 1% of home price; staff said recent data show most impact fees equate to roughly 1% (give or take) relative to a 2022 median home price of about $408,000.

What’s next: staff will refine the final draft to add data breakdowns (vacancy measures, local match details, and funding scenarios) and invited further comment from commissioners before the next meeting.