Sunday, August 05, 2001

Home fix-up help little known

Tax break used most in wealthier areas

By Ken Alltucker
The Cincinnati Enquirer

        An 8-year-old program that gives tax breaks to Cincinnatians who fix up their homes is supposed to improve the city's housing, encourage homeownership and stem population loss to the suburbs.

        But an Enquirer analysis of property records reveals that the program, which offers thousands of dollars in property tax breaks, is used most frequently in the city's wealthier neighborhoods.

[photo] When Jim Gooding restored his home on State Street in Lower Price Hill, his taxes went up.
(Glenn Hartong photos)
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        Homeowners in neighborhoods with stagnant home values or the biggest population drops of the '90s use the program far less often, the records show.

        “The ones that need the program the most are the ones that are not taking full advantage,” says Rick Williams, president and chief executive officer of the Home Ownership Center of Greater Cincinnati.

        Why isn't the program used more in neighborhoods where the need is great? Most Cincinnatians simply don't know about it.

        Lower Price Hill community leaders and developers were surprised to learn they could get property tax breaks for remodeling or repairing older homes. Yet dozens of Hyde Park residents know about the program and have used it to shave thousands of dollars from their tax bills.

        Officials for Cincinnati's Department of Neighborhood Services acknowledge that the existence of property tax breaks should be better promoted.

[photo] The entry hall of Jim Gooding's restored home in Lower Price Hill.
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        “It's something we have to market a little better,” says Martha Hilliard, who recently assumed the job of administering the program. “We want there to be a better distribution of the abatements throughout the city.”

Available citywide

        In 1993, the city established guidelines for the program that offers 10-year tax breaks to people who remodel one- and two-family homes.

        The program exempts thousands of dollars in property taxes that are triggered by home improvements. If remodeling helps increase a home's value from $50,000 to $150,000, the owner must pay property taxes only on the $50,000 for up to 10 years. The idea is that people who invest in home improvements not be punished with higher tax bills.

        The program is the only property tax abatement plan available to all Cincinnati homeowners. The city offers other property tax breaks, but most are limited to construction of new homes, apartment and condo complexes and low-income rental properties in certain neighborhoods.

        When Cincinnati City Council passed its guidelines for the tax breaks, it stated abatements should be given only to spur development “that would not take place absent tax abatement.”

        City Council last month renewed the citywide tax break for repairs of one- and two-family homes through 2005. There was no talk of whether the program had been appropriately used. Nor was there any discussion of improving the marketing of the program so all neighborhoods would take advantage.

        John K. McIlwain, senior resident fellow for housing at the Urban Land Institute, a Washington, D.C.-based organization that studies land-use and real estate issues nationwide, says tax abatements are frequently used by cities nationwide to shore up older homes and stem population loss. But he says tax breaks usually are targeted to certain neighborhoods, not offered citywide.

    Any Cincinnati homeowner is eligible to receive a property tax break for remodeling or improving a one- or two-family home in the city. Both rental and owner-occupied homes can be eligible.
    Here's how the program works:
    • The owner of a home that gains value because of a remodeling or substantial improvement is not charged the extra property taxes resulting from the increased home value. If the owner of a $20,000 home makes $80,000 in improvements, the owner is only responsible to pay property taxes based on the home's $20,000 original value.
    • The tax abatements last 10 years.
    • The city Department of Neighborhood Services asks applicants to provide copies of property tax bills and building permits and evidence of remodeling expenses. Those who have already completed work may still be eligible.
    For more information, call the Cincinnati Department of Neighborhood Services, 352-6146.
        “This kind of tax abatement isn't needed in already wealthy areas,” Mr. McIlwain says. “It really means that the city is giving up revenue to support a neighborhood that already invests in itself.”

Most in Hyde Park

        The Enquirer analysis of Hamilton County Auditor records shows that 478 properties have received the tax breaks since 1993. The analysis excluded more than 100 tax breaks that homeowners received through the Homesteading & Urban Redevelopment Corp., a city-funded non-profit organization that acquires repossessed and vacant homes and gives them to people who promise to fix them up.

        Hyde Park residents took advantage of the citywide tax break program twice as often as any city neighborhood. Sixty-six Hyde Park homeowners are enrolled in the tax break program.

        But with its gaslight-lined streets and trendy shopping square, Hyde Park hasn't had much trouble hanging on to its population or housing value. Its population dropped just 2 percent over the decade. An average Hyde Park home sold for $277,618 in 2000 — a greater average price than all but two city neighborhoods, Mount Lookout and Mount Adams, according to data provided by the Cincinnati Area Board of Realtors.

        In comparison, just four residents used the program in Lower Price Hill, where population dropped 15.3 percent and the average home sold for $63,211.

        Few people in other West Side communities used the tax breaks, either: Only nine used the program in Westwood, the city's most populous neighborhood.

        Westwood didn't have much trouble with population, losing less than 1 percent. But neighborhood homes sold for an average $92,391 in 2000, considerably less than east-side counterparts that use tax breaks more often.

        Other neighborhoods have used tax breaks sparingly, too: one tax break in English Woods, which had a 15.5 percent population decline; and two in Sedamsville, where population fell 15.8 percent.

        No homeowners took advantage in Roselawn or Winton Hills, the city neighborhood with the third-largest population decline, trailing only East End and West End.

        Overall, the city lost 9 percent of its population in the 1990s, the largest drop in Ohio and the 10th largest in the country.

Putting in the bucks

        The struggling neighborhoods did receive some help.

        The Homesteading & Urban Redevelopment Corp. used tax breaks to help fix up and donate 16 North Fairmount homes, 15 in South Fairmount and 10 in Madisonville.

        And the Enquirer analysis shows that the citywide program has achieved some success in at least one poorer neighborhood, Mount Auburn, where 20 properties received tax abatements.

        Mr. McIlwain says tax breaks in poorer neighborhoods are most often used by newcomers, young couples and others who buy and fix old homes. Few longtime homeowners in these neighborhoods take advantage of tax breaks.

        “It's effective in helping homeowners in gentrifying neighborhoods,” Mr. McIlwain says.

        Various city tax abatement programs — residential and business — trimmed total property taxes by $6.7 million in 2000. To offset the loss, the city has agreed to pay Cincinnati Public Schools, which relies on property taxes, $5 million a year for 20 years.

        Ms. Hilliard says home tax abatements are positive because they encourage all city residents to invest in their homes.

        Without the tax abatements, she says, homeowners in wealthier neighborhoods might have left the city to buy homes in the suburbs. “They are really putting the dollars into the property,” she says.

        Possible reasons for more participation in some neighborhoods include higher homeownership rates and more knowledge about the program.

        Ms. Hilliard plans to remedy the disparity by getting the word out: informing community councils, sending out notices in water bills and telling the media.

A matter of knowledge

        Lee Robinson is a typical user of Cincinnati's tax abatement program for repair or remodeling of one- or two-family homes.

        Mr. Robinson, a Realtor with high-profile clients such as New York Yankees slugger David Justice, refurbished his home near Hyde Park Square using the city program.

        “I know about it mostly because of my career,” says Mr. Robinson, adding, however, that many of his colleagues aren't aware of the program. “If a person is knowledgeable about the program, they will utilize it.”

        Sometimes it's a matter of chance.

        Hyde Park resident Lois Buncher was in the early stages of a remodeling when she learned of the program. City workers told her about the tax breaks, so Ms. Buncher applied and received one.

        Some just don't bother to use the program.

        Karla Irvine, director of Housing Opportunities Made Equal, didn't think about applying for a tax break for a recent home improvement. “I knew about the program,” Ms. Irvine says. “I just didn't think about it when I put on a new roof.”

        Several homeowners who have received tax breaks say they would have repaired their homes with or without the city's help.

        Others were surprised to learn they could receive tax breaks for rehabilitating homes.

        Jim Gooding spent thousands of dollars to rehabilitate two Victorian homes in Lower Price Hill. The result was a sharp increase in property taxes.

        He said he would have applied for the tax break if he had known about the program.

        “I just wanted to see something a little more presentable in the neighborhood,” Mr. Gooding says. “I could have moved just as easily.”

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