Tucson is working to implement a program that waives impact fees for private developers who build affordable housing in the city as part of the housing affordability plan adopted by City Council in December.
The City had previously set aside $1M in impact fee subsidies in 2019 to incentivize nonprofit affordable housing development. Only five projects have made use of the subsidy, with approximately $265K in fees waived. Staff has reported more for-profit than nonprofit organizations are building affordable housing in the state, which has minimized the program’s reach.
Housing and Community Development Department Director Terry Galligan informed council he wants to expand the program’s reach. During the March 9th meeting, the Mayor and City Council directed staff to make the same subsidy available for private developers. The plan will be made official in the March 22nd meeting.
Under Arizona law, municipalities must reimburse the amounts they waive to incentivize development. Tucson uses a combination of Highway User Revenue Fund and general fund revenue to reimburse waived fees.
Developments will be targeted at households earning 80% or less of the area median income, and developers must fulfill that requirement for at least 15 years on qualifying properties.
Staff anticipates the subsidy will incentivize more projects that receive funding under Low-Income Housing Tax Credits, as projects with other subsidies in place score more points on their LIHTC qualifying applications. There were only two LIHTC-qualifying developments in Tucson in 2021. (Source)