Changes to Tax Incentives in the City of St. Louis?
The Post-Dispatch ran a story recently about changes being made to how tax incentives are being awarded by the City of St. Louis. The new mayor had campaigned on making changes to the incentive game, and she has, to some extent, made good on her word.
The city’s new mayor vetoed two developer tax breaks that she said were too generous. And then she held up final approval of incentive packages for two other projects that had long enjoyed almost unwavering political support — the City Foundry food hall complex and another phase of development in the Cortex tech district.
We have commended these changes to the old way of doing business. For too long, the city has pumped subsidies into the parts of the city that need them the least. So, points given for being more disciplined with the subsidies.
However, it seems that the quick and easy way for developers to get the subsidies they want is simply to make a “donation” to affordable housing. From the story (emphasis and note added):
Of the deals negotiated so far by the Jones administration, a theme has emerged: developers who want incentives are likely to be pushed to include a contribution to affordable housing.
- The City Foundry deal required the developer to contribute $1.8 million to the city’s affordable housing trust fund, which helps finance affordable projects around the city. [Three other examples follow in the article.]
We love our subsidies in Missouri for affordable/low-income housing. At the state level, low-income housing tax credits have been abused for years. Now the city’s affordable housing trust fund is all the rage. But you know what? St. Louis (and Missouri) don’t have an affordable housing issue. In fact, a report just came out that says that St. Louis is the only metro area in the country where rents are declining. From the report:
There is one outlier among major American cities bucking this trend. Rents fell 4 percent in St. Louis, and it was the only metro to see a decrease in rent in October compared to a year earlier.
The low housing costs here are a result of many factors, both good (limited land-use regulations) and bad (high crime, etc.). But increasing the subsidies for affordable housing is the least of our region’s needs. And that, come to think of it, may be exactly the point. Solving crime in a high-crime area is very hard. Addressing housing costs in an area with low housing costs is, well, easy.
There are many good reasons for the City of St. Louis to substantially tighten up the tax subsidy process. Using it as a pressure point to get added “donations” to a fund that purports to solve the one problem the city doesn’t have is not one of them.