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Mower County approves to renew housing tax-abatement program

For almost four years since the launch of a three-year pilot program addressing Mower County’s housing needs, officials believe that the program’s success warranted the renewal of the tax abatement program.

The Mower County Board approved the renewal of the housing tax abatement program to address the housing shortage in the area. While the local government doesn’t have the statutory authority to build houses for people, they’ve authorized different methods of encouraging private citizens, contractors or developers to build housing. One of those ways, was with the housing tax-abatement program.

After three years of operating the pilot program, the results of the tax-abatement program were shared. Since 2016, Austin, Austin Public Schools and Mower County partnered to promote new construction of single and multi-family homes by offering a five-year property tax-abatement program.

All cities and townships within Mower County were invited to participate, encompassing the school districts of Austin, Southland and LeRoy-Ostrander.

The townships of Clayton and Lyle, and four cities: Austin, Rose Creek, LeRoy and Adams, according to County Administrator Trish Harren.

Around 80 houses were built or are under construction. Nine homes were built in 2016, which shot up to 22 homes in 2017, 25 homes in 2018 and 24 homes in 2019, with one pending application. Generally, new houses were seen being built all over the area, with 41 being constructed in Austin and 39 houses built in greater Mower County.

Overall, new homes were built in seven towns and 15 townships. The average house value is $370,000 with 46 houses below $300,000 and 34 houses above $300,000. The total added property value was estimated to be about $30 million.

“I think there was a huge positive result from the program,” Harren said. “There were 80 homes built within that short amount of time that addressed the huge housing gap in the county. So, the county board while looking at the success of the program, saw that it had achieved its outcome of adding new housing stock and that there was a continued interest. Those were the reasons the board had chosen while considering the renewal of the program.”

The housing tax-abatement is essentially a tax refund returned to a property tax payer. Through the program, the interested party can submit a tax abatement application to the county before construction starts. If approved, the applicant would then build their new home and receive an abatement of taxes on the added value of the home.

Contextually, if someone bought a piece of land in Mower County valued at $30,000 and built a $300,000 new home on that property, the total value of the home would be $330,000, and the abatement would be for the taxes on the added value, in this example $300,000.

In order for someone to receive the abatement, they need to first pay the property taxes in full. For example, if the property tax on the home is $3,330, then for the tax bill, the individual would be rebated the full $3,330 by the taxing entity and the tax would be applied to new construction. The five years of tax abatement in this example would be about $15,000.

When it came to supporting the tax abatement program, Harren put into context the life expectancy of a wood frame house with a concrete foundation to be more than 100 years. However, a house lasting 50 years means the property generates property taxes for 50 years.

Without adding inflation over the course of the next 45 years beyond the tax abatement, the house would generate about $148,500 in property taxes, and adding 80 new houses with an average value of $370,000, excluding the land, will generate about $13.32 million in new taxes during the next 45 years beyond the abatement. Harren said that for local government, tax abatements are a short-term investment for a long-term return that would positively affect all taxpayers in Mower County.

Alongside an income-based loan program that was implemented by the city, those who needed low-income housing were able to move into some of the older housing stock. Around 50 people applied to move into some of the affordable housing stock.

“The county was really pleased to see that aspect of the program be beneficial as well,” Harren said. “This program was designed to help people get into a house, and seeing some new housing stock. Adding that to the market, as well as freeing up affordable housing is positive sight.”

Moving forward, the Austin City Council and the Austin School Board would need to decide whether they will be participating in the tax-abatement program and renew their partnership with the county. The two entities will not be required to join the program again in order for it to continue; however, applicants can expect receiving less of an abatement if the participating city and school district choose not to move forward with the renewal.

“The abatement is not dependent on those entities since the applications go through the county first,” Harren said. “We only have the authority over the county’s portion of the tax abatement.”

While seeing more houses being built in greater Mower County, the board hopes that more districts and cities will participate in the tax-abatement program, where residents who are applying for an abatement can reap greater benefits in order to improve the housing market and availability in the area.

“We’re hoping more will come on board,” Harren said. “We were pleasantly surprised that half of the new housing weren’t built in Austin, and we hope that more townships and more school districts participate, which means more houses. We’re glad to see new housing being added and freeing up old housing stock.”