In many regions of the country, older housing accounts for
a substantial part of the housing inventory. In the Northeast,
almost 30 percent of all housing units in 2000 was constructed
before 1939. In the Midwest, more than 21 percent was in place
before 1939. These units have the potential to continue to
provide housing for millions of Americans who might not be
able to afford newly constructed, higher-priced homes. While
many of those units have needed repair, local building codes
often resulted in increased building costs, thereby reducing
the affordability of these older units.
Building codes designed for new construction are rarely suitable
for use in rehabilitation. Fortunately, ongoing regulatory
reform efforts eventually resulted in the creation of the
International Existing Building Code (IEBC), which addresses
many of the impediments to rehabilitation that were common
in previous code iterations. Recent changes to the IEBC have
made it an even more valuable tool for rehabilitation.
Old Code Approach
Before these reforms were enacted, code officials used a
formula to determine the acceptability of rehabilitation.
Known as the “25-50 percent” rule, the older codes
established different rules based on the cost of the planned
construction relative to the value of the un-rehabilitated
structure. Although this rule varied somewhat in different
jurisdictions, generally, if work would not exceed 25 percent
of the structure’s value, then a contractor and building
officials could negotiate what work was required to comply
with the local code. For work that would cost between 25 and
50 percent of the value of the structure, the contractor had
to meet building codes for all planned work. If the planned
work exceeded 50 percent, then the contractor had to bring
the entire building into compliance with the current building
Let’s say that an owner plans on replacing windows,
doors, and some other items in a modest rental house. Because
the initial value of the house is fairly low, the cost of
the upgrades exceeds 50 percent of the home’s existing
value. Under the old approach, the building official would
require that all electrical and plumbing elements of the house
be brought up to code. Based on these additional costs, the
owner would frequently abandon the entire project as not being
Early Reform Efforts
During the 1970s, the U.S. Department of Housing and Urban
Development (HUD) introduced the concept that code administrators
should base requirements on the type of work undertaken. HUD
prepared a series of rehabilitation guidelines to assist in
fairly and flexibly administering code requirements. After
a HUD-convened symposium held in 1995 (see The
Status of Regulations for Housing Rehabilitation), HUD
and New Jersey jointly undertook further reforms. In early
1997, New Jersey officials issued a draft of a new Model
Rehabilitation Subcode that they subsequently adopted
the following year.
The Subcode codified the idea that requirements should be
based on the nature, rather than the cost, of rehabilitation
work. In May 1997, HUD issued a variation on the New Jersey
Nationally Applicable Recommended Rehabilitation Provisions
(NARRP). Together, these two efforts establish a new regulatory
framework that keeps requirements in proportion to the actual
scope of planned work. Based on these efforts, other states
and local governments followed suit with similar reform efforts,
Island and Maryland.
Encouraged by these promising reform efforts, the International
Code Council (ICC) embarked on its own push to improve the regulatory
requirements for rehab. The ICC is the successor organization
to three previous codes organizations: the Building Officials
and Code Administrators (BOCA), the International Conference
of Building Officials (ICBO), and the Southern Building Code
Congress International (SBCCI). In 1999, ICC appointed a committee
to study various codes and draft the International Existing
Building Code (IEBC). ICC distributed the final draft of the
new code in 2001, and published the first edition of the IEBC
The drafting committee embraced the premise that the extent
and type of planned work, rather than the cost, should dictate
the type of improvements required by the code. The more work
the owner planned, the more upgrades the code would require.
The committee’s approach also recognized the difference
between the terms “repairs,” “alterations,”
and “change of occupancy.” As a result of these
changes, code officials would be able to consistently interpret
and enforce the code’s provisions.
Older housing provides an invaluable source of shelter for
many in the United States. Unduly restrictive code requirements
often discourage the redevelopment of these properties, resulting
in housing deterioration and neighborhood decline. Reforms
that had their origins in the 1970s have significantly contributed
to the ICC’s International Existing Building Code. According
to ICC Manager of Standards Ed Wirtschoreck, "This code
provides flexibility in terms of building design and construction
costs." He went on to say that, "It allows communities
to safeguard the public and improve existing building stock,
without mandating the requirements (and expense) of new construction."
Be sure to read our December issue of Breakthroughs
to see how these reform efforts encourage rehabilitation by
establishing code requirements that are in line with the scope
of work to be performed.
Columbus Makes Written Commitment to Improve
Development Review Process
In the late 1990s, Columbus, Ohio’s mayor determined
that the process for approving development was seriously
flawed, and set out to remedy the situation. Deborah
Hoffman, Administrator of the Building Services Division,
calls the resulting document a historic agreement between
industry and the city to reduce processing time for
building and other permitting reviews. The Memorandum
of Understanding, inked in November of 2001, establishes
a set of standards that the city and industry must meet
in order to reduce the amount of time needed to approve
development plans. As part of the agreement, industry
leaders agreed to a 28 percent increase in fee charges,
as long as these increased fees would assist in streamlining
City Commitments Outlined in the Memorandum
The city agreed to undertake 22 actions to streamline
the development process in Columbus. Some of these actions
Designate a single point of responsibility.
Maintain appropriate staff levels, appropriate training,
and overtime or contract services to cover peak periods.
Here we see an
housing subdivision in Ohio
Make development laws, requirements, standards, procedures,
and processes available in print and on-line.
Hold training seminars.
Consult with the industry before making fee, policy,
rule, or procedural changes.
Provide applicants with the opportunity to have
a pre-filing project review.
Establish and maintain a tracking system to identify
and document processing time.
Notify the applicant’s contact person of the
name of the coordinator assigned to a project.
Establish an e-mail hotline for plan/plat review
Establish a standard form for issuance of a limited
or partial building permit prior to site plan approval.
Perform requested building inspections in the field,
usually within one business day of receiving the request.
Provide builders/contractors checklists for structural,
HVAC, plumbing, and electrical inspections.
Collect and document causes of reinspections.
Advise the builder/contractor of the applicable
code section when rejecting work and limit the reinspection
to only the work that was rejected.
Maintain legally required continuing education.
Identify potential inspection consolidations without
sacrificing public safety and code compliance.
Implement the information technology enhancements.
Industry Commitments Contained in the Memorandum
According to Hoffman, the agreement also specifies
responsibilities on the part of those who apply to the
Columbus Department of Development, Building Services
Division for permission to build housing. These commitments
Learn and comply with the city’s development
laws and processes.
Avoid submitting an incomplete or noncompliant
plat or plan.
Address review comments when submitting a revised
plat or plan.
Contact the staff to schedule a project review before
filing an application for plat/plan approval or building
Provide the plat or plan in both digital and paper
format when filing an application.
Designate a single contact person and project decision-maker
when submitting a plat, site plan, or infrastructure
Depict the planned phases on engineering plans and
plats if the development will be implemented in phases.
Submit final engineering plans for (a) sanitary
sewer and (b) street, storm sewer, water, grading,
erosion control and street lighting prior to or concurrently
with the final plat.
Service Timeframes and Redress Procedures
Columbus also established specific timeline standards
against which city staff’s performance can be
measured. The agreement says, however, that these standards
assume the applicant will submit complete plans and
address review comments. Some examples of the timeline
Processing the preliminary plat – 22 days;
Processing the final plat – 42 days; and
Residential (1, 2, 3-Family) permitting process
– 7 days.
Should these timeframes not be met, applicants will
receive a credit or rebate of a portion of the fee,
or they can request a meeting which will result in a
decision within 120 hours. The agreement also puts city
employees on notice that the city will evaluate performance
on the basis of meeting the standards listed in the
agreement. The agreement also outlines a 19-step process
for reviewing applications and actions applicants can
take, should the city not meet the timeframes contained
in the agreement.
Impact and Results
According to Hoffman, the 13 agencies responsible for
undertaking these reviews have not missed a deadline
since signing the agreement.
According to Jim Hilz, Executive Director of the Building
Industry Association of Central Ohio, “This is
a great effort on behalf of Columbus.” Hilz went
on to say that, “We are trying to copy this process
in other communities where processing delays increase
the cost of owning land before development can occur.”
While he applauds the overall effort, Hilz says that
builders will continue to work with the city to streamline
Hilz congratulates the city on the original document
and the city’s continued willingness to reduce
processing time. “We still have bumps in the road,”
says Hilz, “But overall, there is more good coming
out of this process than bad.”
Increment Financing of Infrastructure
That Use TIF Encourage Affordable Development
by Easing the Tax Burden on Residents
Budgetary and other financial constraints are
forcing local governments to examine alternative
methods of building new schools, roads, fire halls,
libraries and other public facilities amenities.
Many communities require developers to provide
this new infrastructure as part of the development
approval process. While helping to keep a lid
on general property tax increases, these requirements
often add to the cost of providing affordable
housing. Realizing that these costs could impede
affordable housing development,, some communities
are adopting tax increment financing (TIF) to
pay for increased public facility needs.
Tax Increment Financing Fundamentals
In its basic form, TIF allows a local government
to use tax revenue generated by a development to
pay for public infrastructure needed by that development.
In a tax increment financing agreement, the local
government taxing authority establishes an area
or tax district where it agrees to freeze the tax
assessment on a tract of land. For new construction,
the base can be the original assessment against
the raw land. For redevelopment, the base can be
the assessment against the land and the existing
improvements. The taxing authority uses any additional
assessment against the new improvements and the
taxes to finance required improvements.
Tax Increment Financing in Rapid City, South Dakota
TIF has been available in South Dakota since
1978. Rapid City created its first TIF district
in 1983, and has created a total of 52 districts.
In a recent interview, city planner Karen Bulman
observed that, “Rapid City is very conservative
in granting tax districts.” She went on
to say, “Only ten percent of the taxable
value of the city can be in these districts. City
authorities want to maximize the return to the
city for any tax districts established.”
She also commented that using TIF for affordable
housing is a fairly new strategy in rapid City.
In order to qualify for this financing option,
developments must meet several criteria. The mandatory
criteria that apply to housing are:
At least 25 percent of the area is blighted;
The project complies with the Comprehensive
There is no net loss of pre-existing tax revenues.
In addition to the compulsory criteria, a project
must meet two of six elective criteria. Four of
the six relate to housing developments, and encourage
projects that can…
Demonstrate that TIF makes the project economically
Eliminate actual or potential hazard(s) to
Result in additional redevelopment in certain
downtown TIF areas; and/or
Result in the construction of affordable housing
The city defines affordable housing as projects
where the developer reserves at least 51 percent
of the dwellings for those earning below 80 percent
of the area median. In addition, residents must
pay no more than 30 percent of gross income for
housing. The dwelling must remain affordable for
at least ten years or the owner must repay a portion
of the tax increment financing benefit. The city
has a number of discretionary criteria it uses
to evaluate projects. A more detailed description
of these criteria is contained in the “Guide
Developers can use TIF for capital costs of public
improvements, the clearing and grading of land
financing costs, and other costs associated with
the public infrastructure required by the development.
Those constructing affordable housing cannot use
this type of financing to construct residential
Those seeking approval for a TIF district must
complete an application that includes a specific
list of uses for which the developer will need
tax increment financing. Only those identified
uses would be eligible for the program.
City staff submits applications for TIF to the
Project Review Committee, who then makes a recommendation
to the Planning Commission and the city’s
Common Council. The Common Council retains final
authority to approve the proposal. Following approval,
the city staff and the applicant negotiate a development
agreement that the Common Council must approve.
When approving the agreement, the city only makes
a commitment that the applicant/developer can
use the additional tax revenue to retire the debt.
The city does not issue bonds, nor is it responsible
for the debt. The applicant/developer secures
the financing to pay for the approved infrastructure
improvements based on the city’s commitment.
South Creek Village
Recently, a developer approached Rapid City with
a proposal to construct an 80-unit housing development
using Low Income Housing Tax Credits. Since the
developer of South Creek Village was committed
to serving low- and moderate-income households,
the project was, “Just on the edge of profitability,”
said Murray Klane, a consultant with the Gandolf
Group, LLC. The city’s requirement that
any development with more than 40 units provide
two points of ingress and egress would have had
a tremendous impact on the economic feasibility
of the project. In addition, the city required
that this development provide a street connecting
two existing streets. With government restricted
rents, the project could not carry the additional
debt without TIF assistance. According to Klane,
“Categorically, we would not have been able
to complete this project without the policy decision
by the city to create this tax district.”
The developer asked that the city create the tax
district and use the increased revenue to pay
for the required street improvements. Once the
city made its commitment, the developer’s
lender pledged to fund a loan, based on the city’s
action. Klane said that the approval process took
three to four months, but he was so pleased with
the result that he was considering a TIF for another
affordable housing development.
The Tipping Point
Rapid City’s infrastructure requirements
could have prevented the developer from constructing
80 units of much-needed affordable housing. In
this case, the city and the developer created
a means whereby the developer paid for the obligatory
roads, but used TIF, rather than increased rents,
to pay for the improvements.