Tax Abatement on New Construction in Columbiana Ohio

It’s no secret the Mahoning Valley has faced its share of economic challenges. However, an incentive program offered by the State of Ohio takes aim at addressing the issues that have plagued the region for so long.

Introducing the Community Reinvestment Area (CRA)

It’s called the Community Reinvestment Area, or CRA, and it’s a state-sanctioned tax exemption program that allows municipal and county governments the opportunity to offer property tax abatements to incentivize new construction, expansion and rehabilitation for residential and commercial development.

Property owners in Columbiana, Ohio can now save tens of thousands of dollars by being exempt from paying taxes on new construction or renovation projects for up to 15 years. The tax savings keeps more money in the pocket of home and business owners, which indirectly benefits the community, as the CRA will encourage investments into improving existing properties and stimulate economic development.

What is the Purpose of the Program?

Created in 1977 and revised in 1994, Ohio’s Community Reinvestment Area program is designed to promote revitalization in economically challenged areas by offering property tax exemptions for any increased property valuation that would result from renovation of existing structures or new construction activities within the area.

How Does the CRA Work?

Constructing a new home or business, or renovating an existing structure can increase property taxes. Improvements to a property increase the property’s value, while property taxes are a percentage of the taxable property value. With a CRA tax abatement, property owners in Columbiana, Ohio can avoid all or a portion of the tax increase as a result of the improvements made over the course of 10-15 years.

Which Community Locally is Offering this Incentive?

Cities all across Ohio, including areas like Stark, Trumbull and Mahoning counties, have taken advantage of this tax abatement program. Most recently, there’s one community that’s offering CRA to residents and business owners looking for a place to call home. Columbiana, Ohio, home to Das Dutch Haus, Shaker Woods Festival and we can’t forget about the Columbiana Street Fair, has made CRA available. You can find the full list of Ohio cities offering this program here.

Where Does This Help the Most?

The tax abatement encourages new home construction. Why? Because someone who buys a vacant piece of land and, then, spends $200,000+ on the actual construction of a home is avoiding paying any taxes on that $200k+ for the next 15 years. So a $1,000 per year tax bill on a $40k lot stays at $1,000 instead of a total of $4,500 – $5,500 per year like it could be. A theoretical savings of $4,800 per year equates to a $400 savings per month. (A property with a total value of close to $300,000 by the county.) That allows the buyer to jump up into a new price bracket in Columbiana that they could not afford elsewhere. An example would be a buyer whose price threshold is $200k in any other city may then be allowed to shop at $265k in Columbiana once the tax abatement is factored in. That could take someone from looking at dated existing homes and bump them into new construction territory – while keeping their monthly payment relatively the same.

What is the Benefit to Real Estate Agents?

CRA can mean tens of thousands of dollars that a property owner can utilize to invest in other projects throughout the community. That savings could also be utilized to increase an individual’s buying power when searching for a home. With the distinct possibility of now not only looking at existing homes, but being able to look at building new – thus, significantly increasing purchase price as well as a Realtor’s commission (Realtors that have clients who build new construction can be compensated with a commission based on the construction cost, so it’s just like commissions earned on existing home sales. See below for more information.). This keeps your client’s monthly mortgage payment close to the same amount it would be when compared to the lower tiered-priced homes elsewhere. A win-win for both parties. Lastly, should the buyers sell their home in the future, they would have a larger profit versus buying the $200,000 house elsewhere assuming that Columbiana and any other market that they were interested in, appreciate at or near the same annual value growth. For example, a 7% value growth on $200,000 equates to $14,000 of equity gained. Where a 7% value growth on $265,000 over the same period of time in Columbiana is $18,550. This could lead to more potential home buyers and more closed deals for agents.

USDA Rural Development New Home Construction

When considering the tax abatement, know that each loan type goes through its own specific underwriting. They can sometimes be unique to themselves and one loan type approval doesn’t necessarily mean another would get approved. The same can be said be said between different lenders. At AmeriFirst, this tax abatement is approved and allowed for our USDA Rural Development New Home Construction Loans – an area that we specialize and do often. With this loan, buyers can build their dream home and purchase the land, all with just one loan process. The best part? Buyers may qualify with no down payment. A great solution for clients frustrated with a lack of inventory in the market, or homes that don’t fit their unique lifestyles.

For Realtors®, this New Home Construction Loan allows for two commissions at closing – the commission for the land as well as a commission on the total cost of construction from the builder. This means that your income would stay relatively the same, whether the client chooses to buy an existing home, or chooses to build.

How Do You Apply for a CRA Tax Abatement?

The process to getting approved for a CRA starts by filling out either a residential or business application available on the City of Columbiana, Ohio website. Applications must be submitted to Columbiana City Hall, which then will be thoroughly reviewed by the city manager or housing officer for approval.

Where I Can Learn More About CRA?

Contact AmeriFirst Home Mortgage today! We’ll be glad to walk you through the process and help get you approved for a CRA tax abatement.



*Not intended as accounting or investment advice. Contact your tax preparer for more information.