Bulldozers moving dirt and builders hammering away could be seen from a tour bus filled with Realtors®, home builders and community leaders, as they got to hear firsthand the sound of progress. It was all part of a tour showcasing how a tax abatement program is making a difference in Columbiana.
Our AmeriFirst Home Mortgage Poland, Ohio branch organized and coordinated a tour of the city in a chartered bus with roughly 60 Realtors®, builders and nearly all of Columbiana City Council, including Mayor Bryan Blakeman and city manager Lance Willard. It started at the Town Center, which is a new commercial development project at Firestone Farms. From there, the tour included visits to more than a dozen development sites of significant size in the city. At each site, developers talked further about the project itself along with commentary from the AmeriFirst team and Columbiana’s city manager of how these developments would not be feasible without the infrastructure put in place thanks to the CRA.
Through state and federal grants, Columbiana has raised nearly $18 million in the last five years to devote to city projects. This included a brand new water treatment facility, in addition to upgraded water and sewer lines and utilities to ensure the city had the capability to handle an influx of new residents.
Columbiana’s CRA contributing to the city’s recent building boom is an understatement. Since the beginning of 2019, 57 permits for new construction have been sold within the city limits of Columbiana alone. To put the number into perspective, only 23 commercial and residential permits for development were granted in all of Mahoning County in 2018.
About the Community Reinvestment Area (CRA) Program
The Community Reinvestment Area (CRA) program is designed to stimulate residential and commercial development in economically challenged areas by offering property tax exemptions on new construction and improvement projects within the city limits of Columbiana. A municipality can grant a 15-year, 100 percent property-tax abatement as long as the development or repairs result in an increase to the property’s valuation. This translates to a cost savings of tens of thousands of dollars in real estate taxes.
That money can then be reinvested into the community to generate economic development, attract new homeowners, retain city residents and reduce the costs associated with homeownership and rental projects. To this point, however, it has been underutilized by the Realtor® community.
“CRAs are established among municipal and county governments as a relatively easy way to foster economic development, such as real estate in a community,” states Matt Heikkinen, Business Development Manager, AmeriFirst Home Mortgage in Poland, Ohio. “Unfortunately though, most real estate agents are unfamiliar with the program and the few who are aware, may not fully grasp the potential cost savings this can mean for builders and homeowners.”
AmeriFirst began educational outreach to local brokerages and community members, explaining CRAs and how the tax abatements could not only profit their businesses, but also provide prosperity for new and current homeowners, and the community as a whole. Realtors® and local leaders found the meetings to be very informative and insightful, and shared the knowledge they acquired with other agents.
What Realtors® Need to Know
When it comes to CRAs, it’s important for agents to know the following:
1) Since lenders do not need to take the tax savings into account with debt-to-income ratio, this frees up several hundred dollars a month that would have gone towards paying property taxes. This can now go back into the homebuyer’s pocket or be spent toward a larger mortgage.
2) The CRA allows homebuyers to get more bang for their buck and buy a more expensive home with their monthly payments remaining the same if they purchased a house of lesser value.
3) 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 homebuyers and more closed deals for agents.
Similar to Columbiana, there are communities across the Mahoning Valley that are designated as a CRA. If you would like to learn more about the Community Reinvestment Area (CRA) or even schedule a tour for your community, we invite you to reach out to our Business Development Manager, Matthew Heikkinen at firstname.lastname@example.org.
*Not intended as accounting or investment advice. Contact your tax preparer for more information.