<figure class="
sqs-block-image-figure
intrinsic
"
>


























</figure>

What cities have successfully financed housing at the local level? How does tax increment financing work? When should cities stop subsidizing large-scale housing projects? Strong Towns President Chuck Marohn answers all these questions and more in this episode of the Strong Towns Podcast.

<iframe scrolling="no" src="https://www.podbean.com/player-v2/?i=vjbhf-1843693-pb&from=pb6admin&share=1&download=1&rtl=0&fonts=Verdana&skin=12&font-color=auto&logo_link=episode_page&btn-skin=2" allowtransparency="true" width="100%" title="How To Finance Housing in a Smart and Local Way: A Housing Q&A" loading="lazy" data-name="pb-iframe-player" height="150"></iframe>

• 
  
  
  
  
  
  
  
  

  
  <button
  class="accordion-item__click-target"
  aria-expanded="false"
  style="
  padding-top: 15px;
  padding-bottom: 15px;
  padding-left: 0px;
  padding-right: 0px;
  "
  >
  
  Click here for a computer-generated transcript.
  
  
  
  
  
  
  
  
  
  </button>
  

  
  
  
  

  Chuck Marohn 0:00

  Hey everybody. This is Chuck Moran. Welcome back to the strong towns podcast. A while back, I gave a virtual presentation to a group in Bozeman, Montana, and the presentation was on housing. And we got to the end of the session, and there were still a lot of questions that we hadn't been able to answer. And so I said, Go ahead, submit them. We'll take them, and I'll try to do them in a podcast. I've done this a couple times before, and kind of crazily to me, you guys have given us pretty good feedback on these. So the team here set me up to do this again, and I'm going to do it again. They've arranged these. They put these in a, you know, in a Google Doc that I just printed out. I have not read them, so I'm going to read them live with you, and I'm going to try to answer them, starting with this one.

  Chuck Marohn 0:55

  What municipalities or jurisdictions have been successful in local financing and how? What tools like geo bonds, municipal, Community Bank, etc, exist. This is on local financing of housing. Let me, let me answer a question in two ways. First, not many we, we've been searching for examples. You know, we wrote up about Muskegon, their use of tax increment financing. I think that's really brilliant. There's a couple places we've seen that have done some a couple, like, small, innovative things. City's role in our current housing market is to lose money. That that's what the current role of local governments is when it comes to housing. And let me just add, like, another layer on top of that. We ask local governments to lose money providing a tiny trickle of housing when the demand is like an ocean. That's what we ask local governments to do. So the agencies we've set up, the programs we've set up, the things that we do generally ask local governments to lose money, and that's what they typically do. We give away incentives. We give away infrastructure. We, you know, lower permit fees that are designed to pay for review times. You know, we basically like ask local governments to subsidize this style of development in a way that loses that money. One of the main things that we push back against is this idea that local governments can continue to lose money, and that somehow this is a good thing, that somehow this is like a righteous thing for them to do, especially when it builds an ineffective number of units. So you know, where are the examples that we can copy? They're few and far between, and we need to actually grow some more. I think part of that is recognizing that your Government needs to opt out of losing money.

  Chuck Marohn 2:51

  Okay, next question, could the federal government help cities fund these TIFs? TIFs is a tax increment financing I talked about, again, I'll bring up Muskegon. I talked about muskegons use of tiff to help fund entry level housing. Can the federal government help with it? No, no. I know this will be abrupt for some people, but let me just say cities and local governments have a different operating system and a different set of incentives than the federal government does. We make a tragic mistake when we think of local governments as like a smaller version or a lesser version of the federal government is like a completely different entity, right? It's a completely different thing, doing different things with different constraints. When we look at the federal government involvement in things at the local level, we can't look at the good without looking at the distorting effects. Right? Again, when we're doing these kind of tax increment financing, the idea is for the city to be able to do as many of these as people walk in the door, because you actually make money on them. You don't lose money on them when the federal government gets involved. You've got a certain scale that you have to work at which is out of scale of the types of units that that would make sense for local government to do you also are going to have, I think, the underlying idea be, we don't care about making money or losing money. We care about providing the housing. And for local government, yes, we care deeply about providing the housing, but we have to do it in a way that is fiscally responsible, because unlike the federal government, the local government actually has a budget that has to balance. You know, there's this conversation of, well, governments are not like a family. A family is not like a government. That's an insane conversation. It has some sliver of truth when you are looking at the federal government, but when you are looking at. Your City Council, your city government, your city budget. I'm sorry, it is exactly like a family. You have money coming in, you have money going out, you have promises that you have to keep and that you have to pay. You can actually, like, default on those you don't get to print your own money. You don't get to run deficits forever. You actually are as a city, just like a family and so, yeah, you know, could the federal government help with these tips that kind of goes against the entire idea of fixing your local balance sheet and building a lot of housing at the same time.

  Chuck Marohn 5:36

  All right, a lot of TIF questions here in this first section, when our city borrows through the TIF district. How does it exercise the public portion of the project? Does the city retain ownership of the land? Okay, I think here we're getting, like, deeply, deeply. It's interesting that we are going there. We're getting deeply, deeply, deeply into the Muskegon example that I gave. So let me, let me kind of go over how that actually works. I'm going to use really, like, rough number