Joe Urban | Sam Newberg, Urbanist

Density Reduces our Tax Burden

Dateline: 10:27 am May 4, 2011 Filed under:

What impact does increased housing have on cities? This is particularly important to cities like Minneapolis and St. Paul, which have flatlined in terms of population growth as of late, according to the 2010 Census. (For a very good article about this, read Steve Berg at MinnPost.) This is very disturbing for a city with so much potential.

So what do we do about this? Lot’s of things, from plans to zoning for infill development, financial incentives for developers to develop and residents to choose the city, to imrovements to transit and the public realm. But what about getting existing residents to accept more development? Aha, all the plans and incentives can be for naught in the face of NIMBYs. On the one hand, we existing residents complain of our increasing property tax bills, yet many of us complain about new development, even if it can reduce our tax burden. So does it?

I took my query to David Frank, a colleague and the new director of transit oriented development for the city of Minneapolis. After all, his charge is to create acceptance for, and to encourage denser development near rail stations.

David got back to me with some preliminary numbers about the current tax collections – approximately $274 million for the city of Minneapolis in 2011. What about that proposed 100-unit apartment project at the nearby train station, opposed by some as too tall and a threat to create traffic problems and maybe crime? Well, we concluded that taxes collected on that project would total $108,750 per year if the units are valued at $150,000.

In other words, a 100-unit apartment project adds .04% to the city’s tax collections, reducing the tax burden on the rest of us. That may seem like a small number, but add several hundred units at each of the light rail station areas and in other popular locations like downtown and uptown, and suddenly the city is bringing in significantly more revenue.

Sure, our numbers were done “on the back of a napkin,” but in the real estate development world, that’s the way we roll! The point is the city would benefit from a whole lot more development, and existing property owners should feel literally relieved when it happens. It would behoove city officials to look into and refine these numbers, particularly in these new days of austerity in so many of our cities.

There are a lot of arguments for increased density in our cities, but the increase of tax revenue (and corresponding reduced tax burden) should be among them. It may also give NIMBYs at least reason for pause, as well.

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