Chattanooga becomes first Tennessee city to use new Voluntary Attainable Housing Incentives program

By KATE COIL

TT&C Assistant Editor

Chattanooga has become the first city in Tennessee to offer Voluntary Attainable Housing Incentives, zoning relief for housing developments that provide ten percent of units priced at 80% Area Median Income or below. 

This program follows a change in state law spearheaded by Sen. Todd Gardenhire and backed by TML to allow local governments to provide voluntary procedural, zoning, and land use incentives in exchange for attainable housing.  

“These incentives will encourage the development of housing attainable to working Chattanoogans at no cost to taxpayers, working alongside our historic zoning reform, new affordable housing PILOT policies and upcoming revolving loan fund to get more housing built that working people can afford,” said Mayor Tim Kelly. “I’m proud that Chattanooga is the first city in Tennessee to take advantage of the new law passed by Senator Todd Gardenhire making this possible.” 

In addition to working with TML’s Policy Committee, Chattanooga Director of Housing Policy Megan Miles said last year Chattanooga brought together leaders and housing advocates from other local governments across the state to discuss housing issues at a two-day meeting in Chattanooga. While the national housing crisis is challenging, Miles said the meeting showed state and local leaders can work together to make headway on the issue.  

“There are a number of pre-emptions at the state level that prevent local municipalities from being able to implement various programs that are common in other states,” Miles said. “This was identified as something we had traction to change at a state level. This was to create another tool for municipalities to encourage affordability. This is not just an urban issue anymore; it’s something everyone is grappling with. The more we work together and share, the more progress we can make together.” 

While the new legislation contains some restraints, Miles said it allows municipalities a lot of flexibility in the types of incentives they offer, how they define affordable housing, and how they can put together a program that best benefits their city.  

City leaders also met with local developers to see what type of program they would want to participate in. As part of the state law, the incentives can only be offered in zones that allow five or more multi-family dwellings.  

 “We also did a complete overhaul of our zoning code last year because we were seeing a lot of rezoning pieces that indicated our zoning code wasn’t working the way it was supposed to,” she said. “The great thing about doing this in coordination with our zoning code update is that we are doing a complete comprehensive planning process. We are really in a citywide process of thinking about where and why we want to target certain areas for growth. This works great because this program is designed to take place in areas of the city we have already targeted as places we want to see growth.” 

In Chattanooga, a two-person household earning 80% of the Area Median Income has an annual income of $56,000. That is approximately the salary of a teacher, or the combined salaries of a school bus driver and a childcare worker. 

In exchange for developing housing units priced for Chattanoogans making 80% Area Median Income or below, developers could get these incentives:  

• 30% Density Bonus: Allows developers to have more units within the same building.
• Reduced Parking Minimums: Lowers the minimum number of parking spots the developer must include in a project.
• 30% Height Bonus in designated areas: Allows buildings in designated high opportunity neighborhoods near public transit to be 30% taller than in the base zoning code. 

In addition to sitting down with developers and other city leaders, Chattanooga also met with housing advocates. Miles said the number of middle-income families – often working families like teachers and firefighters - are becoming significantly financially burdened by housing costs is rising according to local data. As a result, even more pressure is put on lower-income families who are housing burdened.  

Miles said Chattanooga officials also realized there has been a bit of a mismatch in the past between what consumers want and what the market was making available. Rather than larger three-, four, or five-bedroom units, many families wanted studio and one-bedroom apartments but were forced into larger units due to availability. Populations like seniors, empty nesters looking to downsize, and young couples and professionals would prefer smaller units.  

“It’s important to develop mixed-income communities to ensure that Chattanooga is not just growing and benefiting people at the highest income brackets. We want all of our citizens to live in great neighborhoods with walkability and feel included in Chattanooga’s growth. This is a great example of getting creative and working together to solve this problem in a way that doesn’t cost the city any dollars.” 

Goals of the program include:  

• Boosting the supply of attainable housing to reduce competition and open up rental options renters can afford,
• Leveraging a voluntary, market-driven tool that rides the wave of current development by allowing developers to build more in exchange for moderately priced housing, and
• Driving attainable housing development with zero financial commitment from the city. Benefits come from added units enabled by incentives 

While the program is a valuable new tool, Miles said it is one of many that Chattanooga is using to build a better housing ecosystem. The voluntary incentive program can also be stacked with the city’s PILOT incentives. 

“We want to try to have as many incentives as possible to bring private developers to the table and give them the opportunity to include affordable housing in their projects,” Miles said. “Last year, we updated our PILOT program to make it more flexible for developers. If they do choose to stack both of those, we are going to limit the units that the PILOT will subsidize to 60% AMI or below. We want to offer as much flexibility and opportunities as we can. Our previous PILOT program was more of a blunt instrument, and didn’t work for a lot of developers and projects.” 

The Voluntary Incentives Program will take effect this spring. More information about the program can be found on the city’s affordable housing programs page. To watch a presentation from Chattanooga Director of Housing Policy on these voluntary incentives, click here.