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Government & Politics

Cleveland City Council moves to block tax abatements for houses used as short-term rentals

New townhomes in Cleveland's Glenville neighborhood. A ladder is leaning against one of the units.
Nick Castele
/
Ideastream Public Media
New housing in Cleveland's Glenville neighborhood. The city offers 15-year property tax abatements for new and renovated homes.

Cleveland City Council has begun making changes to Mayor Justin Bibb’s proposed tax abatement overhaul — including an amendment that would block short-term rentals from receiving the property tax break.

For years, the city has offered 15-year, full tax abatements for new or renovated housing. The Bibb administration is proposing to cap those tax breaks for more expensive homes and scale back the benefit on better-off blocks of the city.

The legislation before council would also allow the city to revoke abatements from tax-delinquent or neglected properties. Council on Tuesday added limited lodging such as Airbnb to the list of properties that could see their abatements terminated by the city.

Residential tax abatements are meant to bring in new residents, not subsidize investor-owned properties that skirt the rules for hotels and bed-and-breakfasts, Ward 3 Councilman Kerry McCormack said.

“I have homes mid-block in our community that are tax abated that are party houses, from investors that don’t live anywhere near the city of Cleveland,” he said. “My residents are sick and tired of it.”

Council verbally approved the amendments at Tuesday’s development, planning and sustainability committee meeting, but the amended legislation has not yet been approved by the full council.

Advocates of an abatement revamp argue that Cleveland’s “one size fits all” tax break should be replaced with a more nuanced approach that encourages development in disinvested neighborhoods.

The Bibb administration proposal categorizes city blocks as “market rate,” “middle-market” or “opportunity,” offering 85%, 90% or 100% abatements for new homes in each of those respective zones. It also limits abatements to the first $350,000 of a home’s value in the first two zones and $450,000 on “opportunity” blocks.

Council members amended the proposal Tuesday to make rehabilitated homes eligible for 100% tax abatements — with no cap — regardless of where they’re found in the city.

Only one council member, Ward 13’s Kris Harsh, voted against the proposal in committee. Harsh said that middle markets, like his Old Brooklyn neighborhood, should remain eligible for full tax abatements.

At a public comment session before the meeting, real estate developers encouraged council members to leave the city’s current abatement policy unchanged. They argued that abatements were vital for financing projects, particularly as interest rates and construction costs rise.

Writer and environmental advocate David Beach, who also addressed council, called abatements “fundamentally unfair” and urged the city to restrict the tax break to affordable housing. Short of that, council could widen the differences in abatements offered in market rate, middle-market and opportunity neighborhoods, he said.

Council must approve a tax abatement plan by June 4, when the current program expires.