Fargo city leaders look to tax incentives to alleviate expected strain on affordable housing

City Commissioners expect a workforce surge due to the Fargo-Moorhead flood diversion project and more seniors moving to the area for better access to health care.

The Lashkowitz High Rise located at 101 2nd St. S. in Fargo is seen in this May 2020 file photo. Alyssa Goelzer / The Forum
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FARGO — Members of the Fargo City Commission have expressed interest in boosting local affordable housing tax incentives as the city anticipates an influx of workers and elderly residents in the coming years.

With an expected workforce surge of up to 7,700 construction workers due to the Fargo-Moorhead diversion project and 500 employees at the new Amazon distribution center set to open later this year, some city leaders are concerned about the affordable housing supply.

At an informational City Commission meeting on tax incentive policy last week, Commissioner John Strand said he also expects a "tsunami of senior citizens" looking for places to live in Fargo in the coming years as baby boomers move to Fargo to be closer to health care in the city.

"Where are they going to live?" Strand asked.

The answer to a potential affordable housing squeeze may lie in eight programs that offer tax breaks for homeowners and businesses, city leaders said.



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In all, the programs have tax exemptions of $455 million on businesses and homes, accounting for 3.2% of Fargo's total citywide property value of $14 billion, according to City Strategic Planner Jim Gilmour. Half of the breaks go to businesses and the other half go to renters and homeowners.
Commissioner Arlette Preston suggested studies to gauge the success of the eight programs to identify any gaps. Commissioner Dave Piepkorn floated the idea of developing other incentives to help grow affordable housing for low-income and elderly residents.

Mayor Tim Mahoney floated the idea of hiring a consultant to review existing incentives and assess whether the city is using them effectively.

The city of Fargo hasn't done a housing study for years, Gilmour said. However, he added that a recently-completed city Core Neighborhood Plan addresses what the city can do to improve housing stock and affordable housing options in Fargo's oldest neighborhoods. The plan will be presented at the next city planning commission meeting.

One incentive owners of older homes may not know about is the city's remodeling property tax exemption, Piepkorn and Gilmour said.

Currently, 664 older single-family homes and smaller businesses make up about $20 million of renovation property tax exemptions. The city offers the break based on the added valuation by assessors to homes after the owner renovates or builds an addition to the property.

Structures 25 to 40 years old are eligible for a three-year break and structures older than 40 years old are eligible for five years. The average residential remodeling tax exemption is $25,100, Gilmour said.

The exemption can be a big help for owners of older homes who want to replace furnaces or insulation, Piepkorn said.


"Maybe we need to do a better job of actually telling them," he added.

There's also a new housing exemption for two years on the first $150,000 of value. Gilmour said 482 homeowners are taking advantage of the tax break to the tune of $71 million. The new homes' value before the exemption is $191 million, which those homeowners are paying taxes on.

As for low-income housing incentives, Gilmour said nine multi-unit housing projects are taking advantage of $35 million in tax breaks from the city.

The North Dakota Housing Finance Agency also assists in projects, Gilmour said, but only receives a certain amount of federal funds each year to finance a limited number of low-income housing projects for seniors and low-income residents. He said a few other federal programs have "dried up."

Another city housing tax incentive is available in the area surrounding North Dakota State University, where Gilmour said there's a vacancy rate in apartments of about 10%, compared to about 6% citywide. That program aims to boost student housing and help with blighted areas in north Fargo, he explained.

In the NDSU area, there are currently seven projects with 10-year breaks and four in longer-term Tax Increment Financing districts.

Gilmour said the area near NDSU also has opportunities for more low-income housing. Some vacant rental units could be offered to prospective homeowners to fix up and own at more affordable prices.

In downtown Fargo, there have been a variety of tax breaks for multi-use residential and commercial buildings. In total, Gilmour said there are 30 properties involved in the program with current exemptions of $130 million in value.

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