Recognizing that while commercial construction is increasing building green, but that green residential construction lags in market share, local governments are increasingly looking to enact voluntary incentives to drive residential green building.
At least 44 states and more than 400 local governments across the nation have enacted some form of green building legislation. Voluntary incentives offered by government include tax breaks, direct grants or loans, density bonuses, and advantages in processing approvals for green buildings. As a non-prescriptive, non-mandatory approach which does not burden owners of land with another mandate, this philosophy of advantaging green building is a real estate owner-friendly, results-oriented environmental incentive that may portend a future for broader environmental policy, going even beyond green building.
But as would be expected from such a plethora of unrelated enactments, there is no widely accepted single incentive that owners report drives green building.
However, in the residential arena, developers and builders report that overwhelmingly the single government incentive that most helps drive green residential sales (single family and condominium units) is real property tax credits.
Across the country, local governments are increasingly offering real property tax credits to incentivize residential green building.
The City of Cincinnati offers what is described as the most efficacious residential green building tax credits in the nation. Cincinnati offers property tax abatements for residential and commercial buildings constructed or renovated that are LEED certified. The original green building tax abatement ordinance was passed in 2006 and has been amended four times since, culminating in the current abatement law passed December 19, 2012 that includes the generous residential component.
For residential buildings Cincinnati makes available a 100% property tax abatement for 15 years (for new construction) or 10 years (for existing building retrofits) up to $275,000 LEED Certified buildings, $400,000 for LEED Silver buildings, and $562,000 for LEED Gold buildings. There is no value limitation on the tax abatement for structures that achieve LEED Platinum certification.
A 100% tax abatement for 15 years on a newly constructed LEED certified house is very generous. While precise statistics were nor readily available because the tax abatement is provided on buildings and not on individual units within a building, more than 500 LEED certified residential units have benefitted from the tax incentive.
Former Cincinnati Councilwoman Laure Quinlivan has been widely quoted saying the incentive is unique among others around the country for its generosity. She said the incentive was important to getting development deals to move forward. “We are a leader among sustainable cities because of our green building accomplishments," Quinlivan said.
With over 132 million housing units in the U.S., and more than a million new housing units constructed each year, there is a robust opportunity for green building. The dramatic strength of the housing sector would be further fueled by property tax credits that incentivize green building.
Image © Pasadena EcoHouse 2008