Freeze taxes for apartment owners? Why the city thinks it could help Knoxville renters

The Knoxville City Council will consider three resolutions related to affordable housing and income for renters during its Nov. 14 meeting.

Knoxville's Department of Housing and Neighborhood Development is asking the council to support the creation of a tax freeze incentive so owners of older apartments can keep rental prices low.

The resolution could lead to "another tool to protect high-quality, affordable rental housing in our city," Knoxville Mayor Indya Kincannon said in a statement to Knox News.

The plan being would offer a tax freeze to owners of existing apartments who want to make property improvements. Only unsubsidized, affordable housing built before 1990 would be eligible. These are called Naturally Occurring Affordable Housing properties.

NOAH properties, because they're older, tend to have lower rents.

Kincannon's Chief of Staff David Brace said the owner would be contractually obligated to use money saved from the tax freeze to keep rent affordable based on the U.S. Department of Housing and Urban Development housing rates and tenant income levels.

The U.S. Department of Housing and Urban Development's 2023 Fair Market Value rates for the Knoxville Metropolitan Statistical Area are:

• Studio: $887 a month

• One bedroom: $952 a month

• Two bedroom: $1,156 a month

• Three bedroom: $1,507 a month

• Four bedroom: $1,773 a month

The property owner would have to apply for the program, and the city council would vote to approve or deny the freeze.

Because the city is not mandating apartment owners keep rent low, Brace said the tax freeze would not be a form of rent control, which is illegal in Tennessee. He described the idea as "another carrot."

"We want to make sure people can afford housing," Brace said. "We can't do that through the stick, but we can do it through appropriate incentives."

Just over 70 percent of Knoxville's housing stock, including apartments and single-family homes, was built before 1990, according to the Knoxville Department of Housing & Neighborhood Development.

Brace said the city already is working on this incentive, and the council's approval of this resolution would signal support. More details would be determined down the road, including if any ordinances would need to be changed, which would require the council's approval.

Expanding on missing middle housing

The council will vote on a resolution asking the Knoxville-Knox County Planning Commission to look into adding RN-1 zoning to Kincannon's missing middle housing plan before the council votes on it in December.

The resolution was requested by city councilmembers Tommy Smith and Seema Singh. It would not automatically add RN-1 to the plan.

Kincannon's current plan would only allow missing middle housing in Traditional Residential Neighborhood zones RN-2, RN-3 and RN-4. Missing middle housing includes multifamily structures built in the footprint of a single-family home, like townhomes, duplexes and triplexes.

Smith told Knox News adding RN-1 zoning (which allows for single-family homes and duplexes) expands on the areas where missing middle housing could be developed. The only difference from RN-2, Smith said, is that RN-1 lots are smaller.

"If we're all going to be supportive of missing middle, I think all incidental neighborhoods within (Traditional Residential Neighborhoods) can participate," Smith told Knox News.

Of the 2,039 vacant lots in Knoxville's Traditional Residential Neighborhood areas, only 51 of those lots are zoned RN-1, Knoxville-Knox County Planning Principle Planner Lindsay Crockett said. The data is as of Sept. 23.

There are 1,846 vacant RN-2 lots, 37 vacant RN-3 lots and 105 vacant RN-4 lots. So essentially, adding RN-1 to the missing middle housing plan would create 51 additional empty lots where missing middle housing could be built.

The Knoxville-Knox County Planning Commission delayed voting on Kincannon's missing middle housing plan until December, saying it had been developed without enough public input and didn't do enough to address the housing crunch.

Brace said the city is doing more community outreach and refining the plan, which will come before the planning commission again in December. It also would require a city council vote.

Airbnbs for long-term renters

The third resolution, also requested by Smith and Singh, is asking the planning commission to consider creating a new land use ordinance that would allow long-term renters in residential areas to list their unit on Airbnb.

The tenant would have to get the consent of their landlord before they could obtain a permit to rent out the space.

If the council approves the resolution, the planning staff would create a new land use ordinance that would need to be approved by the planning commission and the city council.

"I think renters, more than ever, are cost burdened," Smith said. "Where possible, they should be treated the same as homeowners. Period."

Currently, only residential tenants in commercial buildings with landlord approval or residential property owners can turn their living spaces into short-term rentals.

Residences above businesses on Gay Street, for example, are within commercially zoned neighborhoods, Smith said.

If the resolution is approved, the residential Airbnb ordinances would still need to be changed.

Singh said she is cosponsoring both items with Smith because the city needs to explore all options to make housing more affordable. She said it's important to have conversations about all options, even if they don't work.

Silas Sloan is the growth and development reporter. Email silas.sloan@knoxnews.com. Twitter @silasloan. Instagram @knox.growth.

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This article originally appeared on Knoxville News Sentinel: Knoxville considers tax freeze for apartments to keep rent affordable