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Financing Tools

Affordable Housing Tax Increment Financing


Definition: Allows cities and towns to designate specific areas as affordable housing development districts. Within these districts, a portion of the future tax revenue increases (tax increments) resulting from new development or property value appreciation can be set aside for present-day affordable housing projects.   


Benefits: By leveraging increased property tax revenues generated by development within the district, a municipality can support and promote affordable housing. Revenues from a district can be used for affordable housing projects, including land acquisition, building or rehabilitating housing, issuing bonds, and/or other related improvements. The revenues can also be used to repay bonds or loans taken to finance these projects.   


Getting Started: Municipalities should first conduct an affordable housing needs assessment to (see “Local Housing Needs Assessment” in Policy Tools), identify potential district areas by locating areas with significant development potential or those with a high concentration of substandard housing, and engage with stakeholders to gather input and ensure buy-in. 


Due to the complexity of the program, local officials should work with municipal finance staff and/or a consultant. GPCOG Economic Development Director Paul Johnson can help municipalities initiate the process. 


State Policy & Local Examples: State law requires that at least 25% of a district be suitable for residential use, development must be primarily residential, and at least one-third of the units must be for households at or below 120% of area median income (30-A M.R.S.A. §§ 5221 - 5235). MaineHousing offers an AHTIF Program to support establishment of AHTIF districts. AHTIF districts have been established in several Maine municipalities, including BridgtonCumberland, and Portland.


Freeport Housing Trust has successfully built two housing projects using affordable housing tax increment financing. The Freeport Town Council in March, 2024 approved a third. The project in the photo was built in 2012 and contains 25 apartments for households ages 55 and older. The Town of Freeport shares 50% of the taxes on the incremental value of the property to be used on operating expenses.

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