Working with Invest Chattanooga is not the only way to benefit from affordable housing development incentives in Chattanooga.​ In the last year, the City of Chattanooga has created new tools to incentivize mixed-income and affordable housing development. Their goal is for any project to benefit from including a share of affordable units.

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For an overview of recent changes, click here.

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Affordable Housing PILOT Program

 

A Payment in Lieu of Taxes (PILOT) program offers developers a property tax discount in exchange for providing affordable rental units. The savings from reduced operating costs help offset the financial impact of charging lower rents. Chattanooga’s Affordable Housing PILOT program is unique because it’s tailored for market-rate developments and directly ties the tax abatement to the cost of offering affordable units. Each affordable unit has a “price,” determined by the potential revenue lost by charging below-market rents. This price is calculated based on the project’s ZIP code, unit size (0, 1, 2, 3, and 4 bedroom), and affordability level (50%, 60%, 70%, and 80% AMI).

 

Applicants can download the PILOT calculator to test scenarios for their project. The calculator generates the tax abatement schedule for the project’s zip code, estimates the project’s tax liability, and allows developers to experiment with different combinations of unit sizes and affordability levels to accumulate property tax abatement. 

 

Program is for: market-rate and affordable housing developments in the City of Chattanooga. Minimum of 10 housing units. Rental housing only. New construction or renovation, but only the value of the improvements can be abated, so minor renovations are unlikely to benefit.

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​​New Zoning Code

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The Chattanooga City Council has adopted the first comprehensive update to the City’s zoning code since the 1960s. This reform streamlines regulations and supports housing development by:

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• Expanding “by-right” development 

• Allowing more residential density and taller buildings

• Reducing lot size requirements, building setbacks, and parking requirements

• Introducing “missing middle” residential zones for small multifamily

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For example, under the old zoning code, a 20-unit apartment building along a commercial corridor required 45,500 square feet of land. The new code reduces this to just 19,000 square feet—a 58% decrease. Additionally, hotels can now be converted to residential units by-right, and Accessory Dwelling Units are allowed by-right in all zones that permit single-family homes.
 

To explore how this zoning reform may impact specific parcels, check out the New Zoning Map and review the updated Zoning Ordinance. 

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Voluntary Incentives Program (VIP)

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In response to recent changes in state law, Chattanooga has designed a by-right zoning incentives program for attainable housing. This forthcoming program, which will become effective in spring 2025, will grant by-right density bonuses and parking reductions to developments that include 10% of units affordable to households earning 80% AMI. 

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Program is for: market-rate and affordable rental housing development in zoning districts in the City of Chattanooga that allow 5 or more units.

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Land Bank Property Donation

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The Chattanooga Land Bank Authority has started releasing Requests for Proposals (RFPs) to donate city-owned properties for affordable housing development. The first round had seven properties and the Land Bank will continue to make properties available through an open RFP process. Proposals must meet the following affordability criteria:

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• Rental units: 80% AMI rents for a 10-year affordability period

• For-sale homes: Home prices are capped at $200,000 and must remain affordable for 15 years

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Program is for: infill housing developments, single family with ADUs or small-scale multifamily.