Over 30 new homes have been built since the city of Austin, Mower County and the Austin School District joined hands in a new housing initiative in August 2016.

The policy says a homeowner can have his property tax abated for five years. During that time, the homeowner pays the current property tax on the land and then receives a tax abatement check once a year, after the taxes are paid.

The move to abatement came after new home starts dwindled in the city. In 2015, six homes were built in Austin and two more in the county.

Austin mayor Tom Stiehm formed an ad hoc housing committee to study the issue, and members later determined that by 2020, Austin would need another 300 rental units and 118 single family homes, to meet the demand in the area.

From there, the initiative took shape, following a similar one adopted in Worthington.

Between September 2016, when the first application for abatement was approved and Nov. 20, 2017, 17 new homes have been built or applied for abatement in Austin, and another 15 in the county.

The program requires the city, county and school district to all waive the taxes for five years; if built in the county, the township must also waive its tax. To date, Austin and LeRoy have enacted the policy, as did Clayton and Lyle townships. Southland School District also agreed to waive the taxes. Rose Creek has also been considering adoption of the policy, said Oscarson.

The values of the homes built in the city range from $165,000 to $500,000, according to City Administrator Craig Clark, and County Coordinator Craig Oscarson said those numbers were similar to home building in the county. All but one of the new constructions are single family homes, although multifamily structures are allowed under the policy.

Clark said he was encouraged by the response over the past 15 months.

“The six new homes (in 2015) “was really the threshold of why we needed to do this,” he said. “New housing starts are a mark of a thriving economy.”

Oscarson said he was happy with the response, adding there were 25-30 percent more than he anticipated in the first year.

Oscarson said he was also encouraged by the participation by developers to build “spec” homes, indicating a confidence in the market.

He said there was criticism of the program when it was first discussed.

“Some wondered if the people would have built anyway,” even if an incentive wasn’t available, he said.

“I heard some say, ‘Why should we being giving a break to people who so obviously don’t need it?’”

Mower County Commissioner Jerry Reinartz was one of them. He said he still believed there should have been a cap on the dollar amount of the homes being built, adding he did not believe a homeowner building a $500,000 home needed an abatement.

He was concerned early in the discussions the policy did not give some help to rehabilitation of older homes. Reinartz said he would also like to see more spec homes being built. A few were built in the first round, which was good, he said.

“All in all, though, everyone seems to find the program a success” in its first year, Reinartz said. He added he will be interested to see how the program progresses.

“I think the economy is improving,” he said. “But I feel I still need to see how it goes in 2018” before he gives it a good grade.

Oscarson said he believes the policy has met its original intent.

“It adds to the tax base, and provides more housing stock” when a homeowner sells an existing home to build a new one, Oscarson said.

Superintendent of Schools Dave Krenz also agreed the program appears to be doing just what it intended, “to stimulate the building of homes – I think it really has.”

“We had a half of dozen new homes built just a few years ago, and now look at it,” he said.

Even if the new homes do not bring more students, “you’re freeing up other spaces, that can be starter homes for young families,” he added. “We’re excited.”

Clark said the city’s applications in the first year will fuel over $5 million in construction into the city’s economy; and while the city will abate $620,250 in property tax over five years, an estimated $3.7 million in taxes will be collected over the next 30 years – six times the abated amount.

Clark added that housing stock doesn’t last forever — another reason to promote new construction. About 25 percent of Austin’s single family housing was built before 1940. Unless renovated or remodeled, the older homes eventually pass out of the market and are not replaced unless there is more new home construction.

Clark added there is plenty of potential for more to come into the new home market. Studies have shown there are about 2,000 in the local workforce who drive daily to Austin. The city would benefit greatly if they decided to move or build here. He heard from some applicants that unless the incentive was in place, they might not have built in Austin.

While he believed the policy to be successful, Clark did not think it was “the silver bullet” to end the housing shortage.

“It’s a part, but that’s not all of it,” he said.

There is an even stronger need for multifamily housing. And while such housing is eligible, it is an expensive proposition. The city has drawn up schematics and formulated financial details to show potential builders.

“But to be able to have the horsepower to fund multi-housing …” he said. “It’s the reason we haven’t seen market-rate units in decades.”

Oscarson said the past year has shown the need to educate some of the population about how the policy works.

For instance, some believed they could start building and then apply for the abatement. The policy firmly states that any abatement had to be approved in advance of any work on the land.

“Once you start to build, broke ground, you’re done” if you haven’t been approved, said Oscarson.

Taxes can also change on the property, so the abatement may change, too, he said. While county property is appraised every five years, it can be adjusted earlier than that if, for instance, nearby property sales suddenly takes an spikes upward. The state requires that adjustments be made, even if it were only a year from the last appraisal.

Keeping abreast of housing needs ripples through the community in myriad ways, Clark said.

If there isn’t adequate housing, “you might not have the volunteer base you once had; the schools are affected, and business is affected. These are things that matter to our community and the reason we’re doing this.”

He added that the initiative has also offered more potential for the housing market in future rewards.

“New construction begets new construction,” he said. “Absolutely.”

Krenz agreed.

“I think that when more contractors hear that building is going on, they’ll see that as a sign of a growing community … that may bring them to town to find out, ‘What’s going on in Austin?’”