A Solution to Displacement

One of the primary complaints about gentrification is the displacement of the existing residents in a neighborhood. To reduce displacement, a growing number of cities are requiring developers to include affordable housing in exchange for permission to build a new housing project.  These mandates violate the property rights of developers by interfering with their freedom to produce and trade. There is, however, a solution to displacement that does not violate property rights.

When gentrification occurs in a neighborhood, property values rise. And, as property values increase, so do property taxes. Many of the property owners in gentrifying neighborhoods are on fixed incomes and cannot afford the higher tax bills. They must sell their home. While the developers responsible for gentrification are often blamed, the real culprits are the taxing authorities.

A solution to displacement is tax relief for the existing  property owners.

Tax relief could take different forms. One way is to limit increases in a property’s taxed value. For example, the increase in a property’s appraised value could be limited to 1 percent per year. Another form of tax relief is an exemption similar to the homestead exemption in Texas (and perhaps in other states as well). In Texas, the homestead exemption reduces a property’s taxed value by $25,000. While this amount would provide little relief if a property’s value doubles or triples, another number could be used.

Regardless of the form tax relief takes, government officials have the power to reduce or even eliminate displacement caused by skyrocketing property taxes. And they can do this while respecting property rights. They can respect the right of developers to use their property as they choose and also respect the rights of the existing property owners by taking less of their money.

The only “loser” in providing tax relief would be the government. While many public officials decry displacement resulting from gentrification, they eagerly accept the higher property taxes gentrification produces. If government officials truly want to slow displacement, then they should prove it by putting the taxpayers’ money where the officials’ mouth is. And that means tax relief.