The Durham Department of Community Development unveiled a draft plan to the City Council on Thursday for a deferred loan program for homeowners struggling to pay property taxes in the revitalized Southside neighborhood.
The drafted plan would offer homeowners affected by increased tax assessments — many of which are low-income — a deferred loan to cover the difference between the previous year’s property tax obligation and the January 2016 countywide reassessment. Payments on the loan would be deferred until the homeowner sells or transfers the property.
The draft came in response to a proposal Mayor Bill Bell revealed last year to help residents pay property tax bills that have surged since the public-private reconstruction of the Rolling Hill site in the Southside area. The effort, which included building rental and standalone housing, raised property values and taxes based on a January 2016 countywide reassessment.
Bell’s original proposal was a forgivable loan program focused solely on the Southside area, but the Department of Community Development (DCD) suggested expanding it to areas in Southwest Central Durham and North-East Central Durham that have also seen city investment. DCD also advised against the forgivable loan option in favor of a deferred loan due to differences in cost.
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DCD estimated that the annual maximum amount needed to assist eligible homeowners in the Southside area would be $6,970, and the maximum amount for the Southwest Central Durham and North-East Central Durham properties would be $143,174.
The criteria eligible homeowners and properties needed to meet for the deferred loan were narrow, but were aimed at helping longtime residents whose property values increased at least 10 percent. DCD estimated the average increase in tax obligations in the Southside area for 2016 was $314.
“What I hope we don’t lose sight of is we had the intention of revitalizing neighborhoods,” Bell said. “... if in fact the city had a part to play in (neighborhood revitalization), then we’ve caused some of those (property value increases) ... that’s what we are trying to compensate for.”
Eligible borrowers must be 80 percent or below the area’s median income, have housing costs above 30 percent of household gross income and lived in the home for at least five years. Homeowners must also have lived in the house prior to city-led revitalization efforts and have applied to one of several tax abatement programs.
The deferred loan plan comes with closing costs between $200 and $500 — which was a burden that some members of the council did not feel comfortable with.
“I would like to avoid charging very low-income people what would be a very substantial fee to them,” Council member Don Moffitt said.
Bell said if the Council wanted to cover those costs that would be fine with him.
Council member Jillian Johnson said she preferred a grant program instead of the loan that would be payable when homes are sold or transferred, and Council Member Charlie Reece also expressed hesitation with making current homeowners pay back the loans.
Council members asked DCD to review how much it would cost the city to cover closing costs and return with another recommendation based upon that suggestion.
The Council also urged that the recommendation be brought back to the council before the summer recess.