Tax Strategies

More plants, less concrete: Houston now will offer tax incentives for eco-friendly development

Houston is hoping to entice commercial developers to trade vast slabs of concrete for more eco-friendly designs, a strategy city officials hope will lead to a new “business as usual” in private development that could help the city stave off flooding and other environmental challenges.

The city this month launched a new property tax abatement program for developers who incorporate green stormwater infrastructure, a type of design aimed at minimizing the downstream impacts of development, into their projects. It also boosted incentives for LEED-certified (Leadership in Energy and Environmental Design) projects, an abatement program that has never been utilized, despite being on the city’s books for 10 years.

Together, city officials hope the new incentives will help enlist private development against the region’s flooding issues and other environmental hazards.

“It’s changing the way we do things, so the built environment can help address the challenges we’re trying to solve for, rather than exacerbate them,” said Marissa Aho, the city’s chief resilience officer. “We have to use all the tools in the toolbox.”

Resilient Houston, the planning document for how Houston can mitigate against climate threats, calls for 100 complete developments in the city with green stormwater infrastructure by 2025.

The stormwater strategies can take different forms, from natural landscapes and gardens with plants and other vegetation that seek to collect or slow runoff, to “green roofs” that apply similar concepts on top of buildings, to permeable pavement that allows water to seep into the ground.

Developers already must meet minimum detention requirements for how much water their projects can detain. Green storm-water infrastructure would not necessarily increase that capacity, but it could retain the water for longer than more traditional projects.

Stormwater would be absorbed by soil or vegetation, holding it instead of letting it slide over concrete and immediately into the drainage system. The plants and other features also can help capture carbon in the atmosphere and reduce urban heat, a phenomenon in which concrete exacerbates warm weather in city environments.

Commercial developers could save as much as 10 percent against their property tax increases when they incorporate green stormwater infrastructure into their developments. The program is open to $3 million projects that include at least an $100,000 investment in the eco-friendly strategy. The maximum abatement is the total cost of the green stormwater infrastructure, effectively reimbursing developers for including it.

The LEED incentives depend on the level of certification a property receives. It is 15 percent for platinum certification, the highest level; 10 percent for gold, and 5 percent for silver. Those abatements previously were 10 percent, 5 percent and 2.5 percent, respectively, in the program that went unused for a decade.

Council passed the green stormwater abatement program 15-2 at its Dec. 16 meeting. Councilmembers Greg Travis and Mike Knox voted no. Travis expressed concern about ceding revenue at a time when the city’s budget is stressed due to the COVID-19 pandemic.

Councilmember Abbie Kamin, who proposed the abatement program when the city was crafting its budget in May, said she hopes it will expand in the future from multi-million dollar commercial developers to homeowners seeking to add rain barrels to their properties.

“This is the start,” Kamin said. “The reason I thought a tax abatement was a good idea is that it incentivizes rather than penalizes, and it creates an opportunity to foster a development culture around sustainability.”

Mike Dishberger, the CEO of Sandcastle Homes and government affairs director for the Greater Houston Builders Association, said the abatement program will likely serve as an extra nudge for developers with big projects who were already considering including the infrastructure. He said he knows of a few large projects for which developers are eying the program.

“It does cause people to think, and a lot of developers are into the energy savings and having a green earth,” Dishberger said. “They’re looking to do some of that anyway, and this is just an incentive to get there.”

Michael Bloom, an engineer with R.G. Miller who wrote a report for the city outlining the need for incentives, said the program is “the first out of the gate.” His report recommended abatements, along with reorienting the city’s development rules, creating an awards program to celebrate successful developments, and streamlining the permitting process.

“I think it’s a great first step. I’m excited that any of the four items we had recommended is moving forward,” Bloom said. “I would say, in a lot of these things, the devil is in the details.”

Bloom said some of the application requirements for the program are “maybe a little bit more burdensome than I would have liked to see.” The program requires developers to show how their projects will achieve one of several environmental goals — such as flood mitigation, reducing urban heat, or improving water quality — a prerequisite that Bloom said involves substantive technical analysis. He said he anticipates participation in the program could be low in the beginning.

City officials would not say how many people they expect to apply in its first year. Gwendolyn Tillotson, the city’s deputy director of economic development, said the novel nature of the program makes it difficult to predict. She said the city will use the next 1.5 years to “fully assess” the program and make changes as needed when the city’s abatement program returns to council in two years for routine consideration of its renewal.

“It’s really uncertain how many applicants we will receive,” Tillotson said.

Laura Patiño, the chief of staff in the city’s recovery and resilience office, said the city tried to learn from the LEED program’s lack of success in trying to develop an abatement that would attract applicants. She pointed out that developers, in Bloom’s report, identified this type of program as worthwhile.

“We did not want to create a program that would not be utilized,” she said.

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