Living Local - RHIDs; Possibly Coming to Manhattan
Tamara Burton
(Graph courtesy of the City of Manhattan - www.cityofmhk.com)
You are hard pressed to go very long without hearing about housing affordability in the news, on social media, as well as in our community. Affordability has, and continues to be a concern across the country. But perhaps it’s currently more painful given interest rates are seemingly stuck on high, costs to construct hasn’t cooled enough, and inventory continues to be low (which is certainly true in Manhattan)
For its part, the city of Manhattan is taking proactive steps to leverage programs to assist with housing costs. You may remember the voters passed a sales tax initiative which allocated 10% of those funds towards workforce housing. While programs to use those funds is still being developed by the City, that pot is beginning to build as sales tax revenue is earned. Another potentially impactful tool the City has the ability to leverage is called a RHID.
RHID stands for Reinvestment Housing Incentive District, previously known as the Rural Housing Incentive District. Changes to the program in 2023, extended their use to communities in Kansas with population limits Manhattan now fits within. Recently, our City Commission has also expressed support for the use of RHIDs in our Community. How do they work?
A RHID takes the increment between the value of the land today to its improved use, and uses that increment to pay off the infrastructure typically financed by the City through a bond. RHIDs can be used in downtown redevelopment in "infill", but they are more commonly used in “greenfield" (new) developments.
Have you heard of special assessment taxes? Maybe you’re even paying them? Most new housing developments in Manhattan are funded through special assessments. Traditionally, this means the City will finance the cost of the infrastructure with a bond and annual special assessments to pay that bond. With “specials”, that additional cost is paid by the homeowner annually with their property taxes. Most specials bond for 20 years, meaning that home will have 20 years of additional property tax due.
The RHID is different in that the homeowner doesn’t have a special assessment to pay, but behind the scenes your property taxes are going to work, paying off the bond or financing used to pay for the infrastructure. Placing less of the development costs on a homeowner through RHIDs should lower housing costs for homeowners as long as the policy is structured effectively (which City staff is hard at work doing). There is a trade-off though. As I have previously written about in February, the lion share of your property taxes are used by entities other than the City. So with a RHID, the school district and the County must agree to participate. The RHID takes their share of property tax dollars, and directs those to pay off the bond used to finance the development’s infrastructure. The theory is, without the RHID, the housing wouldn’t be built, so the revenue wouldn’t be there for the schools or County to enjoy anyway. The RHID should spur housing development, which should in turn help the community with the cost of housing. There is plenty that goes into RHIDs, and I encourage to you check out www.kansascommerce.gov for more information. In the meantime, keep your eye out for more information as the City finalizes their RHID policy.
Tamara Burton l tamara@thealmsgroup.com l 913-484-0808
