Mayor Fischer pitches tax break to combat gentrification in Louisville's neighborhoods

Homeowners in some Louisville neighborhoods could soon be getting a reprieve on their property taxes.

That’s because Louisville Mayor Greg Fischer is pushing for the expansion of the city’s property tax moratorium program, part of an effort to stave off the negative effects of gentrification. 

“The goal is to avoid the displacement that can occur when a neighborhood sees such quick investment that property values rise markedly, which in turn can raise property taxes beyond what current residents can afford and put pressure on existing homeowners to sell,” the mayor’s office said in a news release Monday.

Under the proposed changes, homeowners in western Louisville, Shelby Park and Smoketown who make improvements to their homes worth 5% of the home’s value will have their property taxes frozen for five years, the maximum allowed under the Kentucky Constitution. They can also have the program’s $40 application fee waived.

The tax break only applies to homes that are at least 25 years old and owner-occupied. 

According to the mayor’s office, the average single-family home in western Louisville’s Russell neighborhood is valued at $36,717, meaning the owner would need to spend at least $1,836 on upgrades and improvements to qualify.

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In neighborhoods where half of the households earn less than 60% of the area’s median income, both homeowners and businesses can reap the benefit by making improvements worth 10% of the property’s value, according to the proposed amendment.

The city’s property tax moratorium program was originally put in place in 1983. Only about 40 owners take advantage of it, according to a summary of the proposal posted on the city’s website.

Currently, there’s no specific carve out for owner-occupied homes and the neighborhoods that qualify for the program are poorer — either 70% of residents must make 80% of the median income for Jefferson County or 20% of the residents must have incomes below the poverty level.

Under the program, any owner who makes improvements worth 25% of the property, regardless of where it’s located, also qualifies for the moratorium. That would remain unchanged under the proposal.

The proposal comes as the Jefferson County Property Valuation Administration prepares to reassess Shelby Park and Smoketown this year. In 2019, the PVA found that values in western Louisville had risen.

In a statement, Colleen Younger, Jefferson County property valuation administrator, said that “current, longtime homeowners” are the “heart and soul” of these neighborhoods and must be protected since they are the “most financially fragile.”

“Property values in west Louisville neighborhoods rose for the first time in eight years during the 2019 assessment, and this program will offer some protection as property taxes rise due to fast growth in the target areas,” Younger said.

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John Gilderbloom, director of the Center for Sustainable Neighborhoods and professor of public administration at the University of Louisville, questioned whether residents would actually be displaced as a result of rising property values.

In an email, Gilderbloom also said that if the Fischer administration and city lawmakers "wanted to really come up with a strategy to stop displacement," they would address Louisville's problem of abandoned homes — a figure he and others have placed at upward of 5,000.

"It’s a disgrace," Gilderbloom said. 

But Louisville Urban League President Sadiqa Reynolds called the proposal a “good first step.”

“We are thankful for renewed interest in the west end, Smoketown and Shelby Park but, like many others, have concerns about those who've suffered when there was no investment, being displaced to satisfy desires of wealthier transplants to community, now that revitalization is on the horizon,” Reynolds said in an emailed statement.

She said the Urban League, as Louisville’s oldest U.S. Department of Housing and Urban Development-certified housing counseling agency, also was looking forward to helping residents take advantage of another city program to halt displacement brought on by gentrification — the Down Payment Assistance Program.

“Our focus must be on wealth building strategies,” she said.

Under that program, Louisville Metro Government’s Office of Housing gives qualified homebuyers up to 20% of the purchase price to help them buy homes in neighborhoods throughout Jefferson County, according to the city’s news release.

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The property tax moratorium change is being sponsored by five city lawmakers, including Metro Council President David James.

“I’m happy to be a sponsor of this ordinance as we try to fight against gentrification and protect our citizens and neighborhoods,” James said.

Councilwoman Barbara Sexton-Smith, another of the proposal’s co-sponsors, also praised it.

“This is a small step that eventually will go a long way in giving some homeowners a much-needed tax break at a time when many worry about gentrification,” she said.

Louisville developer Jeff Underhill, who told The Courier Journal he hadn’t yet reviewed the proposal in-depth, described the program as “common sense” and as something Democrats and Republicans should both agree on.

“I think anything that incentivizes people to put money into their property is a good thing,” he said.

Reach reporter Alfred Miller at amiller@gannett.com or 502-582-7142. Follow him on Twitter @AlfredFMiller. Support strong local journalism by subscribing today: courier-journal.com/subscribe.