POTENTIAL HOUSING TRUST FUNDING STRATEGIES
The proposed payment in lieu of partial inclusionary units detailed earlier in the report can create
some revenue for the City’s housing trust. However, the value differential between market rate and
80% of AMI is not substantial and the number of developments each year likely will be limited. To
this point, RKG Associates was asked to identify some other best practices for creating revenue
sources—particularly consistent revenue sources—for the city to consider. Some potential
recommendations around funding a housing trust fund include:
Transfer tax on property sales — The City of Nashua could levy a surcharge on the sale of
property, levied on the seller, the buyer, or both parties. The surcharge could be a fixed
percentage and allow the city to collect funds when a property changes ownership. The tax
could provide a dependable source of revenue for the affordable housing trust fund. One
caveat with a transfer tax is that they work well in healthy real estate markets with consistent
turnover and sales. In less-healthy housing markets, declining home sales and prices reduce
real estate transfer tax revenues, which consequently reduces funding for the affordable
housing trust fund.
Dedicated millage rate on real property — The current real estate property tax in the City of
Nashua is $20.61 per $1,000 in assessed value. The City of Nashua could add an additional
$.01 as a dedicated tax to fund the Affordable Housing Trust Fund. This penny property tax
would be collected annually and provide a consistent stream of income for the affordable
housing trust. Additionally, the tax would be equitable in the everyone in the city would be
contributing towards ensuring that there is an adequate supply of affordable housing.
Linkage/Impact fees — Linkage/Impact fees attempt to link the production of market-rate real
estate to the production of affordable housing. Under this type of program, the City could
charge developers a fee for each square foot of new market-rate construction and use the funds
to pay for affordable housing. The city could direct the funds specifically toward the
Affordable Housing Trust Fund. The money collected in the trust fund could then be used to
support existing subsidized units, or to build new units across the city.
Development review process fee — For proposed developments which require changes to
zoning or a variance, the city should institute a development review fee. Given that many
developers of market rate units can build beyond established zoning guidelines the city should
institute a fee which is applied to development beyond established maximum densities. The
fee can be assessed on either a per square foot or per unit basis. The money collected from the
fee can be earmarked for the Affordable Housing Trust Fund and can be used to build or
subsidize affordable housing in the City of Nashua.
