The basic idea behind a TIF is simple: Tax Increment Financing is a simple way of betting on the future — the city sells some bonds, uses the proceeds to subsidize a development project, and when the property taxes around the development project (hopefully) go up, the extra tax revenue gets skimmed off the general fund and used to pay the interest and principal on the bonds. The Port Covington TIF, which the outgoing Baltimore City government fast tracked despite significant opposition, is just one of many TIF deals used to finance big development projects here over the past decades. But if TIFs are betting on the future, why is the city always betting on a future imagined by wealthy, connected developers? Why can’t we bet instead on a future imagined by residents of our city’s neighborhoods?

Let’s imagine what a “People’s TIF” might look like. The Baltimore Housing Roundtable recently proposed the city float $20 million in bonds to finance the creation of permanently affordable land housing using community land trusts. Why can’t we make TIF financing work for initiatives like this? Let’s do the math: imagine we have 1000 houses owned by the city, but vacant and in disrepair — and generating no tax revenue. Let’s renovate these with a TIF, at a cost of $100,000/house — we can do it cheaply because we are working at a larger scale than a single homeowner trying to renovate can! So we sell $20 million in bonds and renovate 1000 houses, creating a whole bunch of jobs in the process. Now let’s sell these homes at $100,000 to help some Baltimore City residents build some assets as homeowners, and in the process, create the tax base which will—as if by magic—pay for the whole process.

How community land trusts work, if you are curious.

Here’s how this breaks down—if there’s some significant fact I’m missing, please let me know, but I think this calculation holds up, at least as a rough estimate of what’s possible. It assumes that no other sources of funding are in the mix—no philanthropy and no federal community development funding streams. It doesn’t, in the core estimate, account for the many indirect financial benefits of turning vacant houses into real homes—less expenditures for maintenance, less potential for crime, less risk to residents (I do return to this after laying out the basic numbers). It doesn’t consider any of the multiplier effects that come with creating jobs and stabilizing communities in its economic calculations, which are deliberately kept very narrow. In other words—this is a pessimistic take on a “people’s TIF”—the actual numbers may turn out to be even better than what I’ve sketched here.

So let’s take the basic costs of getting a house renovated and occupied, and see if we can’t create some permanently affordable housing out of thin air, eliminating vacant properties at the same time, with some financial wizardry used for the public good.

The first step is to make sure we are really talking about affordable housing, which should be no more than 30% of annual income. The Baltimore City Area Median Income is $41,819. The low end of “low housing cost” would be what’s affordable for someone earning just 60% of AMI—in other words, 30% of $25,091. That means we are looking for a way to create permanently affordable housing that costs the families that live in it no more than $7,527 per year in total housing costs, and magically incurs no other costs for the city. Can we do it?

Let’s get started by figuring out the share of all of this we can expect a resident to pay.

What does $7,527 per year translate to? A fixed rate, FHA 30 year mortgage with a 3.5% downpayment and 3.375% interest on a principal of $100,000 will result in a very affordable monthly mortgage payment of $434/month, or $5,211 a year. At the Baltimore City rate of $2.131 in property taxes per $100 of assessed value, that’s another $2,131 annually. Taxes and mortgage together come to $7,342/year — in other words, right around our target of 30% of 60% of AMI.

So we’ve established that, assuming the small down payment is possible, someone earning 60% of AMI can affordably carry a mortgage for $100,000. How much does a house cost? We’re talking about city-owned properties here, so acquisition costs are nil — the major expense is in the renovation. Estimates for homeowners looking to do a basic total rehab of a Baltimore City rowhouse I could find are in the $150,000 range — let’s assume, for the sake of argument, that doing 1,000 of these at once translates to some significant cost savings, especially when the City is driving the project forward. So let’s say that you could do renovate each house for an average cost of $100,000. (If you don’t like my assumptions about the magnitude of economy of scale here, you can assume we’ll focus on multi-unit buildings we will turn into affordable cooperative housing instead of single-family rowhomes.)

The upshot: the mortgage our new homeowners in our permanently affordable housing land trust will be able to carry will cover the costs of renovation. But we still need to find these buyers, and close on the mortgage — with marketing and closing costs for the seller (the city, or the nonprofit intermediary handling the program) coming in at $10,000, and the closing costs for the buyer coming in at $10,000. Since it’s entirely common for various kinds of homebuying programs to finance the buyer’s share of closing costs, let’s assume that our program will do so too. That means turning each property from a vacant to a stable home in the community costs us an additional $20,000 — for a total cost of $20 million (because the $100 million cost to renovate all these homes is financed with the individual new homeowners’ mortgages.)

So all we need to do is float a bond for $20 million. Can we use the tax revenue generated by these newly renovated properties to pay this off? You bet we can!

Remember that each property goes from from producing zero dollars in annual tax revenue to $2,131. That means $2.13 million in extra annual tax revenue total — over the life of a 30 year bond, that’s an extra $63.93 million. (Remember, we are investing $20,000 per house up front as a City, but getting a return that’s 2.131% annually based on the assessed value of the house at $100,000, not our investment — in other words, a guaranteed return of over 10% annually!) Typical 30-year municipal bond interest for Baltimore is only around 2.9% — meaning that we need to come up with an extra $10 million in interest over the course of the 30 years. So our 1,000 units of permanently affordable housing costs the City just $30,000,000 — and we are realizing over $63 million in additional tax revenue over the life of these bonds. The People’s TIF, in other words, pays for itself and then some. With more than $33 million in surplus revenue, we could, for instance, fund the administration of the 1,000-unit community land trust itself, to the tune of a generous $1 million a year — eliminating the need to assess any kind of CLT fee on participating homeowners to fund operations.

Is this too optimistic a forecast? While I’ve erred on the side of caution wherever possible, I do assume a 100% owner-occupancy rate for these homes for the duration of the 30 year bond term. This is probably unrealistic — so let’s assume a pretty awful case where we renovate 1,000 homes, but are unable to sell 20% of them 30 years later, even though they are being offered with subsidized closing costs and priced for permanent affordability. We pay the same marketing costs, let’s say, but none of the closing costs if we don’t sell a house, so the money spent per unsold house is $105,000 (just the costs of renovation and of our spectacularly ineffective marketing). These vacants decrease the property tax increment we should have realized by 20%, meaning we only realize $51.14 million over thirty years — but even though we are also on the hook for renovating 200 houses we never sell, we still come out $4+ million ahead over 30 years. And we’ve still moved 800 families into permanent affordable homes where they have had a chance to build assets.

The permanent affordability component of this plan is key — we want to take advantage of the well-documented role that community land trusts can play as neighborhood stabilizers. CLTs mitigate against housing cost-induced displacement triggered by gentrification, and also work to minimize foreclosures in an economic downturn—because of the lower mortgages associated with real affordability and because there is a non-profit community institution with a vested interest in maintaining community stability rather than rushing to evict and foreclose. The CLT is a resource not just for affordable prices, but for financial education and counseling — and the investment at scale the People’s TIF unlocks creates the conditions and funding stream to support this vital work.

Of course, permanent affordability does raise a few interesting problems. With the resale value of the houses capped by the CLT’s underlying ownership of the land, it’s important that property tax assessments reflect this — we don’t want either the homeowners or the trust itself saddled with a tax bill that mechanically follows rising market rates as communities stabilize. In essence, the land value should be exempted from tax assessments, and the property tax should be calculated solely on the basis of the improvements made to the home on top of it. That being said — some increased assessment should be possible over the life of the bond — permanent affordability, after all, should allow modest returns to homeowners and the trust itself on resale, especially when AMI increases. In other words, assuming Baltimore pulls itself out of its long economic tailspin, we are likely to see the value of these homes rise, even as they remain pegged to permanent affordability in their resale value. And that means the numbers above get even more favorable, because the initial investment stays the same while the amount of tax revenue realized grows.

It’s also important to note that it is conceivable to structure the program above in a staggered manner, rather than dumping 1,000 below-market rate properties on the market all at once. Assuming you don’t incur too many additional costs by staggering the total investment in a series of bond issues, you could roll this out over five years, 200 houses at a time, and the math would work out more or less the same.

Above I noted that I excluded any knock-on benefits to the City from my math, to keeps things simple. But these are important to note as we make the full case for the People’s TIF. A 2009 study from Baltimore, for instance, concluded that each vacant property on a block increased annual police and fire expenditures by $1,472, and on top of this there’s the public costs of maintaining vacant property — estimated based on a Philly study at $500/year per property. So beyond the extra tax revenue received, which is largely earmarked for the repayment of the bond issue, renovating 1,000 homes translates to nearly $2 million in savings for the city — and this is a minimum lower bound, since we’re not considering any of the extra revenues and multipliers that come with increased local employment and stable communities. Of particular note is that these kind of cost savings are not realized with development of vacant industrial sites — like Port Covington — which does not just by being vacant cost the city more in fire and policing. And these savings can help offset the the cost of providing additional services to the residents of our new permanently affordable homes — the $2,000 in cost savings is, after all, roughly equivalent to the property taxes paid by these residents that are diverted into financing the renovation initiative. And this doesn’t take into account the millions and millions of dollars that are going to be paid in interest financing these mortgages — with proper forethought, a local CDFI could be deployed as a partner in making these mortgages, keeping this additional revenue circulating within an inclusive Baltimore economy. While I’ve suggested meeting “low housing cost” targets—for folks making 60% of AMI—with a program focusing on rowhomes, you could likely use similar mechanisms to create even deeper affordable housing by focusing on shared equity multi-unit developments instead of single family homes, although I haven’t worked out the math for that here.

I welcome readers to try to poke holes in what I’ve sketched above, challenge my assumptions, and so on. But I doubt that anything is so far off to damage the basic point, which is that the same incredibly powerful speculative mechanisms that are being used to drive elite-friendly harbor-side projects for well-connected developers could just as easily be used to address urgent needs for permanently affordable housing in other Baltimore communities. We need our municipal government to evaluate TIF-driven development with an equity lens, and not be afraid to think outside the box to find creative uses for these mechanisms that drive greater inclusion, not amplify the deadly dynamics of exclusion and continuing marginalization at work in Baltimore’s low-income communities of color. And we need community-rooted groups playing offense as well as defense, not just shutting down inequitable development, but working to bring transformative plans for truly inclusive development to the table, and demanding the support these plans deserve from our elected officials.

Want more on equitable, community-driven TIFs? Read this great report on a Chicago TIF where the money was allocated to neighborhood improvements using a directly democratic participatory budgeting process.