Popular 10-year county property tax break spurs new housing

It’s no secret that a chronic housing shortage affects both urban and rural Minnesota in many areas. So three years ago, Martin County officials in southwestern Minnesota decided to do something about it, taking a chance on an experimental program that other counties may want to duplicate.

The county board rolled the dice on a plan to forgo the county’s share of property taxes on new home construction, a tax holiday of up to a decade for recipients. The county’s “if you don’t tax it, they will come” strategy has turned out to be too good of a deal for an increasing number of families to pass up, according to the Fairmont Sentinel.

Martin County is just wrapping up the third year of its tax abatement program. The program offers up to 100 percent abatement of the county’s portion of real estate taxes on new single family homes for up to 10 years.

County Assessor, Mike Sheplee, said that the Martin County Economic Development Authority and Martin County Commissioners have been working toward alleviating the housing shortage for several years which was the driving force behind the program. Ultimately the program provides incentive to encourage construction of new owner occupied housing units.

Sheplee pointed out that when people leave their existing home to start construction on a new one under the program, it frees up their old home for someone else to purchase and occupy.

The approval process for the tax break takes about six weeks. So far, so good with some two dozen new house projects approved under the tax abatement program throughout the county.

It’s a five year program but if it continues to be successful, there’s a possibility that it will be extended. To date, 24 homes have been constructed as part of the program at the collective value of $9.2 million.

The houses have been spread across 11 townships and the cities of Fairmont and Welcome. Seven were approved in 2020, four in 2021 and 12 in 2022.

For a single family house, taxes will be paid annually, but the county portion of the tax bill will be refunded in full. County taxes on a $360,000 single family home in Fairmont are about $1,480 annually so the refund over 10 years would be roughly $14,800.

County officials consider the program a win-win for both taxpayers and recipients. The county tax base increases with the new construction, which pays off for other local government entities.

After 10 years when no more refunds are going back, the $9 million value thus far will contribute to the tax levy for the county.

Sheplee pointed out that in the first 10 years, the township and school district portion of the property taxes will have immediate benefit from an increased tax base.

“I have yet to find a negative to it. It benefits the people building. It benefits all of the tax payers due to the increased tax base. It also adds construction jobs,” Sheplee said.

The idea of cutting taxes goes against the grain of many elected officials. But in Martin County, tax abatement appears to be more than worth it.