A housing shortage in Janesville has put pressure on city leaders to green light more residential projects, and offering tax increment financing, or TIF, deals is a logical next step.

Once reserved for blighted industrial areas, TIF deals have become instrumental for redeveloping all types of business sites, even retail. Other communities also direct TIF money at apartment complexes, and some developers say they won’t build without a TIF.

We favor expanding TIFs to residential projects, but we’re not celebrating the idea.

Developers who spoke at a housing forum last week highlighted, albeit unwittingly, how wealthier communities have essentially forced poorer communities to resort to TIFs. As Hovde Properties President Mike Slavish explained it, his company can earn between $2 and $2.50 per square foot in rent in downtown Madison versus only 87 cents in Janesville. Building costs are about the same in each city, and so the only way to get a return on investment in Janesville is with financial incentives, he said.

In other words, Madison is such a hot real estate market that developers don’t require tax breaks to build there. But to lure these developers to Janesville, city officials would need to refund a large portion of developers’ property tax payments.

We can hear the homeowners at this point grumbling, “Why should I sign up to subsidize apartment developments?”

Residential TIFs are indeed more difficult to justify than TIFs that create jobs. But if the city wants to attract more industry, it will need more workers, and for workers you need housing. Janesville may have no choice but to pursue TIF deals.

The city can—and should—tailor these deals to protect taxpayers’ interests as much as possible. What we don’t want is for an apartment development receiving TIF funds to fall into disrepair and become a drain on both taxpayers and government service providers. Any residential TIF deal should include conditions and a pay-as-you-go structure to encourage developers to maintain properties over the long term.

Finally, the city should treat skeptically developers’ insistence that they need a TIF deal to build in Janesville.

The fact is, a developer proposed building high-end apartments on the city’s northeast side last year and without requesting any TIF. The area—wedged between big-box stores and a residential neighborhood—would have been ideal for apartments, but nearby residents made a fuss. In the end, the Janesville Plan Commission rejected the proposal, putting NIMBYism over the city’s greater needs.

The commission did approve this year two eight-unit apartments—again, without a TIF deal—on the city’s south side.

Unfortunately, such proposals are too small and too few, and the city needs new housing now. If there were a better way to spur residential development, we’d embrace it. But the city appears to have run out of options, and residential TIFs—under limited circumstances—are worth a try.

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