Public Asset Corporations

Public asset corporations are public agencies created specifically to develop publicly owned land for public impact, including mixed-income and affordable housing. By entering into cooperation agreements with other public entities, these corporations can gain control of various publicly owned lands across city government, land banks, public housing authorities, local transit agencies, local school districts, and more. They then undertake a planning and community engagement process to identify the needs of the community and optimal uses of that public land. They may engage in demolition, site preparation, environmental remediation, rezoning, environmental review, and other activities to ensure that sites are “redevelopment ready.”

Once publicly owned land is ready for redevelopment, public asset corporations work with private sector developers to request solicitations for building projects. In the case studies we highlight below, the public asset corporations solicit requests for qualifications rather than requests for proposals to identify developers for collaborative work on developing mixed-income housing and other socially beneficial projects on a site. They negotiate with the developer on the value of the publicly owned land, and may deploy additional public financing tools, including tax abatements or exemptions, below-market loans, bonds, equity investments, grants, operating subsidies, or other mechanisms. Public asset corporations often retain an ownership stake in their projects, retaining ownership over the land, acting as joint-venture partners in a development, or investing equity to ensure long-term affordability. This ownership model enables the public sector to gain positive returns on investment from publicly owned land.

The Atlanta Urban Development Corporation and Invest Chattanooga, created in 2023 and 2024 respectively, are wholly owned subsidiaries of their cities’ public housing authorities and share many of the same development tools and powers. Establishing these organizations as wholly owned subsidiaries of the public housing authority offers three benefits. First, it allows them to operate with the backing of the public housing authority while reducing regulatory burdens. Second, the subsidiary structure insulates the public housing authority from the public asset corporation’s debts, obligations, and liabilities, allowing the authority to focus on traditional housing development tools while the public asset corporation works on public land development. Third, while public housing authorities often have the technical power and development experience to create new housing units, they typically focus on the use of Low-Income Housing Tax Credits, vouchers, and rental assistance programs to finance deals. Creating a new entity allows that organization to focus on the use of new public finance tools, mixed-income and market-rate developments, and land redevelopment owned by entities other than the housing authority.

Both the Atlanta Urban Development Corporation and Invest Chattanooga have independent boards of directors. The Atlanta Urban Development Corporation is governed by an independent eleven-member board of directors appointed by Atlanta Housing and the City of Atlanta:

• Seven voting members nominated by the Mayor and appointed by the board of Atlanta Housing, including at least four members of Atlanta Housing’s board
• Four ex officio nonvoting members:
  • Mayor or Mayor’s designee
  • Chair of City Council Community Development/Human Resources Committee
  • CEO of Invest Atlanta
  • President and CEO of Atlanta Housing

Invest Chattanooga is overseen by a five-member board, including:

• Three members appointed by the board of the Chattanooga Housing Authority.
• Two members appointed by the Mayor of Chattanooga.

Public asset corporations use a four-part financing toolkit to decrease capital costs and, in turn, development costs for public projects: public land contributions, property tax abatements, below-market construction loans, and access to municipal debt markets or low-cost permanent financing. While each of these tools may exist in an existing agency or across multiple existing agencies, Public Asset Corporations are able to pull them all together as a comprehensive suite of options.

Public Land Contributions

Selling or leasing public land at below-market prices can significantly reduce housing development costs. Public asset corporations can negotiate with their development partners over discounted public land values to drive affordability goals and other public benefit goals. Both the Atlanta Urban Development Corporation and Invest Chattanooga have operating and cooperation agreements with other local public agencies, such as the city, to receive public land at low or no cost from those agencies for redevelopment. Frequently, these land contributions serve as equity-like inputs in the capital stack, significantly reducing the cash, equity, and debt required for a project.

Tax Abatements and Exemptions

Property taxes can be a significant operating cost in many jurisdictions. Abating or exempting property taxes on housing projects altogether can decrease operating costs, allowing reduced rents for tenants. That combination can certainly enhance feasibility, but it does have impacts on long-term public benefits that are important to consider. Under state laws in both Georgia and Tennessee, public housing authorities and their subsidiaries are able to exempt properties they control from property taxes. By creating a Public Asset Corporation and partnering with developers, these cities are able to have a deeper relationship and understanding with a developer about the financial feasibility of the project, can combine tax abatements with the other tools described here, and can streamline the process through a joint venture. In turn, that allows public asset corporations to do a better job “right-sizing” and targeting those tax abatements to help make projects financially feasible without giving away too much. Both Atlanta and Chattanooga require a percentage of units to be affordable to households earning under certain income thresholds to have the project qualify for tax abatements.

Below-Market Construction Loans

Some jurisdictions have created revolving, low-interest mezzanine funds to reduce capital costs for project development. Montgomery County, MD, for example, recently established a $50 Housing Production Fund backed by a $3 million annual commitment to the county’s housing trust fund to lower the cost of capital for project development. Atlanta’s 2023 Housing Opportunity Bond financed their own housing production fund, a $38 million appropriation managed by Invest Atlanta to provide low-cost, equity-like mezzanine debt. Invest Chattanooga similarly deploys a $20 million housing production fund. With interest rates below market rate, these loans can cover up to 20%, in Atlanta, or 25%, in Chattanooga, of the capital stack at construction with three- to five-year terms. In all three cities, Housing Production Fund loans can cover pre-development, site acquisition, preparation, and improvement, and initial construction. The capital functions like preferred equity at approximately a 5% rate of return, considerably lower than the 1520% internal rate of return (IRR) typically required by market capital.

Low-Cost Permanent Financing

Since, both the Atlanta Urban Development Corporation and Invest Chattanooga are wholly-owned subsidiaries of their local housing authorities, they can draw from municipal debt markets, and access other preferred capital sources like Tennessee’s Community Investment Tax Credits. Preferential capital products reduce the cost and provide permanent takeout financing for construction debt.

In addition to these financial tools, the Atlanta Urban Development Corporation and Invest Chattanooga utilize various structures to achieve affordability goals. In the case of the Atlanta Urban Development Corporation, partners must commit to affordability requirements, with 20% of units affordable at 50% AMI; 10% of units at 80% AMI, and all units below 140% AMI.

To achieve long-term affordability, the Atlanta Urban Development Corporation and Invest Chattanooga have access to different ownership structures, including Joint Ventures (JVs) and Public Ownership. Projects are structured as JVs where the public asset corporation has an ownership stake of at least 51%. This public ownership structure allows public asset. corporations to maintain long-term control over project governance, affordability covenants, and use restrictions. By structuring deals this way, public asset corporations ensure that public investments generate lasting community benefits, not just short-term gains. JV structures include:

• Public land JVs: These public asset corporations’ partner with equity partners or fee developer partners to redevelop publicly owned land through joint venture structures that align incentives and preserve long-term affordability;
• Capital JVs: In response to unsolicited partnership proposals, public asset corporations can contribute Housing Production Fund mezzanine financing and tax abatements to support development on privately owned land; and
• Ground lease financing: Public asset corporations can structure projects through long-term ground leases, providing tax abatements and potential public financing to enable new construction or the acquisition and rehabilitation of existing properties, while retaining public ownership of the land and receiving a regular revenue stream.

The Atlanta Urban Development Corporation has also experimented with Procurement Flexibility to improve public outcomes. After identifying potential redevelopment sites, the city undertakes a community engagement process to determine potential uses of the site, completes any required rezoning, and fully entitles the site prior to partner procurement. This process maximizes public land value and shortens the development timeline, reducing uncertainty and risk for developers who ultimately compete to build on this public land.

Once a property is entitled, the Atlanta Urban Development Corporation relies on requests for qualifications (RFQs), rather than traditional Requests for Proposals (RFPs). Traditional public procurement projects are cumbersome; requests for proposals (RFPs) often specify form, function, processes, and lengthy requirements to which a bidder must adhere in a detailed bid. Submitting a bid may require a potential bidder to have fully developed architectural renderings, dedicated project financing, and detailed plans to address entitlement issues (e.g., zoning and permitting). Collectively, these requirements increase up-front costs and back-end uncertainty, limiting respondents and increasing costs for potential bidders before a proposal is even selected.

The RFQ process prioritizes developer capacity and alignment with broad affordability and ownership objectives. Rather than reward bidders for detailed proposals which may or may not ever materialize, the RFQ process asks whether a respondent can successfully complete a project in alignment with the Atlanta Urban Development Corporation’s public use and affordability objectives. After selecting a qualified developer through this competitive process, the corporation works collaboratively with the developer to arrange partnership and financing structures, address entitlement issues, and address use, affordability, and development plans. The structure as a public corporation provides assurance to developer partners in working with city permitting agencies (zoning, planning, utilities, etc.).

Unlike the newer entities in Atlanta and Chattanooga, the Port of Greater Cincinnati Development Authority has operated since 2001 (and expanded in 2008) with broad economic development powers, including the power to own, lease, and develop real estate, issue bonds, and manage the county Land Bank, with equally broad powers. Additionally, under state law, Ohio port authorities are exempt from sales tax.

The Port of Cincinnati is an active public asset corporation, pursuing single-family housing developments using its wide range of tools through its Land Bank, ability to issue bonds, and ability to cooperate with other governmental agencies. For developments using its public finance tools to assist the private sector, it retains ownership of multi-family projects, exempting building materials from the sales tax to significantly reduce construction costs. Through the Land Bank, it uses its tax status and public grants to reduce costs when selling real estate for single- or multi-family development Additionally, the Port of Cincinnati looks for opportunities to build market rate housing, reinvesting profits into affordable housing in the same neighborhood

surrounding these new developments. In 2023, the Port used its bonding capacity to bid at auction for a portfolio of 194 single-family rental homes, with the goal of investing in them and selling them as affordable home ownership opportunities. Leveraging its financial capabilities to buy a real estate portfolio with the aim of transforming a neighborhood is the sort of quick action at which public asset authorities can excel.

These three examples — the Atlanta Urban Development Corporation, Invest Chattanooga, and the Port of Cincinnati — highlight how public agencies can leverage public land values, powers, and finance tools to create affordable and mixed-income housing developments that benefit communities and unlock public land for development.