Chattanooga has taken a step forward in addressing its housing affordability crisis with the launch of a new incentive program designed to encourage the development of attainable housing.
On July 22, the City Council voted to amend the zoning ordinance to implement the Voluntary Incentives Program (VIP) – a no-cost initiative that offers developers greater design freedom in exchange for including affordable units in their projects.
The program, set to begin accepting applications Wednesday, Aug. 6, is the first of its kind in Tennessee. It was made possible through state legislation championed by Sen. Todd Gardenhire, who collaborated with the Mayor’s Office and the Tennessee Municipal League to pass a law allowing local governments to offer zoning incentives for housing developments that include dedicated attainable units. Although the local legislation creating VIP passed in January, it required this final zoning amendment before it could be activated.
Under VIP, developers of multi-unit projects can receive substantial zoning benefits – including density and height bonuses, as well as reduced parking requirements – if they set aside at least 10% of their units for households earning 80% or less of the area median income.
In Chattanooga, that threshold represents an annual income of roughly $56,000 for a two-person household. City officials hope the added freedom will make it easier for developers to build affordable units that would not otherwise be financially feasible under current zoning restrictions.
Mayor Tim Kelly praised the vote as a “monumental step forward” in the city’s efforts to ensure that Chattanoogans of all income levels can find a place to live. He said the program reinforces the city’s broader commitment to making housing more accessible and equitable.
Megan Miles, the city’s director of housing policy, echoed those sentiments, calling VIP a powerful new tool in the city’s affordable housing strategy.
“Chattanooga is taking advantage of every opportunity to address our housing crisis. The VIP adds another powerful tool to our housing toolbox and will help create the affordable options our residents need.”
The new program builds on a series of housing policy reforms introduced under Kelly’s administration. Over the past two years, the city has implemented a comprehensive zoning overhaul – the first since the 1960s – modernizing regulations to encourage more housing types and increase density in appropriate areas.
It has also revised the Affordable Housing PILOT (payment-in-lieu-of-taxes) program, expanded support for accessory dwelling units, and launched initiatives such as Invest Chattanooga to attract private investment in affordable housing. Chattanooga’s integrated approach to housing has drawn national attention and was recently highlighted in the National Housing Crisis Task Force’s State and Local Housing Action Plan.
Developers will be able to combine VIP incentives with other local programs, including the PILOT tax abatement, though more stringent affordability requirements will apply to projects that stack incentives.