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HF 1037

A bill for an act modifying economic development provisions relating to housing and residential development in urban renewal areas.

2025-2026 Regular Session

Expands economic development to include workforce housing, tightens TIF use caps, and temporarily cap LMI requirements for certain city projects while extending TIF for others.

Explanation of vote.
#economicdevelopment #housing #urbanrenewal
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Bill Summary · HF 1037

Summary — HF 1037 (2025)

Title: Modifying economic development provisions relating to housing and residential development in urban renewal areas
Introduced: April 28, 2025
Status: Passed both chambers (House 90–0, Senate 45–0); explanation of vote recorded (5/20/2025). Substituted for SF 652. Senate amendment H‑1346 / S‑3174 adopted.

Purpose

HF 1037 updates Iowa’s urban renewal (TIF) and economic development law to:
- Explicitly include workforce housing as an economic development activity;
- Change how certain property tax levies interact with tax‑increment financing (TIF);
- Limit long‑running diversion of tax revenue into municipal TIF funds; and
- Provide a one‑year, limited exception to LMI housing requirements for certain housing projects while extending allowable TIF collection for those projects.

Key provisions (by division)

  • Division I — Housing

    • Expands the Code chapter 15A definition of “economic development” to include “the provision of workforce housing.”
    • Requires consideration of development policies that advance workforce housing.
    • Revises the low‑/moderate‑income family definition (≤80% of the higher of county or statewide nonmetropolitan median income per HUD guidelines) and expands the statutory definition of “low and moderate income family housing” to include projects meeting Iowa Code §15.353 standards (examples: multi‑unit buildings, upper‑story units, brownfield/grayfield rehabilitation, HUD quality standards, board‑set cost caps).

  • Division II — School foundation levy (Code §403.19)

    • Excludes the school foundation property tax (section 257.3; statewide uniform levy of $5.40 per $1,000) from TIF capture for URAs created or expanded on or after Jan 1, 2026.
    • Applies to property taxes due/payable in fiscal years beginning July 1, 2027 (FY 2028 collections onward).

  • Division III — EMS levies (Chapter 422D)

    • Excludes emergency medical services levies from TIF capture.
    • Applies to property taxes due/payable in fiscal years beginning July 1, 2026 (FY 2027 onward).

  • Division IV — Limits on indefinite revenue diversion

    • For URAs without a statutory duration limit, after 15 years (from the division’s effective date or 15 years after first certification of qualifying TIF debt, whichever later) only up to 75% of the increment may go to the municipality’s special fund; beginning in the 6th year after that, the cap drops to 60%. Excess increment is returned to other taxing districts.
    • Fiscal note indicates impacts begin in later decades (example: FY 2041 and FY 2047 timelines cited).

  • Division V — Housing project carve‑out (temporary)

    • For housing/residential projects approved between July 1, 2025 and July 1, 2026 in economic development areas fully inside city limits for 20+ years, the required low‑and‑moderate‑income (LMI) housing assistance may be capped at 20% of the original project cost.
    • For such projects the allowable TIF division is limited to 20 fiscal years, beginning with the second fiscal year after the municipality first certifies the qualifying debt/advances.

  • Division VI — Valuation cap (summary in fiscal note)

    • Imposes a phased cap on the share of a city’s assessed valuation that may be located within URAs (details and effective timing referenced in fiscal materials).

Who is affected

  • Cities and local governments that create or expand URAs and use TIF revenue.
  • School districts (through exclusion of the foundation levy beginning in specified URAs).
  • EMS taxing districts (where levies exist).
  • Developers of qualifying housing projects and low/moderate‑income households (through modified LMI rules and the temporary carve‑out).
  • All other overlapping taxing districts (will receive redirected increment under new limits).

Fiscal impact and timing

  • Fiscal impacts are largely uncertain and implementation is phased:
    • Division II applicability to URAs created/expanded on/after Jan 1, 2026 → affects property taxes due FY 2028+.
    • Division III applies to property taxes due FY 2027+.
    • Division IV caps start many years after enactment (per fiscal note, FY 2041 and FY 2047 example timelines).
    • Division V carve‑out applies to a narrow project approval window (7/1/25–7/1/26).
  • State Legislative Services fiscal note: many impacts unknown; FY2024 urban renewal report cited 4,194 TIF districts and $4.45 billion outstanding TIF debt; FY2025 EMS levies in 12 counties generated ~$4.5 million.

Legislative actions

  • Introduced 4/28/2025; passed House 5/12/2025 (90–0); passed Senate 5/13/2025 (45–0); amendments H‑1346 / S‑3174 adopted; explanation of vote recorded 5/20/2025.

Compiled from official sources — confirm details with the bill’s official record.

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