In 1972, the average home price in the United States was approximately $30,000. Fifty years later, that number broke $500,000, an increase that is, no doubt, aggravated by a 4.5 million-unit deficit in supply. State and local governments have largely failed to respond and continue erecting regulatory barriers to new residential construction. But, in 2023 the Ohio General Assembly adopted a new tax abatement program that combats the shortage with an incentive for more housing development.
Section 5709.56 of the Ohio Revised Code encourages the creation of new residential parcels by alleviating the real estate tax burden imposed upon developers in two ways. First, this program establishes a baseline taxable value for subdivided lots that distributes a prorated share of the purchase price of a parent parcel across the lots subdivided from that parent parcel in the same year. Second, Section 5709.56 freezes the taxable value of the newly created lots for a period of eight tax years, subject to certain conditions that render a property ineligible. The following example readily demonstrates the benefits inuring to developers under this statute:
ABC Development purchases a ten-acre tract in Coshocton County for $100,000. In October 2025, ABC Development files a record plat with the Coshocton County Recorder that creates twenty new, one-half-acre parcels. In November 2025, ABC Development files an application pursuant to Section 5709.56 to abate the taxable value of these properties. On January 1, 2026, the Coshocton County Auditor assesses each parcel at $7,500.
In this hypothetical, the taxable value of each parcel in the 2026 tax year will be $5,000, and that value will remain on each parcel through the 2033 tax year, or until conditions arise to make individual parcels ineligible for the abatement, regardless of changes in the valuations of adjacent parcels.
The basic operation of Section 5709.56, demonstrated above, is clear on its face. Even so, several open questions yet remain, resulting in fractured treatment of the incentive as county auditors resolve these issues on an ad hoc basis. Among the most critical of these issues is which value the statute prorates. Some counties prorate a piece of the purchase price proportionate to the percentage of the parent parcel being subdivided to determine a parcel's unexempted value. Other counties undertake no such arithmetic, instead prorating the parent parcel's entire purchase price in every phase of development, regardless of the acreage actually included in the section, the size of previous phases, or the acreage remaining with the parent parcel. Thus, which county exercises tax jurisdiction over a project will alter the calculus of whether to develop a project in phases or with a single record plat.
Another imminently important issue arises as to the effect that certain tax increment financing (“TIF”) districts have upon a parcel's eligibility for abatement under Section 5709.56. Certain counties endorse the position that a parcel's presence within a TIF district is dispositive of that parcel's eligibility for abatement. However, Section 5709.56 contains clear indicia that parcels remain eligible for abatement until a TIF actually captures a parcel's improvement value.
To be sure, Section 5709.56 provides undeniable benefits to developers by minimizing the tax burden created by vacant parcels held in inventory, even as the taxable value of neighboring parcels soar. Nevertheless, the abatement provided by this program is not suited to every project. And determining whether to apply for the abatement can become a fact-intensive question guided by the contours of the enabling statute. Even so, the tax benefits provided by Section 5709.56 can radically expand the feasibility of, and opportunities for, certain projects by decreasing the amount of red ink used in the budget for taxes.
If you are preparing to subdivide a tract of land to facilitate residential development, this program may be to your benefit, especially as costs dedicated to materials and labor, and demand for good housing opportunities, continue increasing.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
