Virtually every think tank that has studied housing has concluded that America has not built nearly enough housing over the past several decades. The resulting shortage has pushed housing of all types beyond the financial reach of many people.
While the race should be on to build diverse and attainable housing, many communities are wrestling with issues of infrastructure capacity. Even if a developer wants to build workforce housing within reach of workers, the community-based effort can be stalled by a lack of roads, sidewalks, water, sewer and stormwater systems and power to support new dwellings.
One way to resolve the challenge is to encourage infill development — new single- and multifamily units on land already served by infrastructure, as well as parks, schools and amenities. Many cities are removing barriers and incentivizing infill development.
Breaking down silos that exist among a dozen or more authorities, utilities and regulators is key. Collaboration can ensure that infrastructure is in place to sustain momentum toward feasible, affordable and sustainable new housing development.
Educating Communities About Options to Pay for Growth
In the rapidly growing Greater Knoxville area, the East Tennessee REALTORS® (ETNR) is using an NAR grant to create a class about how communities pay for growth.
Maria McHale, ETNR’s governmental affairs and policy director, said many area municipalities are behind on infrastructure. But she said they cannot be blamed because it is a cumbersome process to layer state and federal funding with local resources.
She said some local governments have considered impact fees, increased taxes on property sales and other taxes that “ask a very small number of residents to pay for a broad community benefit.”
The course being developed by ETNR would teach local leaders about development approaches that help keep the money generated within the development area.
“Rather than a one-time impact fee, municipalities can make use of tools like assessment districts, infrastructure districts or tax increment financing,” McHale said. “These methods help add to tax rolls and use the increased value to pay for sidewalks, sewer systems and roads.”
Some large municipalities can issue bonds against future TIF revenue to pay for essential infrastructure upfront. The captured taxes from the growing area pay off the bonds.
“There are partnerships and systems a community can use to pay for infrastructure without resorting to fees that unfairly impact one sector of the business community — and don’t work, because a one-time fee cannot create the long-term funding needed for infrastructure improvements and maintenance.”
Helping Elected Officials Match Resources to Priorities
McHale hopes ETNR’s growth infrastructure curriculum can become a toolkit for local leaders. She notes that many local elected officials might be new to public office. They care about public service but are not familiar with smart growth and tools to support it.
“We want to get them up to speed and to match them to resources and other municipalities that have succeeded in connecting all those pieces,” she said. “This is another opportunity for REALTORS® to serve as a valuable resource for the community.”
ETNR has sought input from municipal, regional and state authorities to identify the greatest infrastructure needs.
“Sometimes the revenue exists, but are we prioritizing it the way we need to? Or is the squeaky wheel getting all the grease?” McHale asked. “We will help make sure municipalities are advocating for and articulating what priorities are in their areas — and land planning in a way that makes the best use of revenue. The goal is to bring all parties together to show that the best return on investment is for the long-term health of the community.”
McHale said REALTORS®, who often serve on zoning boards and local commissions because of their expertise, truly understand the intersection between planning and land use and how it impacts a real person’s quality of life.
“Reasonable density and commercial development in a mixed-use environment can generate revenue three to four times faster than just residential by itself,” she said.
“Let’s stop and think about how we should pay for this. From an economic development and real estate perspective, the answer lies in land use and zoning,” said McHale, citing a study that demonstrates the value of infill development.
Smart Growth Provides Fiscal Benefits to Municipalities
“The up-front cost to government and taxpayers of building roads, water and sewer lines and other public utilities to serve new homes near existing jobs, stores and transit is approximately $21,000 lower per home than the infrastructure costs associated with building homes at the outer edge of cities and towns,” according to a study by the World Resources Institute and ECOnorthwest, with support from The Pew Charitable Trusts.
The research, released in May 2026, estimated the fiscal impact of new housing in 10 states of vastly different sizes and geographies. It found:
- The ongoing costs to government and taxpayers of maintaining roads and utilities that serve new homes are 50 percent lower, on average, when those homes are built near existing jobs, stores and transit.
- Property taxes generated per acre are 13 percent higher, on average, when new homes are built near jobs, stores and transit.
- On average, the payback period for infrastructure associated with new homes is 50 percent longer when those homes are built in outlying areas than when they are built near existing jobs, stores and transit.
- Local government can keep property tax rates down while maintaining healthy balance sheets when more housing is built in established areas.
Smart Growth From a Market Perspective in Knoxville
The City of Knoxville is taking a fresh perspective on economic development by incorporating market-based perspectives from developers, investors and builders. The idea is to grow strategically using flexible and creative tools.
“Someone may be interested in a development site. We want to look at it holistically — to make sure affordability, mixed incomes, and for-sale and for-rent figure into the housing. We also want to ensure growth is supported in all categories of utilities, transportation, parks, public space, plazas, greenway connections and programming,” said Rebekah Jane Justice, Knoxville’s chief of urban design and development.
Justice urges cities to conduct holistic community engagement and to truly understand the unique local market before creating economic incentives. She said Knoxville is seeking projects that fit within its growth needs.
Funding Development Through TIF and PILOT
The city launched a request for qualifications seeking a developer for a portion of its South Waterfront. It is part of a 20-year improvement strategy for approximately 750 acres fronting three miles of the Tennessee River, directly south of downtown and the University of Tennessee, Knoxville. Improvements have included more than $61 million in public investment and $400 million in private investment.
“South Waterfront is a TIF (tax increment financing) district. Private investment turns into the ability to invest in infrastructure improvements. It is leveraged into utility upgrades, parking garages, bridges, public parks and public spaces,” Justice said of creating a successful public realm through a public-private partnership.
Knoxville also uses payments in lieu of taxes (PILOTs) as an economic development incentive that can freeze a property’s tax value for a set period — for example, 10 to 20 years — to incentivize growth on vacant urban lots or guarantee that a development has a certain percentage of affordable or workforce housing.
“A PILOT could pay for a structured garage, with ground floor retail, with 100 shared parking spaces to serve an infill, mixed-use development,” Justice said.
When Covenant Health Park, a $114 million, 6,355-seat venue for professional soccer, minor league baseball and events, was developed, the city worked with the private sector to ensure housing, retail space and public spaces were included, along with infrastructure required to support the economic hub on the eastern edge of the city core.
Is Key: The East Tennessee Development District
The East Tennessee Development District (ETDD) represents 16 counties and 56 municipalities in the East Tennessee region. It is funded by a combination of federal grants, state appropriations, local per capita assessments from member city and county governments and program service fees.
“Development districts exist to solve problems that don’t stop at jurisdiction boundaries — housing, workforce, transportation, utilities, resilience and economic development are deeply interconnected. Our role is to help communities see the larger picture, align investment, leverage funding and build consensus around solutions that benefit the entire region,” said Tim Hendrick, ETDD deputy director and environmental planner.
ETDD conducts a strengths, weaknesses, opportunities and threats (SWOT) analysis of regional needs to produce its Comprehensive Economic Development Strategy, which is updated annually. Anticipating infrastructure needs is a major element, helping ensure that utilities and other systems are in place to support growth.
Multibillion-Dollar Investment Will Drive Growth, Require Housing
Oak Ridge National Laboratory (ORNL) is a federally funded research and development center with a $2.6 billion annual budget dedicated to nuclear science, energy, high-performance computing and national security. Located about 30 minutes west of Knoxville in the city of Oak Ridge, which spans Anderson and Roane counties, ORNL is a major economic driver within the ETDD.
Drawn by the Oak Ridge nuclear ecosystem, the French state-owned nuclear fuel company Orano is building a massive $5 billion uranium enrichment facility — the largest industrial investment in Tennessee’s history.
“That will need ETDD assistance with housing, including workforce housing, schools, water and the coordination with the Tennessee Valley Authority — the largest public utility in the country. Some of our municipalities are very small — a few hundred residents — so we help them with grants and navigating funding,” said Hendrick, noting that the ETDD also creates regional partnerships with the University of Tennessee.
The ETDD works with the Appalachian Regional Commission to provide major infrastructure funding via water and sewer grants. It can also help communities with infrastructure needs access federal funding from the U.S. Department of Housing and Urban Development and the U.S. Economic Development Administration.
Whether the project involves urban infill or compact, mixed-use development in an area planned for growth, the keys are infrastructure that is in place or underway, smart-growth principles and strong collaboration among developers, municipalities, utilities and nonprofits such as REALTOR® associations.
