When urban areas begin to experience a regrowth, you can always anticipate the city providing some tax incentives for developers to build new condos and apartment buildings. All you need to do is drive by a city skyline and see how many cranes there are. If you see any at all or even more thanwhy cities like condos one, there is a mini-boom in place.

And while there may not be a mini-boom where you live there are cities across the country that are experiencing exactly that. But how do cities get involved and why do they care so much about building as many homes as possible on a small footprint?

One of the reasons has to do keeping the city “green” with an eye on energy conservation. When more people live close to their jobs, dining or entertainment, there will be less emissions in the air because the people won’t be driving very far, if at all, and taking public transportation.

But the most important reason cities encourage building condominium towers is due to the increased property taxes gleaned from the same lot size. Property taxes are based primarily on a home’s assessed value. Public appraisers will place a value on all residential and commercial property. The property tax rate is then used to issue a tax bill and the property owner pays the property taxes when due. And when you can stack private property on top of one another, you’re getting more bang for the square footage buck.

This is easily explained by viewing a 10,000 square foot vacant lot and building a brand new 3,000 square foot three bedroom home. Say that home might be worth $300,000 and the tax rate is 1.00% of the value, the annual property tax bill is $3,000. But there is no more land and that’s all that’s coming from that 10,000 square foot lot. Now imagine building 10 more three bedroom homes, all exactly alike, on top of one another. Now that 10,000 square feet is generating $30,000 per month in tax revenue and occupying the very same space on that lot.

Encouraging condo development downtown by public officials means lots of construction jobs and an economic impact on downtown, but in the long run it can turn out to be a cash cow for the city coffers.