A city panel on Wednesday approved a property tax break for a $20 million, 174-unit apartment building on Chattanooga’s Southside in the first use of a revised housing incentive program.

All of the units in the project by Nashville-based Elmington Capital Group would be “affordable” housing, with rents ranging from $600 to $750 a month, according to the company.

Developer John Shepard told the city’s Health, Educational and Housing Facility Board that rent for a two-bedroom apartment would be nearly half what a market-rate complex nearby is charging.

“It would be decent quality housing for people who are residents in this area but are being priced out of it,” he said about the project for the vacant three-acre site near Finley Stadium at 2108 Chestnut St.

All of the apartments, called Chestnut Flats, would be income- and rent-restricted at 60 percent of the area medium gross income, developers said.

The payment-in-lieu-of-tax agreement term is for 10 years following a construction period of two years. The PILOT also includes a five-year phase-in period from 20 percent up to 100 percent.

The three- or four-story building would hold 84 one-bedroom units and 90 two-bedroom apartments, according to developers.

“It puts housing near where people work,” Shepard said.

Board member Dana Perry said she’s “thrilled to hear about the proposal” and that the development group can make the apartment project work.

Helen Burns Sharp, founder of taxpayer watchdog group Accountability for Taxpayer Money, said Chestnut Flats is Chattanooga’s “first good housing PILOT application since 1992.”

That tax break, for the Riverset Apartments downtown near the Tennessee River, served as a catalyst for residential development in the blighted downtown area where no new development had happened in years, she said.

“The Chestnut Flats development is different in that it would be in the bustling Southside where the housing market is sizzling, but only for market-rate housing with rents well above $1,000 per month,” Sharp said. “This project seems like a good one to kick off the ‘new’ housing PILOT program.”

Earlier this year, Chattanooga leaders passed a revised tax-break program which they hope will boost affordable housing options after the old plan drew fire for being too generous to developers.