Rising Tax Assessments Threaten Tax-Credit Apartments
Concerned that skyrocketing property tax bills are jeopardizing the preservation and development of affordable rental housing, NAHB is urging state and local governments across the country to adopt more appropriate ways for assessing property taxes on rental apartment communities financed with Low Income Housing Tax Credits (LIHTC) and other government subsidies.
“Soaring property values are pushing up property tax bills for all commercial properties owners; however, owners of tax credit and other subsidized affordable properties cannot recoup these costs by raising their rents, which is what the owners of market-rate properties do,” explained Lance Swank, chief operating officer of The Sterling Group and chairman of NAHB’s Multifamily Housing Credit Group. “Assessing properties that have rent-restricted units or that are subject to income limitations at the same rate and in the same manner as market-rate properties is putting thousands of affordable units at risk.”
This includes a significant number of tax-credit units. The LIHTC program, which Congress created in 1987 as a funding source for low- and moderate-income housing, is the primary catalyst for affordable housing in the U.S., producing almost 100,000 units annually.
The program works by allowing federal tax credits to offset development costs for new construction or rehabilitation of affordable housing projects. In exchange for the credits, property owners agree to rent restrictions that make units affordable to people whose incomes are 60% or lower than the area median.
Tax credit owners and developers worry that rising operating costs — including high tax assessments — jeopardize not only the properties already in service, but also the financial feasibility of all future affordable housing produced with tax credits.
To protect the financial viability of affordable housing properties, NAHB is urging state legislators across the country to adopt an income-approach under which tax assessors would be required to consider restrictions on rental income when appraising affordable housing properties. Currently, only 14 states require tax assessors to use the income methodology or a similar approach when addressing the valuation of affordable properties.
For more information, e-mail Carmel McGuire at NAHB, or call her at 800-368-5242 x8207.