The state of affordable housing in Georgia is troubling, and the State Supreme Court has recently decided it should stay that way. Let’s say you own a property that offers affordable housing options. You receive tax credits to lessen the burden and incentivize your contribution of affordable living options to the community. Since the affordable housing units provide housing at rates below market value, you are necessarily deriving less than market value for your property. Along with enjoying the lower property taxes associated with a lower property value, the tax credits are meant to offer an additional benefit as an incentive for providing this service to the community.
Eventually, someone comes along to assess the tax you should be paying on your property. In your opinion, your property should be taxed on its actual (lower) value due to the lower rents, and not on the value it retains due to your tax credits; considering the tax benefits when valuing the property partially defeats the purpose of those tax credits to act as an incentive.
“We have a serious problem in this society if voters are unwilling to reduce taxes for those who provide housing to low-income individuals. This should be a policy that crosses political ideologies.”
And the Georgia legislature agreed. In 2014, it passed a law requiring tax assessors to ignore these tax credits when assessing property value. The Georgia Supreme Court recently stepped in and decided to strike down this law as being unconstitutional. In doing so, it reminded us of a recent referendum in which Georgia voters decided they didn’t want affordable housing providers to reap the maximum benefits of the tax credits.
The case lets surface the fundamental problems we have in addressing quality housing for all people. At a time when affordable housing shortages are increasingly widespread, the Georgia Supreme Court’s decision should prompt us to address a past wrong. We can start by encouraging the private development of affordable housing in the same we encourage the private development of other important land uses, like conservation and agriculture. Unless we adopt a statewide mandate for residential areas to provide a proportionate amount of affordable housing, we must take other measures to encourage this practice.
Affordable housing requirements often mandate that a certain percent of your housing units be dedicated to providing lower rent options. Considering that these requirements will reduce the income produced by a property, developers will likely locate their properties where these regulations do not exist. Without a uniform rule across all jurisdictions, developers are free to choose the most economically alluring cities and counties. Therefore, providing benefits to developers or building owners in exchange for their agreement to charge less than market-based rental rates is a necessity if we want more affordable housing. In order for this to work, we need to make sure owners are maximizing the benefits they receive from lower property values and tax credits.
Unfortunately, many government assessors throughout the state have not been taking affordable housing restrictions into account. The Georgia Legislature has repeatedly tried to enact laws informing assessors that they should take rent restrictions into account. According to Darryl Bucher, Senior Managing Consultant with Paradigm Tax Group, assessors have generally ignored these instructions, preferring to value properties at what they would be worth if every unit could be rented at market-based prices. So in 2014, the Georgia Legislature passed HB 954 explicitly instructing tax assessors to take into account affordable housing rent restrictions on properties.
Fortunately, in 1986 the federal government authorized tax credits for providing affordable housing units. This is a great way to incentivize affordable housing, but should be coupled with reduced property taxes to maximize its effect. The problem is that since the credits are benefits directly derived from the buildings being assessed, tax assessors have decided that they should be taken into account when valuing properties. This is likely what prompted the Georgia Legislature to pass the 2001 law prohibiting the consideration of the tax credits.
On September 12, 2016 the Georgia Supreme Court struck down the tax credit provision of the law as unconstitutional. In a unanimous decision, the Court sided with the Lowndes County Board of Tax Assessors, holding that the Georgia Constitution prohibits laws restricting tax assessors from taking tax credits into account under the taxation uniformity provision of the Georgia Constitution. Simply put, this means that the Georgia Legislature is not permitted to create subclasses of properties and giving preferential treatment for tax credits would create such a subclass.
The Constitution explicitly exempts agricultural property, conservation, and historic property from the uniformity provision, but does not exempt low-income housing. According to the Court, this means that legislature is permitted to prevent assessors from taking into account tax credits for agricultural or conservation properties, but cannot do the same for low-income housing properties.
This decision shouldn’t come as much of a surprise. Back in 2002, the Georgia Legislature recognized that such a law was likely unconstitutional when it proposed an amendment to the Georgia Constitution explicitly stating that low-income building projects are classified as separate types of property for tax purposes (just like conservation or agricultural property). This would have made it constitutional for the legislature to require tax assessors to ignore tax credits and take into account affordable housing units when assessing property. However, voters rejected the proposal by a vote of 53 percent to 46 percent.
We have a serious problem in this society if voters are unwilling to reduce taxes for those who provide housing to low-income individuals. This should be a policy that crosses political ideologies. It addresses an increasingly significant social problem by encouraging private industry to create affordable housing using lower taxes as an incentive. It’s inexcusable to provide maximum tax breaks for agricultural and conservation purposes, but to affirmatively deny the same tax breaks for low-income housing purposes.
The federal government and Georgia are in agreement that property owners should receive some tax benefit for providing affordable housing. While tax assessors are valuing properties in a fashion they deem reasonable for the purpose of property sales, this practice undermines the goal of encouraging the private development of affordable housing.
Appropriately amending the Georgia Constitution would allow our legislature to maximize the benefits given to affordable housing providers. Tax credits for conservation uses have gone a long way in encouraging private landowners to establish conservation easements to preserve the natural state of their land. The same could be done for affordable housing if we gave owners and developers the same benefits. Amending our Constitution would make it clear that Georgians believe affordable housing should be a fundamental right in our society.
- Heron Lake II Apartments v. Lowndes Cnty. Bd. of Tax Assessors (GA. 2016).
Categories: Housing, Law and Government
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