ARIZONA HOUSE OF REPRESENTATIVES

Fifty-fifth Legislature

First Regular Session

SB 1076: low-income multifamily housing; valuation

Sponsor: Senator Livingston, LD 22

Caucus & COW

Overview

Classifies low-income multifamily residential rental property as class four property. Requires an assessor to value qualifying properties using an income-based method.

History

The Low-Income Housing Tax Credit Program (LIHTCP) was established by Congress in 1986 to promote the construction and development of affordable rental housing for low-income individuals and families. A low-income housing tax credit is a dollar-for-dollar credit against the federal income tax liability of the owner of a low-income housing development. (Arizona Department of Housing)

In order to be considered for the tax credits, the proposed development must have new construction, substantial rehabilitation or acquisition and rehabilitation. Additionally, the residential property must meet one of the following requirements: 1) have 20% or more of the residential units both rent restricted and with occupants with income 50% or less of the area median gross income or 2) have 40% or more of the residential units be rent restricted and occupied by individuals whose income is 60% or less of the area median gross income.

Class 4 property includes real and personal property and improvements to property that are used as non-primary residential property and leased or rented residential property (A.R.S. § 42-12004).

Provisions

1. Classifies low-income multifamily residential rental property, valued using a statutory income-based method, as class four property. (Sec. 1)

2. Defines "conventional multifamily property," "low-income housing tax credit program," “low-income multifamily residential rental property," "actual annual expenses" and "actual annual income."(Sec. 1)

3. Allows the owner of a low-income multifamily residential rental property to choose a statutory income method for valuation. (Sec. 1)

4. If chosen timely by the owner of a low-income multifamily residential rental property, the county assessor shall value the property based on the income method using actual annual income, actual annual expenses and the determined capitalization rate. (Sec. 1)

5. Requires the assessor to determine the capitalization rate based on the prevailing capitalization rate for a conventional multifamily residence in the area to adjust for differences between low-income multifamily residential rental properties and conventional multifamily properties based on:

a) Additional risk that the recorded affirmative land use restrictive covenants agreement places on the net operating income from the property;

b) The restriction to the use of the property for affordable housing;

c) The time period that the income and use restrictions remain in effect on the property; and

d) The illiquidity caused by the smaller pool of qualified buyers. (Sec. 1)

6. Requires the assessor to add the capitalization rate to the effective tax rate before calculating full cash value. (Sec. 1)

7. Allows the owner of a low-income multifamily residential rental property to have the valuation of the property determined by the income method to value by submitting the three most current annual audited financial statements to the county assessor before September 1 of the year preceding the valuation. (Sec. 1)

a) States that if the owner does not possess three audited statements, the owner may submit the available audited financial statements and the pro forma income and expense data provided to Arizona Department of Housing (DOH) to the county assessor and requires the assessor to use this information for valuation purposes. (Sec. 1)

8. Requires that DOH prescribe a form for an owner of a low-income multifamily residential housing tax credit project to value the property pursuant to this statute. (Sec. 1)

9. Deems that all information submitted to the assessor under this statute is confidential. (Sec. 1)

10. Requires a property that previously qualified as a low-income multifamily residential rental property and transitioned to a conventional multi-family property, to no longer be valued using the income method. (Sec. 1)

11. Requires an owner of a low-income multifamily residential rental property to provide written documentation of the county assessor that the property has been deemed a low-income multifamily residential rental property. (Sec. 1)

12. Allows an owner or operator of a low-income multifamily residential rental property that opts into the income valuation method to appeal the value of the property by submitting more recent income and expense data from the year preceding January 1 of the valuation year. (Sec. 1)

13. Allows an owner or operator of a low-income multifamily residential rental property that does opt into use the income valuation method to appeal the value using the income valuation method. (Sec. 1)

14. Makes technical changes.

Amendment

1. States that the restrictions apply to all units except employee units.

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5. SB 1076

6. Initials VP/CS Page 0 Caucus & COW

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