Found for Increasing Property Tax Burdens
Most housing advocates argue that property taxes have a negative
impact on housing affordability. The prevailing view is that the
threat of higher taxes can often reduce or eliminate the incentive
to rehabilitate or improve property. Steve Smith, Senior Vice President
of AHC, Inc. in Arlington, Virginia states the case succinctly,
observing that , “Our rehabilitation projects increase the
value of the housing we own. If the local government taxes us on
all of the increased value, we have to reduce services or raise
rents.” In addition, increasing property values, assessments,
and taxes often place tremendous burdens on those with limited incomes.
State legislatures and local governments have reacted to these problems
by developing a variety of tax relief measures. Some of these efforts
focus on reducing tax liabilities, while others concentrate on repaying
taxpayers for payments already made.
Reducing Tax Liabilities
States throughout the U. S. offer a variety of programs aimed at
assisting those whose tax liability may be particularly burdensome.
For example, most states offer homestead exemption programs for
residents who are elderly, handicapped and or have low incomes.
These programs exempt a certain amount of a taxpayer’s home
from property tax valuation. Many states have augmented this reform
measure with a variety of tax relief laws. States also differentiate
between tax rates on owner-occupied residential property and rental
property. Rental property is usually taxed at a higher commercial
rate, thereby increasing the cost of rental housing. For example,
Minnesota has instituted a tax classification program that allows
property owners who own affordable rental properties to be taxed
at a rate of 1% of the property’s estimated market value.
In Alaska, tax assessors may value tax credit properties at the
statutorily mandated limited rents, rather than at market rents.
States and communities across the county have found that increased
property tax assessments may discourage owners from repairing older
homes or building new housing. In response, some communities now
allow a phase-in of taxes on these new or rehabilitated properties.
VA, the City permits owners of residential property undergoing substantial
rehabilitation to request a partial tax exemption. Properties with
less than six units can claim the exclusion for 10 years if the
rehabilitation increases the assessed value of the property by 20
percent or more. Larger properties can claim the exemption if the
assessed value increases by 40 percent.
Another innovative approach can be found in New York City, which
provides a partial property tax exemption for new properties of
three units or more. To qualify, the property must have been vacant
or virtually vacant for the last three years. The City of Fort Worth
has a similar program. San
Antonio and St. Louis have structured their tax relief programs
in a slightly different manner by allowing taxes on new property
developed in certain areas of the city to be phased in over time.
“While Virginia allows local governments to phase-in taxes
on the increased value of rehabilitation, it does not allow a phase-in
for newly constructed buildings,” said Smith. “A program
similar to San Antonio or St. Louis would help us keep rents on
our units lower.”
Tax relief programs vary throughout the country. For example, Illinois
allows certain elderly homeowners to freeze the assessment on their
provides property tax relief to specific philanthropic organizations
(such as Habitat for Humanity) that provide affordable housing in
that state. Rather than take the property tax approach, Connecticut
provides tax relief through a sales tax exemption. Residents of
the Nutmeg State enjoy a tax exemption for sales of personal property
and services used in the construction, rehabilitation, renovation,
repair, maintenance, or operation of low- and moderate-income housing.
Sponsors must apply for permission to have these sales declared
tax exempt, but can save substantial construction costs by doing
Some states do not allow tax exemptions or deferrals, but do permit
the state or local government to repay taxpayers for taxes or rent
paid. Both homeowners and renters are now able to take advantage
of these tax relief measures. Colorado allows both homeowners and
renters to deduct a portion of the taxes or rent they’ve paid
from their state income tax. The taxpayer must be elderly or disabled
and be on a limited income. Several states, including Massachusetts,
Maine, Pennsylvania, and New Jersey, provide for rebates of
a portion of taxes or rent paid if the taxpayer is elderly and/or
has a limited income.
Virginia provides a tax credit for property improvements that address
accessibility requirements, while Hawaii permits taxpayers to establish
tax-exempt individual housing savings accounts that residents can
use to purchase their first home. Other states use the tax code
to encourage donations to non-profit housing organizations. For
example, Kentucky provides a tax deduction for donations made to
homeless organizations, while Illinois offers income tax credits
for certain donations made to affordable housing developments.
Cities and states across the country are providing various forms
of tax relief for their residents. Usually directed to low- and
moderate-income households, veterans, or the elderly, these programs
provide significant savings and can decrease overall tax burdens.
Some states have also begun to use tax policy to encourage certain
activities, such as housing rehabilitation. Depending on the level
of subsidy, these programs can have a significant impact on a given
household’s ability to maintain or improve the quality, durability,
or livability of the residence.
The Success of New Jersey’s Rehabilitation
In examining the impediments to housing rehabilitation in New Jersey,
the time for the quick-fix, patch-it-and go approach was over: officials
found clear evidence that an entirely new housing rehabilitation
code would be the only way to go. Overall, officials found that
the existing code served as a powerful deterrent to rehabilitation
because it resulted expensive, unpredictable requirements. The requirements,
as well as ad hoc code enforcement, discouraged developers and investors
from remodeling older homes.
The State found that certain requirements particularly discourage
owners from conducting rehabilitation. As William Connolly, Director
of Codes and Standards for the Department of Community Affairs explains,
“Most existing codes are designed for new construction. This
resulted in prohibitively expensive alterations that carried little
if any safety advantage.” For example, emergency access requirements
often require owners who want to replace old windows with more energy
efficient systems to replace the entire window casing to meet new
emergency access requirements.
The State also looked at the “perfect time” philosophy.
Many building officials believe that when an owner/contractor initiates
a repair on a property, that it is the right time to require all
systems in the unit to be brought into code compliance. Connolly
argues that the “perfect time” philosophy needed to
be changed. He contends that not only does this philosophy discourage
those who want to make improvements, but it also rewards those who
refuse to make any improvements. He argues for a more rational approach
that results in a healthy and safe unit, while not overburdening
the owner with additional – and often – expensive requirements.
The State also examined the fact that implementation of the building
code requirements was inconsistent. Since total code compliance
was almost impossible to achieve, local building inspectors exercised
a great deal of discretion in enforcing and waiving building code
rules. This ad hoc enforcement encouraged a system of noncompliance
among owners, as consequences for not following requirements were
only infrequently enforced.
Crafting a Solution
New Jersey established an advisory committee of over 30 members
in an extensive effort to create a code ensuring the health and
safety of New Jersey residents, while at the same time reducing
costs. According to Connolly, the committee’s focus was to
create a code that would apply to existing conditions. It was a
simple idea, but one that had not been previously considered. The
new code would address health and safety concerns, but would not
focus on dimensions and require expensive upgrades that added little
to safety. According to Connolly, “We wanted this code to
have fewer rules, but we wanted those rules to be very specific
and require very little discretion on the part of building code
officials.” He cites, for example, the requirement for sprinklers
and smoke detectors in reconstructed units. “While these measures
vastly improve health and safety,” he said, “they can
be retrofitted into existing buildings with little impact on the
The Results Are In. The News Is Good.
New Jersey has seen positive results with its new rehab subcode.
So far, the subcode has:
· Lowered project costs and made more projects feasible.
For example, the owner of a five-story affordable apartment complex
in Jersey City estimated that the cost of bringing the building
into full code compliance would be approximately $480,000. Since
rents in the area would not support such costs, he had not undertaken
the work. After passage of the new code, he calculated the rehabilitation
cost to be about $300,000; a savings of over 37 percent.
· Generated dramatic increases in the estimated dollar amount
of rehabilitation. Prior to enactment, rehabilitation contracts
increased about 15 percent a year in central city areas of New Jersey.
For the two years following enactment of the new code, such contracts
in central city areas jumped 60 percent.
· Provided a model for other areas across the country. Since
New Jersey’s adoption of the rehabilitation code, Maryland
and Rhode Island have adopted similar codes. In addition, the new
International Existing Buildings Code and NFPA 5000, Chapter 15
have incorporated many of the features contained in the New Jersey
To learn more abut this Garden State success story, visit http://www.state.nj.us/dca/codes/rehab/index.shtml
or call the Code Assistance Unit at New Jersey Department of Community
Affairs at (609) 984–7609.
Jacksonville Takes Steps to Reduce Opposition
to Manufactured Housing
For many communities, manufactured housing can provide a solution
to an affordable housing crunch. Yet the placement of this housing
can be a source of controversy within the community. Jacksonville,
Florida faced this very dilemma and came up with a workable solution.
The Problem: A Zoning Law That Allows Too Much Discretion
Jacksonville’s zoning ordinance seemed to be the part of
the problem. While Florida state law forbids discrimination against
the placement of manufactured housing in residential districts that
allow site-built housing, Jacksonville’s zoning ordinance
required a prospective manufactured home buyer to seek a zoning
“exception” before it would allow the placement of a
manufactured home in any residential zone. What’s more, the
City required a public hearing before granting any exception –
in effect, allowing those opposed to manufactured housing to rally
the troops and generate strong opposition at the hearing.
Fear – rather than facts – seemed to be the driving
force behind this opposition. According to Bill Turney, Assistant
Executive Director at the Florida Manufactured Housing Association,
“People opposed the placement of manufactured housing because
they misunderstood the installation process. When people saw a truck
transporting a [mobile] home, they didn’t stop to think what
it would look like when it was finished.”
According to City authorities, the exception-granting process,
including the public hearing, was too discretionary in nature and
was in need of clarification. “We wanted to develop a system
that could reduce the fears that some had concerning manufactured
housing, while at the same time make the approval process as rational
as possible based on specific pre-defined criteria,” said
Jeannie Fewell, Planning Director for Jacksonville/Duval County.
The Solution: New Aesthetic Criteria
With this goal in mind, the City set out to revise the existing
zoning ordinance to allow any type of housing in single-family zoned
areas, as long as it blended in with the surrounding neighborhood.
The first step that Jacksonville officials took was to create a
task force comprised of representatives from the manufactured housing
industry, homebuilders, citizens groups, members of the City Council,
and the General Council’s office. Meeting monthly for over
a year, these representatives worked cooperatively to develop criteria
that would allow the siting of all types of single-family dwellings
– including modular and manufactured homes – in Jacksonville
neighborhoods, as long as the newly sited home was compatible with
other homes in the area.
The task force determined that the fear engendered by manufactured
homes among current residents was driven by concerns over what the
homes would look like once they were on the lot next door. To address
these issues, the group developed and recommended a set of aesthetic
criteria for all new single-family dwellings.
“By making all housing meet the same conditions, we reduced
the fear that some had concerning the appearance of some types of
manufactured housing,” said Turney.
In addition to other guidance, the group recommended that all dwellings
be set on permanent foundations and that projections include bay
windows, garages, dormer windows, recessed doors, porches, and decks.
“From our point of view, we wanted to be compatible with
the neighborhood, while still maintaining affordability,”
The next step was to turn these recommendations into law. When
the new aesthetic ordinance was passed, it included many of the
recommendations that grew out of the task force meetings. The resulting
ordinance removes the exception requirement for manufactured housing
and provides aesthetic guidance for all new homes. The ordinance
is focused on compatibility criteria, rather than referring to a
specific type of home. The ordinance also includes various findings
regarding the mandates of Florida’s anti-discrimination laws.
The City defined compatibility as the five closest residential
dwellings with property lines within 350 feet of the proposed house.
Each proposed dwelling unit must meet certain lot grading standards
or have a specified roof pitch. The structure must be on a permanent
foundation, have a similar number of projections in comparison to
other dwellings in the neighborhood, be oriented so that the long
axis is parallel to the street, and be at least 850 square feet.
The ordinance also allows the zoning administrator to make the
final decision about compatibility, which can now be based on clear
and fairly unequivocal criteria. “If our homes meet the criteria,
then the zoning administrator makes the decision based on the merits
of the home – not on anything else,” said Turney.
The Legacy: Has This Change Proven Successful?
According to Fewell, the ordinance has been a success. “The
fights have gone away,” she reports. Manufactured housing
can now be placed in any residential area without a lengthy and
sometimes controversial public review process. In Jacksonville today,
housing must only meet the specific aesthetic guidelines in the
The new aesthetic ordinance has proven so successful that the Florida
Manufactured Housing Association is taking the Jacksonville concept
to other jurisdictions in the state.
For more information on this ordinance, go to Florida/Jacksonville.