Live Local Act: Ad Valorem Tax Exemptions for Affordable and Workforce Housing

Over the past several years, the Florida legislature has increased and expanded the tax exemptions for affordable housing projects in order to incentivize the development of additional affordable housing projects. In Senate Bill 102 (“Live Local Act” or the “Act”) the Florida Legislature dramatically expanded the types of affordable housing projects that qualify for tax exemptions.

CURRENT AD VALOREM TAX EXEMPTIONS FOR AFFORDABLE HOUSING

As background, prior to the Live Local Act, the following project types were considered affordable housing developments that qualified for a 100% ad valorem tax exemption:

1. A project that, subject to certain income caps, provides homes for the aged pursuant to Florida Statutes Section 196.1975 (“Aged Exemption”); and
2. A project wholly owned by an entity that is a not-for-profit corporation (or its wholly owned subsidiary), charitable organization under Section 501(c)(3) of the Internal Revenue Code (“Not for Profit”) and in compliance with certain procedural requirements (“Charitable Exemption”);
3. A multifamily project with a minimum of 70 units and a recorded agreement in favor of the Florida Housing Finance Corporation (“FHFC”) requiring the project to provide affordable housing to households within the extremely-low income, very-low income, or low-income brackets for a minimum of 15 years (“Multifamily Exemption”). The Multifamily Exemption is only available after the completion of the 15 years.

The Live Local Act, while leaving the Aged Exemption unchanged, expands the Charitable Exemption and the Multifamily Exemption as summarized below.

EXPANDED CHARITABLE EXEMPTION

The Act expands the Charitable Exemption by creating a 100% ad valorem tax exemption, provided the land is owned entirely by a Not for Profit, and is leased for a minimum of 99 years for the purpose of, and is predominantly used for, providing housing to households within the extremely-low-income, very-low-income, low-income, or moderate-income brackets.

• The land is deemed to be “predominantly used” for this qualifying purpose if the square footage of the improvements on the land used to provide qualifying housing is greater than 50% of the square footage of all improvements on the land.

• The exemption will apply to the 2024 tax roll and will sunset as of December 31, 2059.

WORKFORCE HOUSING (EXPANDED MULTIFAMILY) EXEMPTION

Ad Valorem exemptions are now available to newly constructed multifamily projects that provide affordable housing to households meeting certain income limitations, that contain more than 70 units, and the units are rented for an amount that does not exceed the amount as specified by the most recent multifamily rental programs income and rent limit chart posted by the FHFC and derived from the Multifamily Tax Subsidy Projects Income Limits published by the United States Department of Housing and Urban Development (“HUD”), or 90% of the fair market value rent as determined by a rental market study.

A project qualifies for a 75% Exemption: if the qualifying household’s annual income level is greater than 80% but not more than 120% of the median annual adjusted gross income (“AMI”) for households within the metropolitan statistical area (“MSA”) (or County, if applicable) in which the person or family resides.

• A project qualifies for a 100% Exemption: if the qualifying household’s annual income level does not exceed 80% of the AMI, for households within the MSA (or County, if applicable) in which the person or family resides.

• “Newly constructed” means an improvement to real property which was substantially completed within five years before the date of an applicant’s first submission of a request for certification from the FHFC or an application for an exemption, whichever is earlier. The requisite certification and application for exemption are further discussed below.

• This exemption does not require a FHFC agreement to be recorded against the property nor does it require a 15-year waiting period before the exemption becomes available.

• Existing affordable housing units that already have an FHFC agreement recorded against the units cannot qualify for the Workforce (Expanded Multifamily) Exemption.

• The exemption will be applied to the 2024 tax roll and will sunset as of December 31, 2059.

• To qualify for the exemption the property owner is required to submit an application to the local property appraiser by March 1, accompanied by a certification notice. It is not clear under the statute whether this application is a one-time application or must be filed annually. To receive the certification notice, the property owner must first submit a request to the FHFC for certification on a form provided by the FHFC, which includes the following:
  1. A rental market study completed within three years that identifies the fair market value of each unit for which the property owner seeks an exemption;
  2. A list of all of the units for which the property owner seeks the exemption;
  3. The rent amount received by the property owner for each unit for which an exemption is sought;
  4. A sworn statement, under penalty of perjury, from the applicant restricting the property for a period of not less than three years to households who meet the income limitations.

LOCAL EXEMPTION OPTION

Ad valorem tax exemptions will now also be available to projects with a minimum of 50 units that are located within the jurisdictional boundaries of a government entity that has enacted the Local Exemption and

(1) at least 20% of the units are used for affordable housing which meets the enumerated income limitations;

(2) the units are used for households whose AMI (i) is between 30% to 60% of the AMI for households within the MSA (or County, if applicable) in which the person or family resides, or (ii) does not exceed 30% of the AMI for households within the MSA (or County, if applicable) in which the person or family resides (the Government Entity can also choose to incorporate either AMI range or both AMI ranges into the enacting ordinance); and

(3) the units are rented for no more than the amount specified by the most recent multifamily rental programs income and rent limit chart posted by the FHFC and derived from the Multifamily Tax Subsidy Projects Income Limit published HUD, or 90% of the fair market value rent as determined by a rental market study, whichever is less.

• 75% Exemption: Qualified property may receive an ad valorem property tax exemption of up to 75% of the assessed value of each residential unit used to provide affordable housing if fewer than 100% of the total multifamily project’s residential units are used to provide affordable housing.

• 100% Exemption: Qualified property may receive an ad valorem property tax exemption of up to 100% of the assessed value if 100% of the multifamily project’s residential units are used to provide affordable housing.

• The Act prohibits the use of the Local Exemption if (1) the project has been cited for code violations on three or more occasions in the past 24 months before submission of the tax exemption application; (2) The project has been cited for any code violations that have not been properly remedied by the property owner before submittal of the tax exemption application; or (3) the project has unpaid fines or charges relating to the cited code violations.

• To qualify for the exemptions the property owner is required to submit an application to the local property appraiser by March 1, accompanied by a certification notice. It is not clear under the statute whether this application is a one-time application or must be filed annually. To receive the certification notice, the property owner must first submit a request to the Government Entity for certification on a form provided by the Government Entity, which includes the following:
  1. The most recently completed rental market study;
  2. A list of the units for which the property owner seeks an exemption; and
  3. The rent amount received by the property owner for each unit for which the property owner seeks an exemption.

• A qualifying property is only exempt from the taxes that are levied by the unit of government entity granting the Local Exemption.

• A project that is receiving the Local Exemption is not eligible for the Workforce Exemption.

• Upon approval of an ordinance enacting the Local Exemption, the Local Exemption will expire the fourth January 1 st after adoption; however, the Local Exemption may be renewed by passage of a new enacting ordinance.

This article is a summary and does not contain all of the statutory requirements for exemptions. In order to qualify for an exemption all statutory requirements must be met. If you would like additional and more specific information regarding the tax advantages available to affordable housing projects please contact us at communications@bilzin.com .