A hue and cry has gone up in the largest of Floridas counties regarding annual double-digit increases in tax assessments on multifamily property for the past 3 years. At last, some relief appears to be in sight.
A little-known and little-used provision of Florida property tax law is being touted as an avenue of tax relief for owners of certain large apartment complexes financed with State funds.
Under the State Housing Tax Credit Program, certain categories of state-financed rent-restricted apartment complexes are entitled to an annual property tax break.
What property is eligible?
In order to qualify for tax relief under this program, the apartment buildings or complexes must have been built with restrictive financing that gave them lower interest rates or some other benefit in exchange for keeping rents in a range defined as affordable by the federal government.
Typically, these are larger apartment complexes. In order to get the favorable loan, the owner had to set aside some or all of the rental units in the building or complex for people earning low to medium wages.
If the borrowers violate these affordable-rent covenants, they run the risk of the loan being in default or payment being accelerated. In most cases, the owners signed rental agreements with lenders that run 20 or 30 years, or more. Once the low-rent covenant is in place, it is generally adhered to throughout the term of the loan. Observance of these and similar covenants make the loans doable in the first place.
Although the State Housing Tax Credit Program statute has been on the books for years, it appears that landlords have not been taking advantage of its provisions, according to Frank Jacobs, Property Appraiser for Miami-Dade County . A list we obtained from the State of Florida contains 172 potentially eligible apartment developments in Miami-Dade County and 1,136 statewide .
Under the current state law, Jacobs said, he can take those financing agreements and draft a land-use restriction for the owners to sign that mirrors the agreement. A county property tax break can be given once the land-use restriction is in place and is recorded in the public records. After recordation, the agreement to limit the units to qualified tenants is the equivalent of a zoning or other land use provision containing the same limitation.
It is the dignity or stature of the rent-restriction covenant as a land-use restriction which allows the county property appraiser to enforce this agreement as though it were an ordinance or statute, within the contemplation of the so-called just value statute which governs preparation of tax assessments generally.
What is the benefit to taxpayers?
Qualifying properties are entitled to be assessed based on their actual income, rather than on market income, which is the general standard in Florida . Because affordable housing is synonymous with below-market rental rates, the advantage of being assessed based on actual rent rather than market rent is self-evident.
For rent-restricted affordable housing rentals, the difference between value based on actual income derived under government-controlled rents and market rent can be significant. In some instances it can spell the difference between a viable financial operation and failure.
To offer an example by analogy, one need look no further than a large apartment complex in Miami-Dade County . Although not part of the State program, the Property Appraisers preliminary assessment of $89 million for 2005 was reduced by a Value Adjustment Board Special Magistrate to $80 million by recognizing actual income and expenses, as opposed o supposed market rates used by the Property Appraiser in preparing the assessment.
Buildings already subsidized with Section 8 vouchers or financed with Low Incoming Housing Tax Credits (LIHTC) are not eligible for the program.
Other properties enrolled in the State Housing Tax Credit Program are eligible for this special benefit. Details can be found under section 420.5093, Florida Statutes.
Statutory guidelines include eligibility requirements, treatment of low income housing agreements recorded in the public records as land use restrictions, and recognition by the property appraiser of the actual rental income from rent-restricted units, rather than market rental rates.
If you are an owner or operator of large multifamily apartment complexes and wish to learn more about the special property tax treatment accorded under the State Housing Tax Credit Program, please see About the Author.
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