Nebraska’s legislature adjourned on May 29, passing two bills that will help to address the lack of affordable workforce, senior, and special needs housing. Legislative Bill 356 establishes the “income approach” in property tax assessment valuation for properties built using Low Income Housing Tax Credits (LIHTCs). Legislative Bill 457 will equally distribute the funds remaining from the terminated Industrial Recovery Fund (IRF) to the Nebraska Affordable Housing Trust Fund (NAHTF) and the Site and Building Development Fund (SBDF). The Nebraska Housing Developers Association (NHDA), an NLIHC State Coalition Partner, coordinated the advocacy efforts that led to these victories.
LB 356 requires county assessors to use the income approach when calculating taxable valuation for rent-restricted housing projects. The law defines rent-restricted housing as housing with five or more units financed, in whole or in part, with federal LIHTCs. The income approach recognizes that rent-restricted housing does not generate the same rent revenue as other housing. Therefore, rent-restricted properties will be assessed based on the maximum amount of income they can legally generate, rather than on the value of the building, land, and location. Advocates in Nebraska pushed for this change because it produces the most accurate tax assessments for LIHTC properties.
LB 356 also creates the Rent-Restricted Housing Projects Valuation Committee, which will develop a market-derived capitalization rate for county assessors to use to appraise rent-restricted projects. The committee will consist of the state tax commissioner, a representative of local government assessors, a representative of the low income housing industry, and an appraiser from the private sector.
The income valuation approach established by LB 356 will create an equitable environment for assessing taxes on LIHTC properties and enhance their economic viability. Nebraska modeled LB 356 on the income approach to valuation used in neighboring Iowa. Based on experience in Iowa, advocates in Nebraska anticipate improved property tax system predictability, allowing LIHTC developers to better plan for these costs. This in turn will help to address Nebraska’s lack of affordable workforce, senior, and special needs housing.
Passage of LB 457 was another key victory for housing advocates. This legislation addresses the allocation of funds remaining in the terminated Industrial Recovery Fund (IRF), by equally dividing the funds between the Nebraska Affordable Housing Trust Fund (NAHTF) and the Site and Building Development Fund (SBDF).
Nebraska created the NAHTF through the Nebraska Affordable Housing Act of 1996. The fund provides financial resources to grantees for the construction, rehabilitation, and infrastructure improvement of affordable housing. The NAHTF can be used for rental or owner-occupied housing, as well as down payment assistance for first-time homebuyers. Rental homes produced with the NAHTF must benefit households with income at or below 80% of area median income (AMI), while homeowner activities must benefit households with income at or below 100% of AMI.
The NAHTF has a dedicated source of funding from the Nebraska Documentary Stamp Tax. For each $2.25 stamp tax, $0.95 is dedicated to the NAHTF. Until 2011, the NAHTF received $1.20 of each stamp tax, but that year the legislature redirected $0.25 of every $2.25 collected to provide ongoing funding for the newly-created SBDF (see Memo, 6/10/11).
Also in 2011, the legislature established the Industrial Recovery Fund, to be funded it with all unexpended NAHTF dollars up to a cap of $1 million. The IRF was intended to offset the community economic impact of plant closures or downsizing. However, in four years, no grants were awarded from the IRF; therefore, LB 457 dissolves it.
The Site and Building Development Fund was created in 2011 to stimulate economic development and industrial readiness by providing financial assistance to develop industrial buildings. A $2 million cash transfer from the NAHTF initially funded the SBDF; it now operates with ongoing funding from the stamp tax.
Because funds were taken from the NAHTF to launch the IRF and the SBDF, the Nebraska Housing Developers Association made restoring and increasing funds to the NAHTF a top priority. When LB 457 was initially proposed this year, all funds from the IRF were to be reallocated to the SBDF. Advocates vigorously objected to that initial proposal, asserting that the funds should be returned to the NAHTF. As a result of robust advocacy by NAHTF supporters, the Senate was unwilling to move forward until LB 457 gained support from both housing advocates and the Department of Economic Development. Passage of LB 457 increases funding for the NAHTF by an estimated $1.2 to $1.4 million.
“I commend the hard work of housing advocates involved in both of these pieces of legislation,” said NHDA Executive Director Danielle Hill. “This legislative session was a great step forward for affordable housing in Nebraska, and it showed that housing advocates are a voice to be reckoned with. We will continue to work to restore funding to the NAHTF that loses nearly 20% of its annual allocation to the SBDF.”
For more information contact Danielle Hill, Executive Director, Nebraska Housing Developers Association, 402-435-0315 x1 or at [email protected]