Florida’s Live Local Act creates 2 affordable housing tax exemptions

In addition to allocating $700 million for affordable housing projects and removing zoning restrictions that could slow development, Florida’s Senate Bill (SB) 102 or “Live Local Act,” passed earlier this year, opens the door for increased affordable housing development by creating property tax exemptions for “newly constructed” projects.

Prior to SB 102, the State of Florida tried to promote affordable housing via the Sadowski Act, passed in 1992, which created a dedicated revenue source to help promote and fund new projects. Unfortunately, in the past 20 years, revenues generated by the Act were often redirected toward other programs and initiatives.

SB 102, as set forth below, enacts two separate property tax exemptions.

Section 8 of SB 102

This section, which provides for an exemption for non-profit and for-profit affordable housing codified as Section 196.1978 of the Florida Statutes, is summarized below:

A nonprofit can now receive an exemption on land leased for affordable housing development, provided that:

a) The land is entirely owned by the nonprofit;

b) The nonprofit leases the property for a minimum of 99 years; and

c) More than 50% of the housing is for:

• Extremely-low-income persons (ELI), 30% of area median income (AMI), or
• Very-low-income persons (VLI), 50% AMI, or
• Low-income persons (LI), 80% AMI, or
• Moderate-income persons (MI), 120% AMI.

Properties can also receive a so-called “missing middle” ad valorem tax exemption. Per the State of Florida Housing Finance Corporation (FHFC), the Middle Market exemption is:

• 75% of the assessed value if the property leases housing to households whose annual income is greater than 80%, but no more than 120% of AMI, or
• 100% if rented to households whose annual income does not exceed 80% of AMI.

In order to qualify, the following conditions must be met:

• The project must be “newly constructed”, defined in the statute as “…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 or an application for exemption pursuant to this section, whichever is earlier.”
• “The property must contain more than 70 units dedicated to persons or households whose incomes are no more than 120% AMI,” the FHFC states.
• Rent must not exceed 90% of fair market value rent as determined by a rental market study.
• Units must not be subject to any restrictive covenant agreement with the FHFC.

Section 9 of SB 102

This exemption under this section, codified as Section 196.1979 of the Florida Statues, permits counties and/or municipalities to adopt a local ordinance to exempt qualifying portions of a property. The exemption is:

• 75% of the assessed value of each residential unit used to provide affordable housing if less than 100% of the multifamily project’s units provide affordable housing, or
• Up to 100% if 100% of the project’s residential units are used to provide affordable housing.

In order to qualify, the following conditions must be met:

• The property must be used to house persons or families whose annual income is greater than 30%, but no more than 60% of AMI.
• The property “must be within a multifamily project containing 50 or more residential units, at least 20% of which are used to provide affordable housing.”
• Rent must be the lesser of:
  • “An amount no greater than the amount as specified by the most recent multifamily rental programs income and rent limit chart posted by the corporation and derived from the Multifamily Tax Subsidy Projects Income Limits published by the United States Department of Housing and Urban Development or
  • “90% of the fair market value rent as determined by a rental market study.”
• The property must not have been cited for code violations on three or more occasions in the 24 months before applying for the exemption, and any code violations or related fines must be addressed before final determination on a property’s exemption.

Next steps

To receive an exemption under either Section 8 or Section 9 of SB 102, a property owner must submit to the local county property appraiser an application, plus a certification notice from the FHFC, by March 1.

Note that a property receiving a Section 8 exemption cannot also receive a Section 9 exemption.

What does CohnReznick think?

On its face, this legislation appears to be very aggressive action taken by Florida legislators in promoting affordable housing. However, the legislation still leaves some open questions. For example, one area of concern is a taxpayer’s right to appeal the taxable portion of the property that exceeds actual market value. There is also a concern about the annual recertification process.

Contact a trusted tax advisor for assistance with the exemption process.

Contact

Tony Franco, Director, State and Local Tax

959.200.7137

Faith Gorman, Principal

561.886.5286