Could a tax break spur affordable housing? Idaho lawmakers bet it can

An Idaho bill to build new partnerships around affordable housing took its first steps this session as legislators advanced a proposal that would give counties more leeway to waive taxes on new low-priced developments.

The House Revenue and Taxation Committee on Tuesday agreed to print HB760, a bill that would give county commissioners wider discretion to offer property tax exemptions on developments with average rents affordable at 60% of a county’s area median income or less, provided a nonprofit group is involved.

The proposal from East Idaho Rep. Jon O. Weber, R-Rexburg, would loosen statute 63-602GG, a 2002 law that allowed counties to waive all or some property taxes on affordable projects from nonprofit developers. That version was too narrow for counties to deploy, according to Lobby Idaho President Jason Kreizenbeck, who testified in support of the measure on behalf of Dominium, a national affordable housing developer.

“We couldn’t find an example of anyone using it because of the restrictions put on it,” Kreizenbeck said.

Weber’s new version is the fourth in the past four years to come before the Legislature, Kreizenbeck said. The proposed changes would allow for-profit businesses that partner with nonprofits to access the tax breaks “and take advantage of other federal financial incentives,” according to the bill’s statement of purpose. It also allows counties to opt-out case by case, charging the full tax assessment if the commissioners deem fit – a provision that aims to prevent new workforce construction from shifting too much tax burden on existing homeowners.

Affordable housing bill loosens income limits

This year’s draft requires average rents to be affordable to residents earning the 60% area median income. The average is simpler than the existing law, which includes a strict rubric defining what percentage of a project’s units must be available at a range of income tiers.

The update is also much more relaxed: Idaho code requires tax-exempt developments to include homes affordable to renters earning as low as 30% of an area’s median income. Families making 30% of area median income are considered “extremely low income,” and there’s a dire shortage of homes in that tranche, according to the National Low Income Housing Coalition. Idaho is short about 25,000 rentals for residents in that bracket, which translates to about $30,000 for a family of four, the Coalition states.

Weber’s proposed threshold would be easier to for developers to meet. It also aligns with the federal government requirements for low-income tax-credit financing, a sought-after mechanism for bankrolling affordable housing. State law now prohibits a project that uses federal tax credit financing or other public incentives from applying for the local property tax break – another provision Weber’s change would wipe from code

HB760 would require a developer to show the county assessor that rents comply with the 60% average each year.

The bill advanced to a committee hearing via a unanimous voice vote but garnered mixed support. While some lawmakers were intrigued by the concept, Rep. John Gannon, D-Boise, said he hoped to get a more concrete idea of the bill’s fiscal impact when he sees it next.

Gannon voted in favor of printing the bill, with a caveat.

“It’s going to be real hard for me to vote for this bill until I know with more certainty what kind of property tax relief this is going to amount to,” he said.