CLEVELAND, Ohio — An amendment in the Ohio Senate’s version of the state’s biennial budget would require county auditors to disregard federal subsidies awarded to low-income housing when conducting appraisals, a move that housing advocates say could lead to financial woes for those property owners that could ultimately lead to fewer homes for the needy.
The amendment, which appeared in the Senate version of the budget unveiled June 1, says that federally subsidized rental properties must be appraised based on the market rate for units in that area instead of accounting for those subsidies and using the amount of rent actually paid. Residents in low-income housing often pay rent capped at lower rates, as mandated by the federal government as part of the subsidies it awards.
The amendment could result in more tax revenue for local government agencies if it passes and goes into effect July 1. An analysis included in the Senate’s version said how much more revenue it would result in “is uncertain but could be substantial.”
That chamber of the Republican-controlled legislature passed its version Wednesday along partisan lines. It will now go to the House, where representatives will likely send it into negotiations with the Senate over their differences. The House’s session is expected to start Thursday afternoon.
Senate President Matt Huffman said that the amendment was aimed at making sure for-profit companies pay their fair share of property taxes, something he felt other taxpayers who don’t get breaks based on federal subsidies should support.
But housing advocates said that is not how the measure would play out for the owners of 200,000 units for low-income residents across the state. Instead, they said the measure could, on average, double the property tax bill for the owners of apartments and homes for lower-income residents, as well as raise operating costs. They also said local government agencies with tax levies do not lose out on income if a low-income property is assessed at a lower value.
Since the federal government usually stipules that property owners cannot increase rents if they receive federal subsidies to build low-income housing, there are few ways for the owners to make up for the extra tax income they would have to pay. That, in turn, could result in deferred maintenance, missed mortgage payments and eventually foreclosures.
“It’s not good for anybody,” said Tony DiBlasi, an executive with Ohio Capital Corporation for Housing, a nonprofit that arranges for investments into affordable housing projects. “It’s not good for the residents, it’s not good for the banks that hold the notes on these properties.
“If this became the way we do things in the state of Ohio, it’s going to reduce the number of units being built.”
Kevin Nowak, executive director of CHN Housing Partners in Cleveland, said the amendment would also severely weaken the ability for nonprofits like the one he leads to negotiate with county auditors for a tax bill reduction.
He cited a senior living complex the agency owns in Maple Heights that the Cuyahoga County auditor assessed in 2018 at more than $1.8 million, about three times higher than the previous assessment. After an appeal to the Board of Revision and subsequent negotiations with the suburb’s school board, the assessment was lowered, and county property records show it as being valued at $975,000 in 2020.
Nowak said while negotiating down an assessment is common, the initial assessment in that situation would be the standard if the amendment passed.
“And in that case, it took our entire project underwater,” Nowak said. “And that’s what would happen over and over again across the state of Ohio and within Northeast Ohio.”
The Ohio Housing Council and the Coalition on Homelessness and Housing in Ohio sent a letter to the House and Gov. Mike DeWine. Undersigned were more than 250 organizations that represent landlords, social services groups and the banking industry.
The amendment “would exacerbate Ohio’s affordable housing shortage by undermining the economic viability of affordable housing developments,” the letter states.
“This amendment would effectively increase property tax liability on many types of federally assisted housing developments without regard to the fact that these projects generate less rental income, and often cost more to operate, than market-rate housing projects,” it continued.
Huffman noted at a media briefing Wednesday that the Ohio Supreme Court said in a 2018 case that it would leave the issue for lawmakers to decide. The Senate president said he did not want to punish nonprofit and religious organizations that build and maintain housing for low-income residents.
“But when someone’s making millions of dollars building low-income housing and then they don’t want to pay the taxes on the true value of that building, that rankles other taxpayers who are paying their taxes,” the Senate president said. “It should also rankle school districts and all the other recipients of these funds.”
But housing advocates said they were caught off-guard by the amendment. Huffman, a Republican from Lima, introduced the same measure as a bill during the last legislative session, before he was Senate president. It never made it past committee.
Nowak, who’s also an officer for the Ohio Housing Council, said the council and the County Auditors’ Association of Ohio have been working through a pilot program to help create a clear set of guidelines for auditors to follow when assessing low-income housing complexes.
“If there is a concern about the fair valuation of affordable housing, let’s take that next step of sitting down, all understanding each other. …. And so how do we take an approach that’s fair across the board?” Nowak said. “And so that’s something that we have been working on for the past couple of years. And then out of the blue this budget amendment was added.”
Huffman said he has had “some good conversations” this week with bankers and with auditors, and said he felt that he would be able “to get a resolution so that we can get back to auditors truly being able to assess these properties at their at their real value.”
A message left for the auditors’ association was not immediately returned.
But advocates are now turning their attention to the House. Hal Keller, a former executive director of the Ohio Capital Corporation for Housing who is volunteering to help the state Housing Council, said they can’t yet quantify how much the amendment will increase property tax bills for projects, or how many units they feel the state could lose.
“Some will have big increases than others,” he said. It’s pretty scary.”
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