BILL ANALYSIS Ó
AB 668
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Date of Hearing: May 20, 2015
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Jimmy Gomez, Chair
AB
668 (Gomez) - As Amended May 5, 2015
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|Policy |Housing and Community |Vote:|6 - 0 |
|Committee: |Development | | |
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| | | | |
|-------------+-------------------------------+-----+-------------|
| |Revenue and Taxation | |9 - 0 |
| | | | |
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Urgency: No State Mandated Local Program: YesReimbursable:
Yes
SUMMARY:
This bill requires a county assessor to consider, when valuing
real property for tax purposes, a recorded contract (i) executed
with a nonprofit corporation that has received a welfare
exemption for properties intended to be sold to low-income
families who participate in an interest free loan program, and
(ii) that restricts the use of the property to affordable
housing for at least 30 years.
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FISCAL EFFECT:
Unknown reduction in property tax receipts, resulting in GF
costs to reimburse counties under the Proposition 98 funding
guarantee.
For example, assuming the average Habitat for Humanity homebuyer
earns $33,600 (55% of the 2014 median household income in
California, the mid-point of Habitat's eligibility scale), and
pays 1/3 of that income towards a mortgage, that buyer could
probably afford a mortgage of approximately $190,000. Further
assuming the median home price in California for a 3 bedroom
home is approximately $420,000, the difference in assessed value
would be $230,000 if the county assessor assessed the value at
what the Habitat homeowner effectively paid.
Habitat for Humanity estimates there are approximately 25 homes
built per year that would be affected by this bill. Assuming
the difference in assessed value in the above example, this bill
would result in a reduction in property tax receipts statewide
of approximately $60,000 in the first year, approximately half
of which would be reimbursed from the General Fund. Over time,
the number of homes that enjoy the reduced tax assessment value
under this bill, and the amount therefore reimbursed from the
General Fund, will increase.
COMMENTS:
1)Purpose. According to the author, this bill promotes
affordable housing and creates additional opportunities for
affordable home ownership by allowing county assessors to
consider certain affordable housing deed restrictions when
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valuing a property for tax purposes. The author claims there
is currently a wide variance between jurisdictions with regard
to assessing the value of affordable homes, and some assessors
continue to assess affordable homes with private deed
restrictions at fair market value. Market rate assessments
can have a significant impact on the property tax, and
therefore the overall affordability, of those homes.
Supporters, including the California Housing Consortium,
assert affordable housing rental and ownership units typically
have restrictions on the rents and sales, but current law does
not give county assessors authority to consider those deed
restrictions when valuing the properties for tax purposes. AB
668 allows county assessors to consider private contractual
restrictions that maintain affordable cost or rent for at
least 30 years when assessing value.
2)Private Restrictions, Public Cost. In opposition, the
California Assessors' Association argues current law requires
assessors to consider "enforceable governmental" restrictions
on property when assessing tax value, but not private
restrictions, because governments are in a better position to
determine whether the overall benefit to the community
justifies the restriction and resulting reduction in tax base.
Allowing an organization like Habitat for Humanity to have
its privately-contracted covenants affect the tax value of
properties allows the organization and homeowners to achieve
tax savings without a public process.
3)Sweat Equity. Habitat for Humanity works with families who
contribute to the construction of their homes, selling the
homes to the families at a price based on their ability to
pay, and attaching covenants or restrictions limiting resale
to ensure the homes remain affordable. Families that purchase
Habitat homes are restricted from spending more than 30% of
their total monthly income on mortgages, including property
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taxes, insurance, HOA dues, and any deferred maintenance.
Habitat for Humanity claims county assessors do not always
take affordable housing covenants into consideration when
valuing the properties, potentially increasing property taxes
and disadvantaging potential buyers.
4)Assessor Authority to Consider Private Agreements. Existing
law requires assessors to consider the effect of any
enforceable restrictions on the use of land when issuing
valuations, including zoning restrictions, easements,
environmental restrictions, and recorded contracts with
government agencies. As a general rule, private parties
cannot reduce the taxable value of real property by imposing
private encumbrances. According to Habitat for Humanity,
whether a government contract is recorded with respect to a
property varies from project to project, and may often depend
upon circumstances unique to each project. It seems clear,
however, that absent this bill, assessors lack clear statutory
or other legal authority to consider private contracts when
assessing value.
Analysis Prepared by:Joel Tashjian / APPR. / (916)
319-2081
AB 668
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