HB 2245 (Callsen), as introduced, would require affordable housing property operated under certain federal housing programs to be assessed using the income approach, based on the analysis of certain enumerated data points. Under current law, in valuing affordable housing properties, assessors are required to consider the contract rent and the impact of applicable rent restrictions; restrictions on the transfer of title or other restraints on alienation of the real property; and the actual operating expenses and expenditures and the impact of any such additional expenses or expenditures, but retain some flexibility to use alternative methods to determine fair market value under generally accepted appraisal practices. Under generally accepted appraisal practices, the three approaches to valuing property (cost, sales comparison, and income) must be considered, but an approach may be rejected if adequate information is not available, or the method would lead to unreliable results. Under the introduced bill, if the assessor failed to comply with the revised valuation requirements and the property owner prevailed in an appeal, the locality would owe the owner attorney fees and costs, unless the owner had failed to comply with his or her obligation to provide income and expense data. The introduced bill also required the Department of Taxation to convene a stakeholder group to develop a form to collect income and expense data from property owners.
A more extensive version of this legislation was considered during the 2024 session and referred to the Virginia Housing Commission over concerns expressed by VACo, VML, and Commissioners of the Revenue about the breadth of the changes proposed and the effect of strictly prescribing one methodology to value property. VACo, VML, and Commissioners of the Revenue had several discussions with proponents of the legislation over the “off season” to attempt to address concerns about application of the existing statute. One of the results of these discussions was a request by VACo, VML, and the Commissioners of the Revenue to the Department of Taxation to develop a training module for assessment professionals on the assessment of affordable housing properties. The Department agreed to develop this training and plans to have it ready later this year.
This year’s version of the legislation has been pared back from the 2024 proposal, but local governments remained concerned with a strict requirement to use the income approach, even in situations where the information required to perform such a valuation was not provided. After further discussions, the patron agreed to several amendments, including removal of the attorney fees provisions. As reported by the full House Finance Committee on Wednesday, the legislation now requires property operated as affordable housing under the specified federal programs that is generating income to be assessed using an income approach based on certain specified data points; however, if the information needed for this analysis is not provided by the property owner or is not available on relevant databases, the income approach would not be required. Language regarding the owner’s submission of income and expense information on a standard form was revised to ensure that the information would have to be complete and accurate in order to satisfy the owner’s existing statutory obligation to report this information. These amendments improve the bill; VACo appreciates the patron’s willingness to discuss local government’s concerns and has withdrawn its opposition.
VACo Contacts: Katie Boyle and Joe Lerch, AICP