the rent an owner can charge,
who can occupy a unit based on a tenant’s income, and
the owner’s ability to sell the property.
LIHTC housing is also burdened by state regulatory authorities who impose operational and compliance costs, periodic monitoring, on-site inspections, and compliance reviews.
Maricopa County sought to block county assessors from taking into account these restrictions in determining a property’s value and, instead, force them to use the Arizona Department of Revenue’s Subsidized Housing Valuation Guidelines issued in 1998. The Guidelines assume that a LIHTC property is not encumbered by deed restrictions and, instead, market rent and expenses are used to value LIHTC housing. In other words, LIHTC apartments should be valued as though they are market-rent apartments.
In its May 20, 2021, ruling, the Arizona Court of Appeals rejected Maricopa County’s argument and agreed with the taxpayers. The court noted that “a market value approach requires us to consider market value limitations.” The deed restrictions must be accounted for because they “have a direct and immediate effect upon marketability.” The failure to recognize that the current use of LIHTC housing as low-income apartments, the court pointed out, would require assessors to value them in excess of their actual fair market value in violation of Arizona law.
If Maricopa County had succeeded, it would have caused property tax assessments to increase, thereby burdening low-income housing operators and making it financially more difficult to underwrite and develop low-income housing projects in Arizona, thus exacerbating Arizona’s shortage of low-income housing.
Since Congress created the Low-Income Housing Tax Credit (LIHTC) program in 1986, 16,000 housing LIHTC units have been placed into service in Arizona. Despite the increase in LIHTC housing, there are currently 183,343 extremely low-income renter households in Arizona, and only 48,585 affordable and available rental homes. Arizona is currently tied for the second-worst affordable housing shortage for low-income earners in the nation, and the Phoenix metro area is tied for the third worst among large U.S. metropolitan areas.