HOUSE BILL REPORT

3SSB 5550

BYSenate Committee on Ways & Means (originally sponsored by Senators Lee, Williams and Fleming)

Providing a procedure for the classification and valuation of property devoted primarily to low-income housing.

House Committe on Housing

Majority Report:  Do pass as amended.  (7)

      Signed by Representatives Nutley, Chair; Leonard, Vice Chair; Winsley, Ranking Republican Member; Anderson, Padden, Rector and Todd.

House Staff:Kenny Pittman (786-7392)

Rereferred House Committee on Revenue

Majority Report:  Do pass as amended by Committee on Housing.  (11)

      Signed by Representatives Wang, Chair; Pruitt, Vice Chair; Appelwick, Basich, Fraser, Grant, Morris, Phillips, Rust, Silver and H. Sommers.

House Staff:      Rick Wickman (786-7150)

AS PASSED HOUSE FEBRUARY 27, 1990

BACKGROUND:

A proposed constitutional amendment, 2SSJR 8212, would allow property with buildings that are devoted to low-income housing and containing at least five low-income dwelling units to be valued at current use value rather than true and fair market value for property tax purposes.

SUMMARY:

Counties are authorized to base valuation of property with buildings that are devoted primarily to low-income housing and contain at least five low-income dwelling units or mobile home parks at its current use value rather than true and fair market value for property tax purposes.  The current use valuation process must be approved by resolution or ordinance of the county.

A low-income persons is defined as a family or household whose annual income does not exceed 50 percent of the median income, adjusted for household size, in the area in which the qualifying property is located.

Property with Buildings

For property tax purposes, the current use valuation designation for low-income dwelling units would apply to any property with a building, including areas used for parking and landscaping required by local building and zoning ordinances, that meet all of the following criteria: (1) the property must be totally devoted to low-income housing; (2) at least five dwelling units are occupied by persons of low-income; (3) the rents charged to low-income persons are below market rates established by the federal government or a local housing authority, or at or below 15 percent of the area median income; and (4) the building and dwelling units rented to low-income persons comply with local health and safety standards.

A dwelling unit is defined as a structure that is used as a home, residence, or sleeping area by one or more persons maintaining a common household, including but not limited to units of multiplexes and apartment buildings.

Property with Mobile Home Park

For property tax purposes, the current use valuation designation for mobile home parks would apply to any property used for a mobile home park, including areas used for parking and landscaping required by local building and zoning ordinances, that meet all of the following criteria: (1) the mobile home park must be totally devoted to low-income housing; (2) at least five mobile home spaces in the mobile home park must dedicated to housing for persons of low-income; (3) the rents charged to low-income persons are below market rates for mobile home park spaces; and (4) the mobile home park must comply with local health and safety standards.

A mobile home park means any real property that is rented or held out for rent to others for the placement of two or more mobile homes for the primary purpose of producing income.  This definition does not include a mobile home rented for seasonal recreational purposes only and is not intended for year-round occupancy.

General Provisions

The current use valuation could be applied only to those portions of the property that is dedicated to housing for persons of low-income or mobile home park spaces dedicated to persons of low-income.

The current use valuation designation does not apply to: (1) substandard buildings; (2) institutional housing, except housing under contract to a governmental organization or private health care organization; (3) employee housing, including contract workers, employees, or relatives of the owner; and (4) any property beyond five acres, except for mobile home parks.

In computing current use value, the county assessor is to disregard: (1) potential uses that might return a higher income; (2) rents that might be charged were the owner to maximize returns; and (3) the value of the property if either the land or improvements were unencumbered by their current commitment to low- income housing.  The assessed value is to be the lesser of the property's value based on current use or its value if it were assessed without regard to this classification.

Property classified as "devoted to low-income housing" must remain in that use for at least 10 years.  After eight years, the owner of the property may choose to change its use.  Two years' notice of a change in classification must be given to the assessor of the county in which the property is located.  Upon removal from classification, the bill provides for the repayment of seven years of foregone taxes, plus a 20 percent penalty, and interest. This provision is consistent with existing current use law for agricultural lands, timber lands, and other property under the Open Space Act.

The Department of revenue shall adopt rules to implement this chapter.

The Department of Community Development shall prepare and publish data on county median income figures.

Revenue:    This bill has a revenue impact.

Fiscal Note:      Available.

Effective Date:This bill takes effect after the approval by the voters in the November 1990 general election.

House Committee ‑ Testified For:    (Housing) Bernie Ryan, King County Assessor's Office; Mike Ryherd, Low-Income Housing Congress (with comment); and Ron Main, King County Council.

(Revenue) Mike Ryherd, Low Income Housing Congress; and Cheryl Chow, City of Seattle.

House Committee - Testified Against:      (Housing) No one.

(Revenue) No one.

House Committee - Testimony For:    (Housing) The bill will provide an incentive to owners to keep housing for low-income use.  This is a least cost method that should be supported.  However, the bill should be amended as not to require the property to be totally occupied by low-income persons to qualify under the program. This would encourage mixing of incomes.  There would not be a revenue loss to the local taxing districts, only a shift of the tax burden to other uses.  This shift would result in minimal increases in property taxes.  Tax loss would only occur if the taxing district is already at its maximum levy amount.

(Revenue) Current use property tax assessments for low income housing, and mobile homes are needed to replace "highest and best" use to stimulate, preserve, and to meet the future demands for low income housing.  It is appropriate to authorize current use assessments for low income housing to provide an incentive for owners to maintain low income housing.  Proper safeguards such as health and safety standards are necessary to protect the granting of current use assessments to properties devoted to low income housing.

House Committee - Testimony Against:      (Housing) None.

(Revenue) None.