Taxation of Affordable Housing in Community Land Trusts

<p>Imagine that you own a home, but not the land on which it sits. You’re a tenant on the land, subject to a 99-year ground lease. As a condition of the ground lease, you are permitted to sell your home only to a household earning less than the community’s median wage, and the ground lease sets a maximum sales price to ensure that the home is affordable to that household. Just down the street, similar homes are selling for considerably more than your price restriction allows. That fact doesn’t bother you, because you knew the terms when you bought the place. Even with the price restrictions, you will earn some equity upon resale, and besides, you got a great deal when you bought it.</p> <p>Now the tax assessor visits. Should your price-restricted home be valued in the same way as the market-rate home down the street, or should the assessor take your price restriction into consideration? That is the question addressed by the General Assembly in S.L. 2009-481.</p> <p>Before looking at the General Assembly’s response, some background is helpful. The preceding scenario describes the community land trust (CLT) model for affordable housing. Under this model, a nonprofit corporation obtains ownership of a parcel of land and constructs a house on that land. It then leases the land (typically through a very inexpensive 99-year ground lease) and sells the improvements to a household earning less than the area’s median wage. The house price is affordable because land costs are essentially excluded from the price. Sometimes a subordinated lien is recorded [...]</p>