Committee rejects House Bill 1894 to set valuation method for affordable housing

Representative Howard Beatty, sponsor: "18 94 is, to establish a method of valuation for real property used, for affordable housing" and later summarized fair market value as "what a willing buyer or willing seller would agree to exchange a property for in an arms length sale." The committee took no recorded roll-call and a voice vote failed when the chair announced, "the noes have it; bill has failed."

Beatty opened the discussion by saying House Bill 1894 would "provide clear guidance to the assessors, the taxpayers, and agencies on how to value unique and complex property types such as affordable housing." He said the measure was intended to ensure affordable housing is valued consistent with fair market value while accounting for federally and state-imposed use and rent restrictions.

Two witnesses opposed the bill. Lindsey French of the Association of Arkansas Counties told the committee the proposal "create[s] special tax treatment for 1 type of special interest group" and noted Article 16, Section 5 of the Arkansas Constitution requires property be taxed "equal and uniform throughout the state" and that changes affecting that provision require a three-fourths vote in each chamber. Russell Hill, Washington County assessor and president of the Arkansas Assessors Association, said assessors already apply appraisal standards that use three approaches — income, sales and cost — and reconcile them to determine market value. "When we do look at low income housing, we do lean towards and we do major consideration based on their income," Hill said, describing current practice as giving specialized properties appropriate adjustments.

Opponents argued the bill would single out subsidized housing for different tax treatment and could set a precedent that other property types (for example, storage facilities) might later seek. Hill and French told committee members that constitutionally established equal-and-uniform requirements and professional appraisal standards should guide valuation rather than a statutory mandate that prescribes a single approach.

Committee members asked technical questions about appraisal methods. Hill said assessors sometimes rely more heavily on the cost or income approach when sales comparable are scarce and that capitalization rates, vacancy and repair costs can materially affect valuations. He estimated value differences in disputed cases can be substantial, noting an example where values differed by about 25 percent between owner and assessor estimates.

Representative Beatty closed by reiterating the bill’s intent to clarify how restrictions on affordable housing use can affect market value and asked for committee support and eventual three-fourths majorities in both chambers. The committee proceeded to a voice vote on a motion to pass; the chair called for aye/no responses and then announced the noes had it. The motion to pass House Bill 1894 failed.