House committee rejects bill to set valuation method for affordable housing

A House committee failed to pass House Bill 1894, which would have established a statutory method for valuing real property used for affordable housing for ad valorem tax purposes.

The bill’s sponsor, State Representative Howard Beatty, told the committee that the measure would "establish a method of valuation for real property used for affordable housing" and 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 change was intended to ensure uniform treatment of affordable housing when arriving at fair market value.

Opponents, including Lindsey French of the Association of Arkansas Counties and Russell Hill, assessor for Washington County and president of the Arkansas Assessors Association, argued the bill would improperly single out one class of property for special tax treatment and could conflict with the state constitution. French said, "This bill does what, other bills in the past have attempted to do, which is create special tax treatment for 1 type of special interest group." She cited Article 16, Section 5 of the Arkansas Constitution and noted that, because the change would affect the constitutionally required method of valuation, a three-fourths vote of each chamber would be required for permanent change.

Hill described current appraisal practice and the need to consider multiple valuation approaches. "On the appraisal side of that, according to the uniform standards of professional appraisal practice, it's very important that we utilize all 3 approaches to determining the market value of a property," he said, adding that assessors already "lean heavily on the income approach" for many subsidized properties and reconcile cost, income and sales approaches when possible. Hill also told the committee that in his experience valuation differences between assessors and owners on subsidized housing can be material — citing an example where values differed about 25 percent — and that owners may appeal to a board of equalization or circuit court.

Committee members asked technical questions about appraisal practice, capitalization rates and the three traditional approaches (cost, income and sales) cited by Hill. Representative Beatty closed by restating that the bill would permit assessors to take into account the use restrictions on affordable housing when arriving at market value and asked for a do-pass motion.

The committee took a voice vote on a motion to pass the bill. No recorded roll-call tally was taken; the chair announced, "The noes have it," and "Bill has failed."