County to Eliminate Tax Exemption for Apartment Renovations

Comments at Arlington County Board Meeting, March 21, 2020

Buried in the County Manager’s proposed FY21 budget is a proposal to repeal the partial tax incentive for renovating multi-family properties. Yes, you heard me. After all the song and dance about affordable housing, the County Manager wants to scrap the one program in the County’s arsenal of housing tools that actually delivers affordable housing. He wants to transfer the revenue stream of additional taxes to the County’s so-called affordable housing programs. Here’s the proposal:

“The Proposed Budget recommends repealing Partial Exemption for Certain Rehabilitated Residential Real Estate. At this time the Manager is recommending that the exemption for owners/developers of multi-family properties be discontinued and that the County Board should consider investing in the County’s affordable housing programs instead of providing tax abatements to renovated properties. Repeal of the ordinance will not impact the FY 2021 Budget. Current applications will be allowed to continue to utilize the tax exemption. It is estimated that the collection of otherwise foregone revenue will not be realized until FY 2022 or FY 2023. This is due to the normal delay which occurs from the filing of the application, construction and rehabilitation, and the ultimate assessment and billing for the approved exemption.”

Budget Book 87-97

This initiative is directly contrary to several goals outlined in the Affordable Housing Master Plan, among them to:

“1.2.1 Incentivize the production of moderately-priced ownership housing through land use and zoning policy.

“1.2.2 Encourage production and preservation of family-sized (e.g. 3+bedroom) moderately-priced ownership units.”

It’s also fiscally irresponsible. At $400,000 and up, the cost of construction of a so-called committed affordable unit (CAF) exceeds that of a luxury condo. Renovation of an existing market rate unit might cost $200,000 or less. Housing non-profits like APAH will tell you that the loans they get from the County to build CAFs are all paid back in the form of rent. What they don’t tell you is that these rents are heavily subsidized by taxpayers. So whereas tenants make out like bandits, the taxpayer is gouged.

Scrapping the tax incentive to renovate market rate units belies the County’s commitment to affordable housing and is unfair to taxpayers.

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