New Bill by Senator Jerry Hill Offers Property Tax Relief to Charities That Privately Fund Affordable Housing

February 14, 2019

For Immediate Release – Office of State Senator Jerry Hill – February 14, 2019

New Bill by Senator Jerry Hill Offers Property Tax Relief to Charities That Privately Fund Affordable Housing

SACRAMENTO – The property tax burden for charities, religious organizations and other nonprofits that privately fund affordable housing and do not receive tax credits would be eased under legislation introduced today by state Senator Jerry Hill.

Senate Bill 294 would raise the cap on property tax exemptions for such nonprofits from the $20 million in assessed value currently allowed by law to $250 million in assessed value.

The bill marks the third time in recent years that Senator Hill has introduced legislation to provide property tax relief to nonprofits that do not receive tax credits for their efforts to increase the supply of non-publicly financed affordable housing. His earlier bills, SB 996 in 2016 and SB 1115 in 2018, raised the property tax exemption cap, updating the law to account for skyrocketing property values and decreasing availability of affordable housing in California. The state is home to four of the nation’s five least affordable rental markets.

“Affordable housing is in scant supply and we need to help organizations that provide affordable housing in their communities, privately raise money to do so and receive no tax credits for their efforts,” said Senator Hill, D-San Mateo and Santa Clara Counties. “These organizations have said yes to affordable housing in their communities. They should not be punished for being successful in their efforts and acquiring property for affordable housing whose assessed value pushes the nonprofit beyond the amount currently allowed for an exemption.”

Relatively few nonprofits with affordable housing property meet the requirements to qualify for the property tax exemption. Only 26 organizations do so. They own 75 properties that are subject to the property tax exemption cap. Of the 26 organizations, only two possess property with an assessed value that exceeds the current $20 million cap.

One of them is the St. Francis Center in Redwood City, which recently acquired a property as part of the organization’s commitment to provide affordable housing for low income and very low income families. But, in addition to the cap on assessed value, the law requires that at least 90 percent of tenants in an affordable housing property are low income in order to qualify for the property tax exemption. Acquisition of the building disqualified the center from full property tax exemption on two counts: The assessed value of the property pushed the center’s affordable holdings beyond the exemption cap, and while 52 percent of the existing tenants in the building were low income, 48 percent were moderate income. The St. Francis Center chose to give those tenants a chance to find other housing instead of immediately displacing them to try to gain a tax break.

“Organizations like the St. Francis Center also should not be punished for their compassion in giving existing tenants in a purchased property who do not meet low income requirements time to locate other housing,” Senator Hill said. “The St. Francis Center chose not to add to the number of households in crisis with an immediate need for affordable housing, which would have worsened the problem the center has dedicated itself to address.”

With that in mind, Senator Hill included provisions in SB 294 that change the low income tenancy requirement to a threshold of 50 percent, instead of 90 percent. The bill also would enable such properties of nonprofits to benefit from the property tax exemption on a pro rata basis, provided that a nonprofit and its affordable housing properties otherwise qualify for the exemption. For example, a property where 60 percent of the tenants are low income would be eligible for a 60 percent property tax exemption as long as the nonprofit meets the other eligibility requirements for the property tax exemption – it privately funds its affordable housing efforts, does not receive tax credits and the total assessed value of affordable housing properties does not exceed the new proposed cap of $250 million.

“The law needs to support non-publicly financed affordable housing provided by nonprofits as part of the state’s overall strategy to address the housing crisis,” said Senator Hill. “We want to help these efforts, not hinder them.”

Sister Christina Heltsley, executive director of the St. Francis Center, praised SB 294. “This law would give much-needed relief to nonprofits working diligently to provide dignified, safe, clean and affordable housing to extremely low and very low income families,” she said. “It will allow us, in concert with our legislators, to care for the most vulnerable families in California. Further, it will not inhibit nonprofits that are working in the field of low income housing from searching for and purchasing more housing so that it can be safe-guarded for lower income families who are seriously burdened by the exorbitant rents in the Bay Area and all over California.”

In addition, the new bill would forgive unpaid property tax bills imposed on the St. Francis Center and the AIDS Healthcare Foundation, the only other nonprofit organization affected by the cap, for exceeding the limit.

“AHF has initiated an aggressive housing program for extremely low and very low income people and has added more than 635 residential units across Los Angeles,” said Michael Weinstein, president of the AIDS Healthcare Foundation. “We need ‘out-of-the-box’ solutions to address our housing affordability crisis. The current property tax exemption for low-income housing is one of those solutions, although the current cap of $20 million has been quickly exceeded. We are deeply grateful to Senator Hill for introducing SB 294, which will increase the cap to $250 million and give us additional relief as we strive to provide decent housing to thousands more low-income Californians.”

The foundation provides care, treatment and other services to people with HIV, regardless of the ability to pay. It is the largest nonprofit organization of its kind and has a growing housing program for extremely low and very low income people living with HIV and those without it. The foundation owns nearly $52 million in affordable properties, all currently in Los Angeles County. One hundred percent of their residents meet the eligibility criteria for low income.

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The text for SF 294 will be posted at http://leginfo.legislature.ca.gov/ within 24 hours. The fact sheet for the bill is available here.

Media Contact: Leslie Guevarra, 415-298-3404, leslie.guevarra@sen.ca.gov