Laserfiche WebLink
12 <br /> <br /> <br />Restraining rents on NOAH properties can be accomplished not only by getting more of <br />those properties in the hands of mission driven housing providers but also by providing good <br />reasons for existing owners to keep their rents affordable rather than taking full advantage of <br />strong market conditions that allow for large and repeated rent increases. <br /> <br />The prime means under discussion to accomplish this goal is through an expanded use of <br />the Minnesota Low Income Rental Classification program (LIRC), also commonly referred to as <br />“4d.” This program provides a 40% tax break to rental properties which receive financial <br />assistance from federal, state or local government, and whose owners agree to rent and income <br />restrictions at 60% AMI and below on at least 20% of the units in a building. Mostly this <br />program has been applied to subsidized rental properties, but as HJC pointed out in a 2015 <br />report, local governments could easily extend it to NOAH properties by providing minimal <br />financial assistance (as low as $1) so long as owners agreed to the necessary rent and income <br />restrictions.32 <br /> <br />At the time HJC issued its report in 2015, there existed a significant gap between the per <br />unit per month tax savings with 4d and the amount the savings would have to be to get owners to <br />sign up and agree to the rent and income restrictions. Therefore, we concluded that the 4d tax <br />break would probably have to be combined with some additional financial incentive to attract <br />substantial owner interest. But conditions have changed since then. With rising property values <br />have come rising property taxes and increasing landlord concerns about the property tax burden. <br />It now appears that the gap between the 4d savings and what landlords need to get interested in <br />the program has narrowed. This year, Minneapolis rolled out a pilot program for 4d tax relief for <br />NOAH properties and got a strong response. Owners are qualified for the program if they <br />commit to at least 20% of the units at rents at 60% AMI or below, and the building has at least <br />ten units. The City intends to expand the program in the coming year. A number of other cities <br />have expressed similar interest in creating a “local 4d” program.33 <br /> <br />Note that this is an area where there could be a role for counties as well. Hennepin <br />County, for example, has granted 4d tax status to several NOAH properties recently acquired by <br />Aeon. There may be some value in county administered NOAH 4d programs, either because of <br />limited local government capacity or because the 4d benefit could be combined with county <br />programs, such as favorable financing for rental rehab or energy efficiency investments. The <br />Minneapolis pilot program offers owners a menu of 4d only or 4d combined with rehab or <br />energy efficiency investments. <br /> <br />These ideas also overlap with concerns on behalf of a number of cities that have NOAH <br />properties perceived as being badly in need of physical rehab. Discussions continue among <br /> <br />32 http://hjcmn.org/_docs/LISC_4d_final_report_1-9-2015.pdf <br /> <br />33 Of course, there is no free lunch here. Expanded use of 4d reduces tax payments coming in, <br />which shifts the tax burden to the rest of the tax base. For many cities the impact is negligible, <br />but some smaller cities with limited tax bases have expressed concern about the impact of <br />expanded 4d for their tax base.