AB 1868: Property taxation: assessments: affordable housing.
- Session Year: 2023-2024
- House: Assembly
- Latest Version Date: 2024-09-25
Current Status:
Passed
(2024-09-25: Chaptered by Secretary of State - Chapter 553, Statutes of 2024.)
Introduced
In Committee
First Chamber
In Committee
Second Chamber
Enacted
Existing law requires the county assessor to consider, when valuing real property for property taxation purposes, the effect of any enforceable restrictions to which the use of the land may be subjected. Under existing law, these restrictions include, among other enumerated items, a recorded contract with a nonprofit corporation that meets prescribed requirements, including requirements that the nonprofit corporation has received a welfare exemption for properties intended to be sold to low-income families who participate in a special no-interest loan program, and that the contract includes a deed of trust on the property in favor of the nonprofit corporation to ensure compliance with the terms of the program, as described.
This bill would, for purposes of valuing property by the county assessor, establish a rebuttable presumption that, at the time of purchase, an assessor shall not include the value of the above-described deed of trust. By changing the manner in which county assessors assess property for property taxation purposes, this bill would impose a state-mandated local program.
The bill would also make a technical, nonsubstantive change to those provisions.
This bill would incorporate additional changes to Section 402.1 of the Revenue and Taxation Code proposed by AB 2897 to be operative only if this bill and AB 2897 are enacted and this bill is enacted last.
The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that, if the Commission on State Mandates determines that the bill contains costs mandated by the state, reimbursement for those costs shall be made pursuant to the statutory provisions noted above.
Existing law requires the county assessor to consider, when valuing real property for property taxation purposes, the effect of any enforceable restrictions to which the use of the land may be subjected. Under existing law, these restrictions include, among other enumerated items, a recorded contract with a nonprofit corporation that meets prescribed requirements, including requirements that the nonprofit corporation has received a welfare exemption for properties intended to be sold to low-income families who participate in a special no-interest loan program, and that the contract includes a deed of trust on the property in favor of the nonprofit corporation to ensure compliance with the terms of the program, as described.
This bill would, for purposes of valuing property by the county assessor, establish a rebuttable presumption that, at the time of purchase, an assessor shall not include the value of the above-described deed of trust. By changing the manner in which county assessors assess property for property taxation purposes, this bill would impose a state-mandated local program.
The bill would also make a technical, nonsubstantive change to those provisions.
This bill would incorporate additional changes to Section 402.1 of the Revenue and Taxation Code proposed by AB 2897 to be operative only if this bill and AB 2897 are enacted and this bill is enacted last.
The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that, if the Commission on State Mandates determines that the bill contains costs mandated by the state, reimbursement for those costs shall be made pursuant to the statutory provisions noted above.
Existing law requires the county assessor to consider, when valuing real property for property taxation purposes, the effect of any enforceable restrictions to which the use of the land may be subjected. Under existing law, these restrictions include, among other enumerated items, a recorded contract with a nonprofit corporation that meets prescribed requirements, including requirements that the nonprofit corporation has received a welfare exemption for properties intended to be sold to low-income families who participate in a special no-interest loan program, and that the contract includes a deed of trust on the property in favor of the nonprofit corporation to ensure compliance with the terms of the program, as described.
This bill would, for purposes of valuing property by the county assessor, establish a rebuttable presumption that, at the time of purchase, an assessor shall not include the value of the above-described deed of trust. By changing the manner in which county assessors assess property for property taxation purposes, this bill would impose a state-mandated local program.
The bill would also make a technical, nonsubstantive change to those provisions.
This bill would incorporate additional changes to Section 402.1 of the Revenue and Taxation Code proposed by AB 2897 to be operative only if this bill and AB 2897 are enacted and this bill is enacted last.
The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that, if the Commission on State Mandates determines that the bill contains costs mandated by the state, reimbursement for those costs shall be made pursuant to the statutory provisions noted above.
Existing law requires the county assessor to consider, when valuing real property for property taxation purposes, the effect of any enforceable restrictions to which the use of the land may be subjected. Under existing law, these restrictions include, among other enumerated items, a recorded contract with a nonprofit corporation that meets prescribed requirements, including requirements that the nonprofit corporation has received a welfare exemption for properties intended to be sold to low-income families who participate in a special no-interest loan program, and that the contract includes a deed of trust on the property in favor of the nonprofit corporation to ensure compliance with the terms of the program, as described.
This bill would, for purposes of valuing property by the county assessor, establish a rebuttable presumption that, at the time of purchase, an assessor shall not include the value of the above-described deed of trust. By changing the manner in which county assessors assess property for property taxation purposes, this bill would impose a state-mandated local program.
The bill would also make a technical, nonsubstantive change to those provisions.
The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that, if the Commission on State Mandates determines that the bill contains costs mandated by the state, reimbursement for those costs shall be made pursuant to the statutory provisions noted above.
Existing law requires the county assessor to consider, when valuing real property for property taxation purposes, the effect of any enforceable restrictions to which the use of the land may be subjected. Under existing law, these restrictions include, among other enumerated items, a recorded contract with a nonprofit corporation that meets prescribed requirements, including requirements that the nonprofit corporation has received a welfare exemption for properties intended to be sold to low-income families who participate in a special no-interest loan program, and that the contract includes a restriction on the use of the land for at least 30 years to owner-occupied housing available at affordable housing cost. deed of trust on the property in favor of the nonprofit corporation to ensure compliance with the terms of the program, as described.
This bill would, for purposes of valuing property by the county assessor, establish a rebuttable presumption that, at the time of purchase, the value of real property subject to a recorded contract that meets the above-described requirements is no greater than the sum of the value of the first mortgage and any applicable down payment. an assessor shall not include the value of the above-described deed of trust. By changing the manner in which county assessors assess property for property taxation purposes, this bill would impose a state-mandated local program.
The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that, if the Commission on State Mandates determines that the bill contains costs mandated by the state, reimbursement for those costs shall be made pursuant to the statutory provisions noted above.
Existing law requires the county assessor to consider, when valuing real property for property taxation purposes, the effect of any enforceable restrictions to which the use of the land may be subjected. Under existing law, these restrictions include, among other enumerated items, a recorded contract with a nonprofit corporation that meets prescribed requirements, including requirements that the nonprofit corporation has received a welfare exemption for properties intended to be sold to low-income families who participate in a special no-interest loan program, and that the contract includes a restriction on the use of the land for at least 30 years to owner-occupied housing available at affordable housing cost.
This bill would, for purposes of valuing property by the county assessor, establish a rebuttable presumption that, at the time of purchase, the value of real property subject to a recorded contract that meets the above-described requirements is no greater than the sum of the value of the first mortgage and any applicable down payment. By changing the manner in which county assessors assess property for property taxation purposes, this bill would impose a state-mandated local program.
The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that, if the Commission on State Mandates determines that the bill contains costs mandated by the state, reimbursement for those costs shall be made pursuant to the statutory provisions noted above.
(a)In the assessment of land, the assessor shall consider the effect upon value of any enforceable restrictions to which the use of the land may be subjected. These restrictions shall include, but are not limited to, all of the following:
(1)Zoning.
(2)Recorded contracts with governmental agencies other than those provided in Sections 422, 422.5, and 422.7.
(3)Permit authority of, and permits issued by, governmental agencies exercising land use powers concurrently with local governments, including the California Coastal Commission and regional coastal commissions, the San Francisco Bay Conservation and Development Commission, and the California Tahoe Regional Planning Agency.
(4)Development controls of a local government in accordance with any local coastal program certified pursuant to Division 20 (commencing with Section 30000) of the Public Resources Code.
(5)Development controls of a local government in accordance with a local protection program, or any component thereof, certified pursuant to Division 19 (commencing with Section 29000) of the Public Resources Code.
(6)Environmental constraints applied to the use of land pursuant to provisions of statutes.
(7)Hazardous waste land use restriction pursuant to Section 25226 of the Health and Safety Code.
(8)(A)A recorded conservation, trail, or scenic easement, as described in Section 815.1 of the Civil Code, that is granted in favor of a public agency, or in favor of a nonprofit corporation organized pursuant to Section 501(c)(3) of the Internal Revenue Code that has as its primary purpose the preservation, protection, or enhancement of land in its natural, scenic, historical, agricultural, forested, or open-space condition or use.
(B)A recorded greenway easement, as described in Section 816.52 of the Civil Code, that is granted in favor of a public agency, or in favor of a nonprofit corporation organized pursuant to Section 501(c)(3) of the Internal Revenue Code that has as its primary purpose the developing and preserving of greenways.
(9)A solar-use easement pursuant to Chapter 6.9 (commencing with Section 51190) of Part 1 of Division 1 of Title 5 of the Government Code.
(10)(A)A contract where the following apply:
(i)The contract is with a nonprofit corporation organized pursuant to Section 501(c)(3) of the Internal Revenue Code that has received a welfare exemption under Section 214.15 for properties intended to be sold to low-income families who participate in a special no-interest loan program.
(ii)The contract restricts the use of the land for at least 30 years to owner-occupied housing available at affordable housing cost in accordance with Section 50052.5 of the Health and Safety Code.
(iii)The contract includes a deed of trust on the property in favor of the nonprofit corporation to ensure compliance with the terms of the program, which has no value unless the owner fails to comply with the covenants and restrictions of the terms of the home sale.
(iv)The local housing authority or an equivalent agency, or, if none exists, the city attorney or county counsel, has made a finding that the long-term deed restrictions in the contract serve a public purpose.
(v)The contract is recorded and provided to the assessor.
(B)For real property subject to a contract that satisfies all the requirements of subparagraph (A), there shall be a rebuttable presumption that, at the time of purchase, an assessor shall not include the value of the deed of trust referenced in clause (iii) of subparagraph (A) of this paragraph.
(11)(A)A contract where the following apply:
(i)The contract is a renewable 99-year ground lease between a community land trust and the qualified owner of an owner-occupied single-family dwelling or an owner-occupied unit in a multifamily dwelling.
(ii)The contract subjects a single-family dwelling or unit in a multifamily dwelling, and the land on which the dwelling or unit is situated that is leased to the qualified owner by a community land trust for the convenient occupation and use of that dwelling or unit, to affordability restrictions.
(iii)One of the following public agencies or officials has made a finding that the affordability restrictions in the contract serve the public interest to create and preserve the affordability of residential housing for persons and families of low or moderate income:
(I)The director of the local housing authority or equivalent agency.
(II)The county counsel.
(III)The director of a county housing department.
(IV)The city attorney.
(V)The director of a city housing department.
(iv)The contract is recorded and is provided to the assessor.
(B)(i)For purposes of this paragraph, the sale or resale price of the dwelling or unit is rebuttably presumed to include both the dwelling or unit and the leased land on which the dwelling or unit is situated. This presumption may be overcome if the assessor establishes by a preponderance of the evidence that all or a portion of the value of the leased land is not reflected in the sale or resale price of the dwelling or unit.
(ii)Notwithstanding any other law, corrections of base year values and declines in value owing to the restrictions on properties assessed under this subparagraph shall apply to all lien dates occurring after September 27, 2016.
(C)For purposes of this paragraph, all of the following definitions shall apply:
(i)Affordability restrictions mean that all of the following conditions are met:
(I)The dwelling or unit can only be sold or resold to a qualified owner to be occupied as a principal place of residence.
(II)The sale or resale price of the dwelling or unit is determined by a formula that ensures the dwelling or unit has a purchase price that is affordable to qualified owners.
(III)There is a purchase option for the dwelling or unit in favor of a community land trust intended to preserve the dwelling or unit as affordable to qualified owners.
(IV)The dwelling or unit is to remain affordable to qualified owners by a renewable 99-year ground lease.
(ii)Community land trust means a nonprofit corporation organized pursuant to Section 501(c)(3) of the Internal Revenue Code that satisfies all of the following:
(I)Has as its primary purposes the creation and maintenance of permanently affordable single-family or multifamily residences.
(II)All dwellings and units located on the land owned by the nonprofit corporation are sold to a qualified owner to be occupied as the qualified owners primary residence or rented to persons and families of low or moderate income.
(III)The land owned by the nonprofit corporation, on which a dwelling or unit sold to a qualified owner is situated, is leased by the nonprofit corporation to the qualified owner for the convenient occupation and use of that dwelling or unit for a renewable term of 99 years.
(iii)Limited equity housing cooperative has the same meaning as that term is defined in Section 817 of the Civil Code.
(iv)Persons and families of low or moderate income has the same meaning as that term is defined in Section 50093 of the Health and Safety Code.
(v)Qualified owner means persons and families of low or moderate income, including persons and families of low or moderate income that own a dwelling or unit collectively as member occupants or resident shareholders of a limited equity housing cooperative.
(b)There is a rebuttable presumption that restrictions will not be removed or substantially modified in the predictable future and that they will substantially equate the value of the land to the value attributable to the legally permissible use or uses.
(c)Grounds for rebutting the presumption may include, but are not necessarily limited to, the past history of like use restrictions in the jurisdiction in question and the similarity of sales prices for restricted and unrestricted land. The possible expiration of a restriction at a time certain shall not be conclusive evidence of the future removal or modification of the restriction unless there is no opportunity or likelihood of the continuation or renewal of the restriction, or unless a necessary party to the restriction has indicated an intent to permit its expiration at that time.
(d)In assessing land with respect to which the presumption is unrebutted, the assessor shall not consider sales of otherwise comparable land not similarly restricted as to use as indicative of value of land under restriction, unless the restrictions have a demonstrably minimal effect upon value.
(e)In assessing land under an enforceable use restriction wherein the presumption of no predictable removal or substantial modification of the restriction has been rebutted, but where the restriction nevertheless retains some future life and has some effect on present value, the assessor may consider, in addition to all other legally permissible information, representative sales of comparable lands that are not under restriction but upon which natural limitations have substantially the same effect as restrictions.
(f)For the purposes of this section the following definitions apply:
(1)Comparable lands are lands that are similar to the land being valued in respect to legally permissible uses and physical attributes.
(2)Representative sales information is information from sales of a sufficient number of comparable lands to give an accurate indication of the full cash value of the land being valued.
(g)It is hereby declared that the purpose and intent of the Legislature in enacting this section is to provide a method of determining whether a sufficient amount of representative sales information is available for land under use restriction to ensure the accurate assessment of that land. It is also hereby declared that the further purpose and intent of the Legislature in enacting this section and Section 1630 is to avoid an assessment policy which, in the absence of special circumstances, considers uses for land that legally are not available to the owner and not contemplated by government, and that these sections are necessary to implement the public policy of encouraging and maintaining effective land use planning. This statute shall not be construed as requiring the assessment of any land at a value less than as required by Section 401 or as prohibiting the use of representative comparable sales information on land under similar restrictions when this information is available.
SEC. 1.5.Section 402.1 of the Revenue and Taxation Code is amended to read:402.1.(a)In the assessment of land, the assessor shall consider the effect upon value of any enforceable restrictions to which the use of the land may be subjected. These restrictions shall include, but are not limited to, all of the following:
(1)Zoning.
(2)Recorded contracts with governmental agencies other than those provided in Sections 422, 422.5, and 422.7.
(3)Permit authority of, and permits issued by, governmental agencies exercising land use powers concurrently with local governments, including the California Coastal Commission and regional coastal commissions, the San Francisco Bay Conservation and Development Commission, and the California Tahoe Regional Planning Agency.
(4)Development controls of a local government in accordance with any local coastal program certified pursuant to Division 20 (commencing with Section 30000) of the Public Resources Code.
(5)Development controls of a local government in accordance with a local protection program, or any component thereof, certified pursuant to Division 19 (commencing with Section 29000) of the Public Resources Code.
(6)Environmental constraints applied to the use of land pursuant to provisions of statutes.
(7)Hazardous waste land use restriction pursuant to Section 25226 of the Health and Safety Code.
(8)(A)A recorded conservation, trail, or scenic easement, as described in Section 815.1 of the Civil Code, that is granted in favor of a public agency, or in favor of a nonprofit corporation organized pursuant to Section 501(c)(3) of the Internal Revenue Code that has as its primary purpose the preservation, protection, or enhancement of land in its natural, scenic, historical, agricultural, forested, or open-space condition or use.
(B)A recorded greenway easement, as described in Section 816.52 of the Civil Code, that is granted in favor of a public agency, or in favor of a nonprofit corporation organized pursuant to Section 501(c)(3) of the Internal Revenue Code that has as its primary purpose the developing and preserving of greenways.
(9)A solar-use easement pursuant to Chapter 6.9 (commencing with Section 51190) of Part 1 of Division 1 of Title 5 of the Government Code.
(10)(A)A contract where the following apply:
(i)The contract is with a nonprofit corporation organized pursuant to Section 501(c)(3) of the Internal Revenue Code that has received a welfare exemption under Section 214.15 for properties intended to be sold to low-income families who participate in a special no-interest loan program.
(ii)The contract restricts the use of the land for at least 30 years to owner-occupied housing available at affordable housing cost in accordance with Section 50052.5 of the Health and Safety Code.
(iii)The contract includes a deed of trust on the property in favor of the nonprofit corporation to ensure compliance with the terms of the program, which has no value unless the owner fails to comply with the covenants and restrictions of the terms of the home sale.
(iv)The local housing authority or an equivalent agency, or, if none exists, the city attorney or county counsel, has made a finding that the long-term deed restrictions in the contract serve a public purpose.
(v)The contract is recorded and provided to the assessor.
(B)For real property subject to a contract that satisfies all the requirements of subparagraph (A), there shall be a rebuttable presumption that, at the time of purchase, an assessor shall not include the value of the deed of trust referenced in clause (iii) of subparagraph (A) of this paragraph.
(11)(A)A contract where the following apply:
(i)The contract is a renewable 99-year ground lease between a community land trust, or a wholly owned subsidiary of a community land trust that is solely directed and managed by the community land trust, and the qualified owner of an owner-occupied single-family dwelling or an owner-occupied unit in a multifamily dwelling.
(ii)The contract subjects a single-family dwelling or unit in a multifamily dwelling, and the land on which the dwelling or unit is situated that is leased to the qualified owner by a community land trust for the convenient occupation and use of that dwelling or unit, to affordability restrictions.
(iii)One of the following public agencies or officials has made a finding that the affordability restrictions in the contract serve the public interest to create and preserve the affordability of residential housing for persons and families of low or moderate income:
(I)The director of the local housing authority or equivalent agency.
(II)The county counsel.
(III)The director of a county housing department.
(IV)The city attorney.
(V)The director of a city housing department.
(iv)The contract is recorded and is provided to the assessor.
(B)(i)For purposes of this paragraph, the sale or resale price of the dwelling or unit is rebuttably presumed to include both the dwelling or unit and the leased land on which the dwelling or unit is situated. This presumption may be overcome if the assessor establishes by a preponderance of the evidence that all or a portion of the value of the leased land is not reflected in the sale or resale price of the dwelling or unit.
(ii)Notwithstanding any other law, corrections of base year values and declines in value owing to the restrictions on properties assessed under this subparagraph shall apply to all lien dates occurring after September 27, 2016.
(C)For purposes of this paragraph, all of the following definitions shall apply:
(i)Affordability restrictions mean that all of the following conditions are met:
(I)The dwelling or unit can only be sold or resold to a qualified owner to be occupied as a principal place of residence.
(II)The sale or resale price of the dwelling or unit is determined by a formula that ensures the dwelling or unit has a purchase price that is affordable to qualified owners.
(III)There is a purchase option for the dwelling or unit in favor of a community land trust intended to preserve the dwelling or unit as affordable to qualified owners.
(IV)The dwelling or unit is to remain affordable to qualified owners by a renewable 99-year ground lease.
(ii)Community land trust means a nonprofit corporation exempt from federal income tax pursuant to Section 501(c)(3) of the Internal Revenue Code that satisfies all of the following:
(I)Has as its primary purposes the creation and maintenance of permanently affordable single-family or multifamily residences.
(II)(ia)All dwellings and units located on the land owned by the nonprofit corporation or its wholly owned subsidiary are either sold to a qualified owner to be occupied as the qualified owners primary residence or rented to persons and families of low or moderate income.
(ib)In the case of dwellings or units sold to qualified owners, if the community land trust, directly or through its wholly owned subsidiary, owns the land underneath the dwellings or units, then the land underneath the dwellings or units shall be leased to the qualified owner of a dwelling or unit on the land for the convenient occupation and use of that dwelling or unit for a renewable term of 99 years. In the case of dwellings or units that are part of a condominium, cooperative, or other common interest development under which the land is owned by a homeowners association or person other than the community land trust, then the condominium unit or interest owned by the community land trust shall be sold to qualified owners for the convenient occupation and use of that dwelling or unit subject to affordability restrictions as that term is defined in this subdivision, except that in lieu of a ground lease there shall be an affordability covenant, of a duration of at least 99 years, recorded against the unit or interest.
(iii)Limited equity housing cooperative has the same meaning as that term is defined in Section 817 of the Civil Code.
(iv)Persons and families of low or moderate income has the same meaning as that term is defined in Section 50093 of the Health and Safety Code.
(v)Qualified owner means persons and families of low or moderate income, including persons and families of low or moderate income that own a dwelling or unit collectively as member occupants or resident shareholders of a limited equity housing cooperative.
(b)There is a rebuttable presumption that restrictions will not be removed or substantially modified in the predictable future and that they will substantially equate the value of the land to the value attributable to the legally permissible use or uses.
(c)Grounds for rebutting the presumption may include, but are not necessarily limited to, the past history of like use restrictions in the jurisdiction in question and the similarity of sales prices for restricted and unrestricted land. The possible expiration of a restriction at a time certain shall not be conclusive evidence of the future removal or modification of the restriction unless there is no opportunity or likelihood of the continuation or renewal of the restriction, or unless a necessary party to the restriction has indicated an intent to permit its expiration at that time.
(d)In assessing land with respect to which the presumption is unrebutted, the assessor shall not consider sales of otherwise comparable land not similarly restricted as to use as indicative of value of land under restriction, unless the restrictions have a demonstrably minimal effect upon value.
(e)In assessing land under an enforceable use restriction wherein the presumption of no predictable removal or substantial modification of the restriction has been rebutted, but where the restriction nevertheless retains some future life and has some effect on present value, the assessor may consider, in addition to all other legally permissible information, representative sales of comparable lands that are not under restriction but upon which natural limitations have substantially the same effect as restrictions.
(f)For the purposes of this section the following definitions apply:
(1)Comparable lands are lands that are similar to the land being valued in respect to legally permissible uses and physical attributes.
(2)Representative sales information is information from sales of a sufficient number of comparable lands to give an accurate indication of the full cash value of the land being valued.
(g)It is hereby declared that the purpose and intent of the Legislature in enacting this section is to provide for a method of determining whether a sufficient amount of representative sales information is available for land under use restriction to ensure the accurate assessment of that land. It is also hereby declared that the further purpose and intent of the Legislature in enacting this section and Section 1630 is to avoid an assessment policy which, in the absence of special circumstances, considers uses for land that legally are not available to the owner and not contemplated by government, and that these sections are necessary to implement the public policy of encouraging and maintaining effective land use planning. This statute shall not be construed as requiring the assessment of any land at a value less than as required by Section 401 or as prohibiting the use of representative comparable sales information on land under similar restrictions when this information is available.
SEC. 2.Section 1.5 of this bill incorporates amendments to Section 402.1 of the Revenue and Taxation Code proposed by both this bill and Assembly Bill 2897. That section of this bill shall only become operative if (1) both bills are enacted and become effective on or before January 1, 2025, (2) each bill amends Section 402.1 of the Revenue and Taxation Code, and (3) this bill is enacted after Assembly Bill 2897, in which case Section 1 of this bill shall not become operative.
SEC. 3.If the Commission on State Mandates determines that this act contains costs mandated by the state, reimbursement to local agencies and school districts for those costs shall be made pursuant to Part 7 (commencing with Section 17500) of Division 4 of Title 2 of the Government Code.
(a)In the assessment of land, the assessor shall consider the effect upon value of any enforceable restrictions to which the use of the land may be subjected. These restrictions shall include, but are not limited to, all of the following:
(1)Zoning.
(2)Recorded contracts with governmental agencies other than those provided in Sections 422, 422.5, and 422.7.
(3)Permit authority of, and permits issued by, governmental agencies exercising land use powers concurrently with local governments, including the California Coastal Commission and regional coastal commissions, the San Francisco Bay Conservation and Development Commission, and the California Tahoe Regional Planning Agency.
(4)Development controls of a local government in accordance with any local coastal program certified pursuant to Division 20 (commencing with Section 30000) of the Public Resources Code.
(5)Development controls of a local government in accordance with a local protection program, or any component thereof, certified pursuant to Division 19 (commencing with Section 29000) of the Public Resources Code.
(6)Environmental constraints applied to the use of land pursuant to provisions of statutes.
(7)Hazardous waste land use restriction pursuant to Section 25226 of the Health and Safety Code.
(8)(A)A recorded conservation, trail, or scenic easement, as described in Section 815.1 of the Civil Code, that is granted in favor of a public agency, or in favor of a nonprofit corporation organized pursuant to Section 501(c)(3) of the Internal Revenue Code that has as its primary purpose the preservation, protection, or enhancement of land in its natural, scenic, historical, agricultural, forested, or open-space condition or use.
(B)A recorded greenway easement, as described in Section 816.52 of the Civil Code, that is granted in favor of a public agency, or in favor of a nonprofit corporation organized pursuant to Section 501(c)(3) of the Internal Revenue Code that has as its primary purpose the developing and preserving of greenways.
(9)A solar-use easement pursuant to Chapter 6.9 (commencing with Section 51190) of Part 1 of Division 1 of Title 5 of the Government Code.
(10)(A)A contract where the following apply:
(i)The contract is with a nonprofit corporation organized pursuant to Section 501(c)(3) of the Internal Revenue Code that has received a welfare exemption under Section 214.15 for properties intended to be sold to low-income families who participate in a special no-interest loan program.
(ii)The contract restricts the use of the land for at least 30 years to owner-occupied housing available at affordable housing cost in accordance with Section 50052.5 of the Health and Safety Code.
(iii)The contract includes a deed of trust on the property in favor of the nonprofit corporation to ensure compliance with the terms of the program, which has no value unless the owner fails to comply with the covenants and restrictions of the terms of the home sale.
(iv)The local housing authority or an equivalent agency, or, if none exists, the city attorney or county counsel, has made a finding that the long-term deed restrictions in the contract serve a public purpose.
(v)The contract is recorded and provided to the assessor.
(B)For real property subject to a contract that satisfies all the requirements of subparagraph (A), there shall be a rebuttable presumption that, at the time of purchase, an assessor shall not include the value of the deed of trust referenced in clause (iii) of subparagraph (A) of this paragraph.
(11)(A)A contract where the following apply:
(i)The contract is a renewable 99-year ground lease between a community land trust and the qualified owner of an owner-occupied single-family dwelling or an owner-occupied unit in a multifamily dwelling.
(ii)The contract subjects a single-family dwelling or unit in a multifamily dwelling, and the land on which the dwelling or unit is situated that is leased to the qualified owner by a community land trust for the convenient occupation and use of that dwelling or unit, to affordability restrictions.
(iii)One of the following public agencies or officials has made a finding that the affordability restrictions in the contract serve the public interest to create and preserve the affordability of residential housing for persons and families of low or moderate income:
(I)The director of the local housing authority or equivalent agency.
(II)The county counsel.
(III)The director of a county housing department.
(IV)The city attorney.
(V)The director of a city housing department.
(iv)The contract is recorded and is provided to the assessor.
(B)(i)For purposes of this paragraph, the sale or resale price of the dwelling or unit is rebuttably presumed to include both the dwelling or unit and the leased land on which the dwelling or unit is situated. This presumption may be overcome if the assessor establishes by a preponderance of the evidence that all or a portion of the value of the leased land is not reflected in the sale or resale price of the dwelling or unit.
(ii)Notwithstanding any other law, corrections of base year values and declines in value owing to the restrictions on properties assessed under this subparagraph shall apply to all lien dates occurring after September 27, 2016.
(C)For purposes of this paragraph, all of the following definitions shall apply:
(i)Affordability restrictions mean that all of the following conditions are met:
(I)The dwelling or unit can only be sold or resold to a qualified owner to be occupied as a principal place of residence.
(II)The sale or resale price of the dwelling or unit is determined by a formula that ensures the dwelling or unit has a purchase price that is affordable to qualified owners.
(III)There is a purchase option for the dwelling or unit in favor of a community land trust intended to preserve the dwelling or unit as affordable to qualified owners.
(IV)The dwelling or unit is to remain affordable to qualified owners by a renewable 99-year ground lease.
(ii)Community land trust means a nonprofit corporation organized pursuant to Section 501(c)(3) of the Internal Revenue Code that satisfies all of the following:
(I)Has as its primary purposes the creation and maintenance of permanently affordable single-family or multifamily residences.
(II)All dwellings and units located on the land owned by the nonprofit corporation are sold to a qualified owner to be occupied as the qualified owners primary residence or rented to persons and families of low or moderate income.
(III)The land owned by the nonprofit corporation, on which a dwelling or unit sold to a qualified owner is situated, is leased by the nonprofit corporation to the qualified owner for the convenient occupation and use of that dwelling or unit for a renewable term of 99 years.
(iii)Limited equity housing cooperative has the same meaning as that term is defined in Section 817 of the Civil Code.
(iv)Persons and families of low or moderate income has the same meaning as that term is defined in Section 50093 of the Health and Safety Code.
(v)Qualified owner means persons and families of low or moderate income, including persons and families of low or moderate income that own a dwelling or unit collectively as member occupants or resident shareholders of a limited equity housing cooperative.
(b)There is a rebuttable presumption that restrictions will not be removed or substantially modified in the predictable future and that they will substantially equate the value of the land to the value attributable to the legally permissible use or uses.
(c)Grounds for rebutting the presumption may include, but are not necessarily limited to, the past history of like use restrictions in the jurisdiction in question and the similarity of sales prices for restricted and unrestricted land. The possible expiration of a restriction at a time certain shall not be conclusive evidence of the future removal or modification of the restriction unless there is no opportunity or likelihood of the continuation or renewal of the restriction, or unless a necessary party to the restriction has indicated an intent to permit its expiration at that time.
(d)In assessing land with respect to which the presumption is unrebutted, the assessor shall not consider sales of otherwise comparable land not similarly restricted as to use as indicative of value of land under restriction, unless the restrictions have a demonstrably minimal effect upon value.
(e)In assessing land under an enforceable use restriction wherein the presumption of no predictable removal or substantial modification of the restriction has been rebutted, but where the restriction nevertheless retains some future life and has some effect on present value, the assessor may consider, in addition to all other legally permissible information, representative sales of comparable lands that are not under restriction but upon which natural limitations have substantially the same effect as restrictions.
(f)For the purposes of this section the following definitions apply:
(1)Comparable lands are lands that are similar to the land being valued in respect to legally permissible uses and physical attributes.
(2)Representative sales information is information from sales of a sufficient number of comparable lands to give an accurate indication of the full cash value of the land being valued.
(g)It is hereby declared that the purpose and intent of the Legislature in enacting this section is to provide a method of determining whether a sufficient amount of representative sales information is available for land under use restriction to ensure the accurate assessment of that land. It is also hereby declared that the further purpose and intent of the Legislature in enacting this section and Section 1630 is to avoid an assessment policy which, in the absence of special circumstances, considers uses for land that legally are not available to the owner and not contemplated by government, and that these sections are necessary to implement the public policy of encouraging and maintaining effective land use planning. This statute shall not be construed as requiring the assessment of any land at a value less than as required by Section 401 or as prohibiting the use of representative comparable sales information on land under similar restrictions when this information is available.
SEC. 1.5.Section 402.1 of the Revenue and Taxation Code is amended to read:402.1.(a)In the assessment of land, the assessor shall consider the effect upon value of any enforceable restrictions to which the use of the land may be subjected. These restrictions shall include, but are not limited to, all of the following:
(1)Zoning.
(2)Recorded contracts with governmental agencies other than those provided in Sections 422, 422.5, and 422.7.
(3)Permit authority of, and permits issued by, governmental agencies exercising land use powers concurrently with local governments, including the California Coastal Commission and regional coastal commissions, the San Francisco Bay Conservation and Development Commission, and the California Tahoe Regional Planning Agency.
(4)Development controls of a local government in accordance with any local coastal program certified pursuant to Division 20 (commencing with Section 30000) of the Public Resources Code.
(5)Development controls of a local government in accordance with a local protection program, or any component thereof, certified pursuant to Division 19 (commencing with Section 29000) of the Public Resources Code.
(6)Environmental constraints applied to the use of land pursuant to provisions of statutes.
(7)Hazardous waste land use restriction pursuant to Section 25226 of the Health and Safety Code.
(8)(A)A recorded conservation, trail, or scenic easement, as described in Section 815.1 of the Civil Code, that is granted in favor of a public agency, or in favor of a nonprofit corporation organized pursuant to Section 501(c)(3) of the Internal Revenue Code that has as its primary purpose the preservation, protection, or enhancement of land in its natural, scenic, historical, agricultural, forested, or open-space condition or use.
(B)A recorded greenway easement, as described in Section 816.52 of the Civil Code, that is granted in favor of a public agency, or in favor of a nonprofit corporation organized pursuant to Section 501(c)(3) of the Internal Revenue Code that has as its primary purpose the developing and preserving of greenways.
(9)A solar-use easement pursuant to Chapter 6.9 (commencing with Section 51190) of Part 1 of Division 1 of Title 5 of the Government Code.
(10)(A)A contract where the following apply:
(i)The contract is with a nonprofit corporation organized pursuant to Section 501(c)(3) of the Internal Revenue Code that has received a welfare exemption under Section 214.15 for properties intended to be sold to low-income families who participate in a special no-interest loan program.
(ii)The contract restricts the use of the land for at least 30 years to owner-occupied housing available at affordable housing cost in accordance with Section 50052.5 of the Health and Safety Code.
(iii)The contract includes a deed of trust on the property in favor of the nonprofit corporation to ensure compliance with the terms of the program, which has no value unless the owner fails to comply with the covenants and restrictions of the terms of the home sale.
(iv)The local housing authority or an equivalent agency, or, if none exists, the city attorney or county counsel, has made a finding that the long-term deed restrictions in the contract serve a public purpose.
(v)The contract is recorded and provided to the assessor.
(B)For real property subject to a contract that satisfies all the requirements of subparagraph (A), there shall be a rebuttable presumption that, at the time of purchase, an assessor shall not include the value of the deed of trust referenced in clause (iii) of subparagraph (A) of this paragraph.
(11)(A)A contract where the following apply:
(i)The contract is a renewable 99-year ground lease between a community land trust, or a wholly owned subsidiary of a community land trust that is solely directed and managed by the community land trust, and the qualified owner of an owner-occupied single-family dwelling or an owner-occupied unit in a multifamily dwelling.
(ii)The contract subjects a single-family dwelling or unit in a multifamily dwelling, and the land on which the dwelling or unit is situated that is leased to the qualified owner by a community land trust for the convenient occupation and use of that dwelling or unit, to affordability restrictions.
(iii)One of the following public agencies or officials has made a finding that the affordability restrictions in the contract serve the public interest to create and preserve the affordability of residential housing for persons and families of low or moderate income:
(I)The director of the local housing authority or equivalent agency.
(II)The county counsel.
(III)The director of a county housing department.
(IV)The city attorney.
(V)The director of a city housing department.
(iv)The contract is recorded and is provided to the assessor.
(B)(i)For purposes of this paragraph, the sale or resale price of the dwelling or unit is rebuttably presumed to include both the dwelling or unit and the leased land on which the dwelling or unit is situated. This presumption may be overcome if the assessor establishes by a preponderance of the evidence that all or a portion of the value of the leased land is not reflected in the sale or resale price of the dwelling or unit.
(ii)Notwithstanding any other law, corrections of base year values and declines in value owing to the restrictions on properties assessed under this subparagraph shall apply to all lien dates occurring after September 27, 2016.
(C)For purposes of this paragraph, all of the following definitions shall apply:
(i)Affordability restrictions mean that all of the following conditions are met:
(I)The dwelling or unit can only be sold or resold to a qualified owner to be occupied as a principal place of residence.
(II)The sale or resale price of the dwelling or unit is determined by a formula that ensures the dwelling or unit has a purchase price that is affordable to qualified owners.
(III)There is a purchase option for the dwelling or unit in favor of a community land trust intended to preserve the dwelling or unit as affordable to qualified owners.
(IV)The dwelling or unit is to remain affordable to qualified owners by a renewable 99-year ground lease.
(ii)Community land trust means a nonprofit corporation exempt from federal income tax pursuant to Section 501(c)(3) of the Internal Revenue Code that satisfies all of the following:
(I)Has as its primary purposes the creation and maintenance of permanently affordable single-family or multifamily residences.
(II)(ia)All dwellings and units located on the land owned by the nonprofit corporation or its wholly owned subsidiary are either sold to a qualified owner to be occupied as the qualified owners primary residence or rented to persons and families of low or moderate income.
(ib)In the case of dwellings or units sold to qualified owners, if the community land trust, directly or through its wholly owned subsidiary, owns the land underneath the dwellings or units, then the land underneath the dwellings or units shall be leased to the qualified owner of a dwelling or unit on the land for the convenient occupation and use of that dwelling or unit for a renewable term of 99 years. In the case of dwellings or units that are part of a condominium, cooperative, or other common interest development under which the land is owned by a homeowners association or person other than the community land trust, then the condominium unit or interest owned by the community land trust shall be sold to qualified owners for the convenient occupation and use of that dwelling or unit subject to affordability restrictions as that term is defined in this subdivision, except that in lieu of a ground lease there shall be an affordability covenant, of a duration of at least 99 years, recorded against the unit or interest.
(iii)Limited equity housing cooperative has the same meaning as that term is defined in Section 817 of the Civil Code.
(iv)Persons and families of low or moderate income has the same meaning as that term is defined in Section 50093 of the Health and Safety Code.
(v)Qualified owner means persons and families of low or moderate income, including persons and families of low or moderate income that own a dwelling or unit collectively as member occupants or resident shareholders of a limited equity housing cooperative.
(b)There is a rebuttable presumption that restrictions will not be removed or substantially modified in the predictable future and that they will substantially equate the value of the land to the value attributable to the legally permissible use or uses.
(c)Grounds for rebutting the presumption may include, but are not necessarily limited to, the past history of like use restrictions in the jurisdiction in question and the similarity of sales prices for restricted and unrestricted land. The possible expiration of a restriction at a time certain shall not be conclusive evidence of the future removal or modification of the restriction unless there is no opportunity or likelihood of the continuation or renewal of the restriction, or unless a necessary party to the restriction has indicated an intent to permit its expiration at that time.
(d)In assessing land with respect to which the presumption is unrebutted, the assessor shall not consider sales of otherwise comparable land not similarly restricted as to use as indicative of value of land under restriction, unless the restrictions have a demonstrably minimal effect upon value.
(e)In assessing land under an enforceable use restriction wherein the presumption of no predictable removal or substantial modification of the restriction has been rebutted, but where the restriction nevertheless retains some future life and has some effect on present value, the assessor may consider, in addition to all other legally permissible information, representative sales of comparable lands that are not under restriction but upon which natural limitations have substantially the same effect as restrictions.
(f)For the purposes of this section the following definitions apply:
(1)Comparable lands are lands that are similar to the land being valued in respect to legally permissible uses and physical attributes.
(2)Representative sales information is information from sales of a sufficient number of comparable lands to give an accurate indication of the full cash value of the land being valued.
(g)It is hereby declared that the purpose and intent of the Legislature in enacting this section is to provide for a method of determining whether a sufficient amount of representative sales information is available for land under use restriction to ensure the accurate assessment of that land. It is also hereby declared that the further purpose and intent of the Legislature in enacting this section and Section 1630 is to avoid an assessment policy which, in the absence of special circumstances, considers uses for land that legally are not available to the owner and not contemplated by government, and that these sections are necessary to implement the public policy of encouraging and maintaining effective land use planning. This statute shall not be construed as requiring the assessment of any land at a value less than as required by Section 401 or as prohibiting the use of representative comparable sales information on land under similar restrictions when this information is available.
SEC. 2.Section 1.5 of this bill incorporates amendments to Section 402.1 of the Revenue and Taxation Code proposed by both this bill and Assembly Bill 2897. That section of this bill shall only become operative if (1) both bills are enacted and become effective on or before January 1, 2025, (2) each bill amends Section 402.1 of the Revenue and Taxation Code, and (3) this bill is enacted after Assembly Bill 2897, in which case Section 1 of this bill shall not become operative.
SEC. 3.If the Commission on State Mandates determines that this act contains costs mandated by the state, reimbursement to local agencies and school districts for those costs shall be made pursuant to Part 7 (commencing with Section 17500) of Division 4 of Title 2 of the Government Code.
(a)In the assessment of land, the assessor shall consider the effect upon value of any enforceable restrictions to which the use of the land may be subjected. These restrictions shall include, but are not limited to, all of the following:
(1)Zoning.
(2)Recorded contracts with governmental agencies other than those provided in Sections 422, 422.5, and 422.7.
(3)Permit authority of, and permits issued by, governmental agencies exercising land use powers concurrently with local governments, including the California Coastal Commission and regional coastal commissions, the San Francisco Bay Conservation and Development Commission, and the California Tahoe Regional Planning Agency.
(4)Development controls of a local government in accordance with any local coastal program certified pursuant to Division 20 (commencing with Section 30000) of the Public Resources Code.
(5)Development controls of a local government in accordance with a local protection program, or any component thereof, certified pursuant to Division 19 (commencing with Section 29000) of the Public Resources Code.
(6)Environmental constraints applied to the use of land pursuant to provisions of statutes.
(7)Hazardous waste land use restriction pursuant to Section 25226 of the Health and Safety Code.
(8)(A)A recorded conservation, trail, or scenic easement, as described in Section 815.1 of the Civil Code, that is granted in favor of a public agency, or in favor of a nonprofit corporation organized pursuant to Section 501(c)(3) of the Internal Revenue Code that has as its primary purpose the preservation, protection, or enhancement of land in its natural, scenic, historical, agricultural, forested, or open-space condition or use.
(B)A recorded greenway easement, as described in Section 816.52 of the Civil Code, that is granted in favor of a public agency, or in favor of a nonprofit corporation organized pursuant to Section 501(c)(3) of the Internal Revenue Code that has as its primary purpose the developing and preserving of greenways.
(9)A solar-use easement pursuant to Chapter 6.9 (commencing with Section 51190) of Part 1 of Division 1 of Title 5 of the Government Code.
(10)(A)A contract where the following apply:
(i)The contract is with a nonprofit corporation organized pursuant to Section 501(c)(3) of the Internal Revenue Code that has received a welfare exemption under Section 214.15 for properties intended to be sold to low-income families who participate in a special no-interest loan program.
(ii)The contract restricts the use of the land for at least 30 years to owner-occupied housing available at affordable housing cost in accordance with Section 50052.5 of the Health and Safety Code.
(iii)The contract includes a deed of trust on the property in favor of the nonprofit corporation to ensure compliance with the terms of the program, which has no value unless the owner fails to comply with the covenants and restrictions of the terms of the home sale.
(iv)The local housing authority or an equivalent agency, or, if none exists, the city attorney or county counsel, has made a finding that the long-term deed restrictions in the contract serve a public purpose.
(v)The contract is recorded and provided to the assessor.
(B)For real property subject to a contract that satisfies all the requirements of subparagraph (A), there shall be a rebuttable presumption that, at the time of purchase, an assessor shall not include the value of the deed of trust referenced in clause (iii) of subparagraph (A) of this paragraph.
(11)(A)A contract where the following apply:
(i)The contract is a renewable 99-year ground lease between a community land trust and the qualified owner of an owner-occupied single-family dwelling or an owner-occupied unit in a multifamily dwelling.
(ii)The contract subjects a single-family dwelling or unit in a multifamily dwelling, and the land on which the dwelling or unit is situated that is leased to the qualified owner by a community land trust for the convenient occupation and use of that dwelling or unit, to affordability restrictions.
(iii)One of the following public agencies or officials has made a finding that the affordability restrictions in the contract serve the public interest to create and preserve the affordability of residential housing for persons and families of low or moderate income:
(I)The director of the local housing authority or equivalent agency.
(II)The county counsel.
(III)The director of a county housing department.
(IV)The city attorney.
(V)The director of a city housing department.
(iv)The contract is recorded and is provided to the assessor.
(B)(i)For purposes of this paragraph, the sale or resale price of the dwelling or unit is rebuttably presumed to include both the dwelling or unit and the leased land on which the dwelling or unit is situated. This presumption may be overcome if the assessor establishes by a preponderance of the evidence that all or a portion of the value of the leased land is not reflected in the sale or resale price of the dwelling or unit.
(ii)Notwithstanding any other law, corrections of base year values and declines in value owing to the restrictions on properties assessed under this subparagraph shall apply to all lien dates occurring after September 27, 2016.
(C)For purposes of this paragraph, all of the following definitions shall apply:
(i)Affordability restrictions mean that all of the following conditions are met:
(I)The dwelling or unit can only be sold or resold to a qualified owner to be occupied as a principal place of residence.
(II)The sale or resale price of the dwelling or unit is determined by a formula that ensures the dwelling or unit has a purchase price that is affordable to qualified owners.
(III)There is a purchase option for the dwelling or unit in favor of a community land trust intended to preserve the dwelling or unit as affordable to qualified owners.
(IV)The dwelling or unit is to remain affordable to qualified owners by a renewable 99-year ground lease.
(ii)Community land trust means a nonprofit corporation organized pursuant to Section 501(c)(3) of the Internal Revenue Code that satisfies all of the following:
(I)Has as its primary purposes the creation and maintenance of permanently affordable single-family or multifamily residences.
(II)All dwellings and units located on the land owned by the nonprofit corporation are sold to a qualified owner to be occupied as the qualified owners primary residence or rented to persons and families of low or moderate income.
(III)The land owned by the nonprofit corporation, on which a dwelling or unit sold to a qualified owner is situated, is leased by the nonprofit corporation to the qualified owner for the convenient occupation and use of that dwelling or unit for a renewable term of 99 years.
(iii)Limited equity housing cooperative has the same meaning as that term is defined in Section 817 of the Civil Code.
(iv)Persons and families of low or moderate income has the same meaning as that term is defined in Section 50093 of the Health and Safety Code.
(v)Qualified owner means persons and families of low or moderate income, including persons and families of low or moderate income that own a dwelling or unit collectively as member occupants or resident shareholders of a limited equity housing cooperative.
(b)There is a rebuttable presumption that restrictions will not be removed or substantially modified in the predictable future and that they will substantially equate the value of the land to the value attributable to the legally permissible use or uses.
(c)Grounds for rebutting the presumption may include, but are not necessarily limited to, the past history of like use restrictions in the jurisdiction in question and the similarity of sales prices for restricted and unrestricted land. The possible expiration of a restriction at a time certain shall not be conclusive evidence of the future removal or modification of the restriction unless there is no opportunity or likelihood of the continuation or renewal of the restriction, or unless a necessary party to the restriction has indicated an intent to permit its expiration at that time.
(d)In assessing land with respect to which the presumption is unrebutted, the assessor shall not consider sales of otherwise comparable land not similarly restricted as to use as indicative of value of land under restriction, unless the restrictions have a demonstrably minimal effect upon value.
(e)In assessing land under an enforceable use restriction wherein the presumption of no predictable removal or substantial modification of the restriction has been rebutted, but where the restriction nevertheless retains some future life and has some effect on present value, the assessor may consider, in addition to all other legally permissible information, representative sales of comparable lands that are not under restriction but upon which natural limitations have substantially the same effect as restrictions.
(f)For the purposes of this section the following definitions apply:
(1)Comparable lands are lands that are similar to the land being valued in respect to legally permissible uses and physical attributes.
(2)Representative sales information is information from sales of a sufficient number of comparable lands to give an accurate indication of the full cash value of the land being valued.
(g)It is hereby declared that the purpose and intent of the Legislature in enacting this section is to provide a method of determining whether a sufficient amount of representative sales information is available for land under use restriction to ensure the accurate assessment of that land. It is also hereby declared that the further purpose and intent of the Legislature in enacting this section and Section 1630 is to avoid an assessment policy which, in the absence of special circumstances, considers uses for land that legally are not available to the owner and not contemplated by government, and that these sections are necessary to implement the public policy of encouraging and maintaining effective land use planning. This statute shall not be construed as requiring the assessment of any land at a value less than as required by Section 401 or as prohibiting the use of representative comparable sales information on land under similar restrictions when this information is available.
SEC. 1.5.Section 402.1 of the Revenue and Taxation Code is amended to read:402.1.(a)In the assessment of land, the assessor shall consider the effect upon value of any enforceable restrictions to which the use of the land may be subjected. These restrictions shall include, but are not limited to, all of the following:
(1)Zoning.
(2)Recorded contracts with governmental agencies other than those provided in Sections 422, 422.5, and 422.7.
(3)Permit authority of, and permits issued by, governmental agencies exercising land use powers concurrently with local governments, including the California Coastal Commission and regional coastal commissions, the San Francisco Bay Conservation and Development Commission, and the California Tahoe Regional Planning Agency.
(4)Development controls of a local government in accordance with any local coastal program certified pursuant to Division 20 (commencing with Section 30000) of the Public Resources Code.
(5)Development controls of a local government in accordance with a local protection program, or any component thereof, certified pursuant to Division 19 (commencing with Section 29000) of the Public Resources Code.
(6)Environmental constraints applied to the use of land pursuant to provisions of statutes.
(7)Hazardous waste land use restriction pursuant to Section 25226 of the Health and Safety Code.
(8)(A)A recorded conservation, trail, or scenic easement, as described in Section 815.1 of the Civil Code, that is granted in favor of a public agency, or in favor of a nonprofit corporation organized pursuant to Section 501(c)(3) of the Internal Revenue Code that has as its primary purpose the preservation, protection, or enhancement of land in its natural, scenic, historical, agricultural, forested, or open-space condition or use.
(B)A recorded greenway easement, as described in Section 816.52 of the Civil Code, that is granted in favor of a public agency, or in favor of a nonprofit corporation organized pursuant to Section 501(c)(3) of the Internal Revenue Code that has as its primary purpose the developing and preserving of greenways.
(9)A solar-use easement pursuant to Chapter 6.9 (commencing with Section 51190) of Part 1 of Division 1 of Title 5 of the Government Code.
(10)(A)A contract where the following apply:
(A)(i)The contract is with a nonprofit corporation organized pursuant to Section 501(c)(3) of the Internal Revenue Code that has received a welfare exemption under Section 214.15 for properties intended to be sold to low-income families who participate in a special no-interest loan program.
(B)(ii)The contract restricts the use of the land for at least 30 years to owner-occupied housing available at affordable housing cost in accordance with Section 50052.5 of the Health and Safety Code.
(C)(iii)The contract includes a deed of trust on the property in favor of the nonprofit corporation to ensure compliance with the terms of the program, which has no value unless the owner fails to comply with the covenants and restrictions of the terms of the home sale.
(D)(iv)The local housing authority or an equivalent agency, or, if none exists, the city attorney or county counsel, has made a finding that the long-term deed restrictions in the contract serve a public purpose.
(E)(v)The contract is recorded and provided to the assessor.
(B)For real property subject to a contract that satisfies all the requirements of subparagraph (A), there shall be a rebuttable presumption that, at the time of purchase, an assessor shall not include the value of the deed of trust referenced in clause (iii) of subparagraph (A) of this paragraph.
(11)(A)A contract where the following apply:
(i)The contract is a renewable 99-year ground lease between a community land trust trust, or a wholly owned subsidiary of a community land trust that is solely directed and managed by the community land trust, and the qualified owner of an owner-occupied single-family dwelling or an owner-occupied unit in a multifamily dwelling.
(ii)The contract subjects a single-family dwelling or unit in a multifamily dwelling, and the land on which the dwelling or unit is situated that is leased to the qualified owner by a community land trust for the convenient occupation and use of that dwelling or unit, to affordability restrictions.
(iii)One of the following public agencies or officials has made a finding that the affordability restrictions in the contract serve the public interest to create and preserve the affordability of residential housing for persons and families of low or moderate income:
(I)The director of the local housing authority or equivalent agency.
(II)The county counsel.
(III)The director of a county housing department.
(IV)The city attorney.
(V)The director of a city housing department.
(iv)The contract is recorded and is provided to the assessor.
(B)(i)For purposes of this paragraph, the sale or resale price of the dwelling or unit is rebuttably presumed to include both the dwelling or unit and the leased land on which the dwelling or unit is situated. This presumption may be overcome if the assessor establishes by a preponderance of the evidence that all or a portion of the value of the leased land is not reflected in the sale or resale price of the dwelling or unit.
(ii)Notwithstanding any other law, corrections of base year values and declines in value owing to the restrictions on properties assessed under this subparagraph shall apply to all lien dates occurring after September 27, 2016.
(C)For purposes of this paragraph, all of the following definitions shall apply:
(i)Affordability restrictions mean that all of the following conditions are met:
(I)The dwelling or unit can only be sold or resold to a qualified owner to be occupied as a principal place of residence.
(II)The sale or resale price of the dwelling or unit is determined by a formula that ensures the dwelling or unit has a purchase price that is affordable to qualified owners.
(III)There is a purchase option for the dwelling or unit in favor of a community land trust intended to preserve the dwelling or unit as affordable to qualified owners.
(IV)The dwelling or unit is to remain affordable to qualified owners by a renewable 99-year ground lease.
(ii)Community land trust means a nonprofit corporation organized exempt from federal income tax pursuant to Section 501(c)(3) of the Internal Revenue Code that satisfies all of the following:
(I)Has as its primary purposes the creation and maintenance of permanently affordable single-family or multifamily residences.
(II)(ia)All dwellings and units located on the land owned by the nonprofit corporation or its wholly owned subsidiary are either sold to a qualified owner to be occupied as the qualified owners primary residence or rented to persons and families of low or moderate income.
(III)The land owned by the nonprofit corporation, on which a dwelling or unit sold to a qualified owner is situated, is leased by the nonprofit corporation to the qualified owner for the convenient occupation and use of that dwelling or unit for a renewable term of 99 years.(ib)In the case of dwellings or units sold to qualified owners, if the community land trust, directly or through its wholly owned subsidiary, owns the land underneath the dwellings or units, then the land underneath the dwellings or units shall be leased to the qualified owner of a dwelling or unit on the land for the convenient occupation and use of that dwelling or unit for a renewable term of 99 years. In the case of dwellings or units that are part of a condominium, cooperative, or other common interest development under which the land is owned by a homeowners association or person other than the community land trust, then the condominium unit or interest owned by the community land trust shall be sold to qualified owners for the convenient occupation and use of that dwelling or unit subject to affordability restrictions as that term is defined in this subdivision, except that in lieu of a ground lease there shall be an affordability covenant, of a duration of at least 99 years, recorded against the unit or interest.
(iii)Limited equity housing cooperative has the same meaning as that term is defined in Section 817 of the Civil Code.
(iv)Persons and families of low or moderate income has the same meaning as that term is defined in Section 50093 of the Health and Safety Code.
(v)Qualified owner means persons and families of low or moderate income, including persons and families of low or moderate income that own a dwelling or unit collectively as member occupants or resident shareholders of a limited equity housing cooperative.
(b)There is a rebuttable presumption that restrictions will not be removed or substantially modified in the predictable future and that they will substantially equate the value of the land to the value attributable to the legally permissible use or uses.
(c)Grounds for rebutting the presumption may include, but are not necessarily limited to, the past history of like use restrictions in the jurisdiction in question and the similarity of sales prices for restricted and unrestricted land. The possible expiration of a restriction at a time certain shall not be conclusive evidence of the future removal or modification of the restriction unless there is no opportunity or likelihood of the continuation or renewal of the restriction, or unless a necessary party to the restriction has indicated an intent to permit its expiration at that time.
(d)In assessing land with respect to which the presumption is unrebutted, the assessor shall not consider sales of otherwise comparable land not similarly restricted as to use as indicative of value of land under restriction, unless the restrictions have a demonstrably minimal effect upon value.
(e)In assessing land under an enforceable use restriction wherein the presumption of no predictable removal or substantial modification of the restriction has been rebutted, but where the restriction nevertheless retains some future life and has some effect on present value, the assessor may consider, in addition to all other legally permissible information, representative sales of comparable lands that are not under restriction but upon which natural limitations have substantially the same effect as restrictions.
(f)For the purposes of this section the following definitions apply:
(1)Comparable lands are lands that are similar to the land being valued in respect to legally permissible uses and physical attributes.
(2)Representative sales information is information from sales of a sufficient number of comparable lands to give an accurate indication of the full cash value of the land being valued.
(g)It is hereby declared that the purpose and intent of the Legislature in enacting this section is to provide for a method of determining whether a sufficient amount of representative sales information is available for land under use restriction to ensure the accurate assessment of that land. It is also hereby declared that the further purpose and intent of the Legislature in enacting this section and Section 1630 is to avoid an assessment policy which, in the absence of special circumstances, considers uses for land that legally are not available to the owner and not contemplated by government, and that these sections are necessary to implement the public policy of encouraging and maintaining effective land use planning. This statute shall not be construed as requiring the assessment of any land at a value less than as required by Section 401 or as prohibiting the use of representative comparable sales information on land under similar restrictions when this information is available.
SEC. 2.Section 1.5 of this bill incorporates amendments to Section 402.1 of the Revenue and Taxation Code proposed by both this bill and Assembly Bill 2897. That section of this bill shall only become operative if (1) both bills are enacted and become effective on or before January 1, 2025, (2) each bill amends Section 402.1 of the Revenue and Taxation Code, and (3) this bill is enacted after Assembly Bill 2897, in which case Section 1 of this bill shall not become operative.
SEC. 2.SEC. 3.If the Commission on State Mandates determines that this act contains costs mandated by the state, reimbursement to local agencies and school districts for those costs shall be made pursuant to Part 7 (commencing with Section 17500) of Division 4 of Title 2 of the Government Code.
(a)In the assessment of land, the assessor shall consider the effect upon value of any enforceable restrictions to which the use of the land may be subjected. These restrictions shall include, but are not limited to, all of the following:
(1)Zoning.
(2)Recorded contracts with governmental agencies other than those provided in Sections 422, 422.5, and 422.7.
(3)Permit authority of, and permits issued by, governmental agencies exercising land use powers concurrently with local governments, including the California Coastal Commission and regional coastal commissions, the San Francisco Bay Conservation and Development Commission, and the California Tahoe Regional Planning Agency.
(4)Development controls of a local government in accordance with any local coastal program certified pursuant to Division 20 (commencing with Section 30000) of the Public Resources Code.
(5)Development controls of a local government in accordance with a local protection program, or any component thereof, certified pursuant to Division 19 (commencing with Section 29000) of the Public Resources Code.
(6)Environmental constraints applied to the use of land pursuant to provisions of statutes.
(7)Hazardous waste land use restriction pursuant to Section 25226 of the Health and Safety Code.
(8)(A)A recorded conservation, trail, or scenic easement, as described in Section 815.1 of the Civil Code, that is granted in favor of a public agency, or in favor of a nonprofit corporation organized pursuant to Section 501(c)(3) of the Internal Revenue Code that has as its primary purpose the preservation, protection, or enhancement of land in its natural, scenic, historical, agricultural, forested, or open-space condition or use.
(B)A recorded greenway easement, as described in Section 816.52 of the Civil Code, that is granted in favor of a public agency, or in favor of a nonprofit corporation organized pursuant to Section 501(c)(3) of the Internal Revenue Code that has as its primary purpose the developing and preserving of greenways.
(9)A solar-use easement pursuant to Chapter 6.9 (commencing with Section 51190) of Part 1 of Division 1 of Title 5 of the Government Code.
(10)(A)A contract where the following apply:
(i)The contract is with a nonprofit corporation organized pursuant to Section 501(c)(3) of the Internal Revenue Code that has received a welfare exemption under Section 214.15 for properties intended to be sold to low-income families who participate in a special no-interest loan program.
(ii)The contract restricts the use of the land for at least 30 years to owner-occupied housing available at affordable housing cost in accordance with Section 50052.5 of the Health and Safety Code.
(iii)The contract includes a deed of trust on the property in favor of the nonprofit corporation to ensure compliance with the terms of the program, which has no value unless the owner fails to comply with the covenants and restrictions of the terms of the home sale.
(iv)The local housing authority or an equivalent agency, or, if none exists, the city attorney or county counsel, has made a finding that the long-term deed restrictions in the contract serve a public purpose.
(v)The contract is recorded and provided to the assessor.
(B)For real property subject to a contract that satisfies all the requirements of subparagraph (A), there shall be a rebuttable presumption that, at the time of purchase, an assessor shall not include the value of the deed of trust referenced in clause (iii) of subparagraph (A) of this paragraph.
(11)(A)A contract where the following apply:
(i)The contract is a renewable 99-year ground lease between a community land trust and the qualified owner of an owner-occupied single-family dwelling or an owner-occupied unit in a multifamily dwelling.
(ii)The contract subjects a single-family dwelling or unit in a multifamily dwelling, and the land on which the dwelling or unit is situated that is leased to the qualified owner by a community land trust for the convenient occupation and use of that dwelling or unit, to affordability restrictions.
(iii)One of the following public agencies or officials has made a finding that the affordability restrictions in the contract serve the public interest to create and preserve the affordability of residential housing for persons and families of low or moderate income:
(I)The director of the local housing authority or equivalent agency.
(II)The county counsel.
(III)The director of a county housing department.
(IV)The city attorney.
(V)The director of a city housing department.
(iv)The contract is recorded and is provided to the assessor.
(B)(i)For purposes of this paragraph, the sale or resale price of the dwelling or unit is rebuttably presumed to include both the dwelling or unit and the leased land on which the dwelling or unit is situated. This presumption may be overcome if the assessor establishes by a preponderance of the evidence that all or a portion of the value of the leased land is not reflected in the sale or resale price of the dwelling or unit.
(ii)Notwithstanding any other law, corrections of base year values and declines in value owing to the restrictions on properties assessed under this subparagraph shall apply to all lien dates occurring after September 27, 2016.
(C)For purposes of this paragraph, all of the following definitions shall apply:
(i)Affordability restrictions mean that all of the following conditions are met:
(I)The dwelling or unit can only be sold or resold to a qualified owner to be occupied as a principal place of residence.
(II)The sale or resale price of the dwelling or unit is determined by a formula that ensures the dwelling or unit has a purchase price that is affordable to qualified owners.
(III)There is a purchase option for the dwelling or unit in favor of a community land trust intended to preserve the dwelling or unit as affordable to qualified owners.
(IV)The dwelling or unit is to remain affordable to qualified owners by a renewable 99-year ground lease.
(ii)Community land trust means a nonprofit corporation organized pursuant to Section 501(c)(3) of the Internal Revenue Code that satisfies all of the following:
(I)Has as its primary purposes the creation and maintenance of permanently affordable single-family or multifamily residences.
(II)All dwellings and units located on the land owned by the nonprofit corporation are sold to a qualified owner to be occupied as the qualified owners primary residence or rented to persons and families of low or moderate income.
(III)The land owned by the nonprofit corporation, on which a dwelling or unit sold to a qualified owner is situated, is leased by the nonprofit corporation to the qualified owner for the convenient occupation and use of that dwelling or unit for a renewable term of 99 years.
(iii)Limited equity housing cooperative has the same meaning as that term is defined in Section 817 of the Civil Code.
(iv)Persons and families of low or moderate income has the same meaning as that term is defined in Section 50093 of the Health and Safety Code.
(v)Qualified owner means persons and families of low or moderate income, including persons and families of low or moderate income that own a dwelling or unit collectively as member occupants or resident shareholders of a limited equity housing cooperative.
(b)There is a rebuttable presumption that restrictions will not be removed or substantially modified in the predictable future and that they will substantially equate the value of the land to the value attributable to the legally permissible use or uses.
(c)Grounds for rebutting the presumption may include, but are not necessarily limited to, the past history of like use restrictions in the jurisdiction in question and the similarity of sales prices for restricted and unrestricted land. The possible expiration of a restriction at a time certain shall not be conclusive evidence of the future removal or modification of the restriction unless there is no opportunity or likelihood of the continuation or renewal of the restriction, or unless a necessary party to the restriction has indicated an intent to permit its expiration at that time.
(d)In assessing land with respect to which the presumption is unrebutted, the assessor shall not consider sales of otherwise comparable land not similarly restricted as to use as indicative of value of land under restriction, unless the restrictions have a demonstrably minimal effect upon value.
(e)In assessing land under an enforceable use restriction wherein the presumption of no predictable removal or substantial modification of the restriction has been rebutted, but where the restriction nevertheless retains some future life and has some effect on present value, the assessor may consider, in addition to all other legally permissible information, representative sales of comparable lands that are not under restriction but upon which natural limitations have substantially the same effect as restrictions.
(f)For the purposes of this section the following definitions apply:
(1)Comparable lands are lands that are similar to the land being valued in respect to legally permissible uses and physical attributes.
(2)Representative sales information is information from sales of a sufficient number of comparable lands to give an accurate indication of the full cash value of the land being valued.
(g)It is hereby declared that the purpose and intent of the Legislature in enacting this section is to provide for a method of determining whether a sufficient amount of representative sales information is available for land under use restriction to ensure the accurate assessment of that land. It is also hereby declared that the further purpose and intent of the Legislature in enacting this section and Section 1630 is to avoid an assessment policy which, in the absence of special circumstances, considers uses for land that legally are not available to the owner and not contemplated by government, and that these sections are necessary to implement the public policy of encouraging and maintaining effective land use planning. This statute shall not be construed as requiring the assessment of any land at a value less than as required by Section 401 or as prohibiting the use of representative comparable sales information on land under similar restrictions when this information is available.
SEC. 2.If the Commission on State Mandates determines that this act contains costs mandated by the state, reimbursement to local agencies and school districts for those costs shall be made pursuant to Part 7 (commencing with Section 17500) of Division 4 of Title 2 of the Government Code.
(a)In the assessment of land, the assessor shall consider the effect upon value of any enforceable restrictions to which the use of the land may be subjected. These restrictions shall include, but are not limited to, all of the following:
(1)Zoning.
(2)Recorded contracts with governmental agencies other than those provided in Sections 422, 422.5, and 422.7.
(3)Permit authority of, and permits issued by, governmental agencies exercising land use powers concurrently with local governments, including the California Coastal Commission and regional coastal commissions, the San Francisco Bay Conservation and Development Commission, and the Tahoe Regional Planning Agency.
(4)Development controls of a local government in accordance with any local coastal program certified pursuant to Division 20 (commencing with Section 30000) of the Public Resources Code.
(5)Development controls of a local government in accordance with a local protection program, or any component thereof, certified pursuant to Division 19 (commencing with Section 29000) of the Public Resources Code.
(6)Environmental constraints applied to the use of land pursuant to provisions of statutes.
(7)Hazardous waste land use restriction pursuant to Section 25226 of the Health and Safety Code.
(8)(A)A recorded conservation, trail, or scenic easement, as described in Section 815.1 of the Civil Code, that is granted in favor of a public agency, or in favor of a nonprofit corporation organized pursuant to Section 501(c)(3) of the Internal Revenue Code that has as its primary purpose the preservation, protection, or enhancement of land in its natural, scenic, historical, agricultural, forested, or open-space condition or use.
(B)A recorded greenway easement, as described in Section 816.52 of the Civil Code, that is granted in favor of a public agency, or in favor of a nonprofit corporation organized pursuant to Section 501(c)(3) of the Internal Revenue Code that has as its primary purpose the developing and preserving of greenways.
(9)A solar-use easement pursuant to Chapter 6.9 (commencing with Section 51190) of Part 1 of Division 1 of Title 5 of the Government Code.
(10)(A)A contract where the following apply:
(i)The contract is with a nonprofit corporation organized pursuant to Section 501(c)(3) of the Internal Revenue Code that has received a welfare exemption under Section 214.15 for properties intended to be sold to low-income families who participate in a special no-interest loan program.
(ii)The contract restricts the use of the land for at least 30 years to owner-occupied housing available at affordable housing cost in accordance with Section 50052.5 of the Health and Safety Code.
(iii)The contract includes a deed of trust on the property in favor of the nonprofit corporation to ensure compliance with the terms of the program, which has no value unless the owner fails to comply with the covenants and restrictions of the terms of the home sale.
(iv)The local housing authority or an equivalent agency, or, if none exists, the city attorney or county counsel, has made a finding that the long-term deed restrictions in the contract serve a public purpose.
(v)The contract is recorded and provided to the assessor.
(B)For real property subject to a contract that satisfies all the requirements of subparagraph (A), there shall be a rebuttable presumption that the value of the real property at the time of purchase is no greater than the sum of the value of the first mortgage and any applicable down payment. that, at the time of purchase, an assessor shall not include the value of the deed of trust referenced in clause (iii) of subparagraph (A) of this paragraph.
(11)(A)A contract where the following apply:
(i)The contract is a renewable 99-year ground lease between a community land trust and the qualified owner of an owner-occupied single-family dwelling or an owner-occupied unit in a multifamily dwelling.
(ii)The contract subjects a single-family dwelling or unit in a multifamily dwelling, and the land on which the dwelling or unit is situated that is leased to the qualified owner by a community land trust for the convenient occupation and use of that dwelling or unit, to affordability restrictions.
(iii)One of the following public agencies or officials has made a finding that the affordability restrictions in the contract serve the public interest to create and preserve the affordability of residential housing for persons and families of low or moderate income:
(I)The director of the local housing authority or equivalent agency.
(II)The county counsel.
(III)The director of a county housing department.
(IV)The city attorney.
(V)The director of a city housing department.
(iv)The contract is recorded and is provided to the assessor.
(B)(i)For purposes of this paragraph, the sale or resale price of the dwelling or unit is rebuttably presumed to include both the dwelling or unit and the leased land on which the dwelling or unit is situated. This presumption may be overcome if the assessor establishes by a preponderance of the evidence that all or a portion of the value of the leased land is not reflected in the sale or resale price of the dwelling or unit.
(ii)Notwithstanding any other law, corrections of base year values and declines in value owing to the restrictions on properties assessed under this subparagraph shall apply to all lien dates occurring after September 27, 2016.
(C)For purposes of this paragraph, all of the following definitions shall apply:
(i)Affordability restrictions mean that all of the following conditions are met:
(I)The dwelling or unit can only be sold or resold to a qualified owner to be occupied as a principal place of residence.
(II)The sale or resale price of the dwelling or unit is determined by a formula that ensures the dwelling or unit has a purchase price that is affordable to qualified owners.
(III)There is a purchase option for the dwelling or unit in favor of a community land trust intended to preserve the dwelling or unit as affordable to qualified owners.
(IV)The dwelling or unit is to remain affordable to qualified owners by a renewable 99-year ground lease.
(ii)Community land trust means a nonprofit corporation organized pursuant to Section 501(c)(3) of the Internal Revenue Code that satisfies all of the following:
(I)Has as its primary purposes the creation and maintenance of permanently affordable single-family or multifamily residences.
(II)All dwellings and units located on the land owned by the nonprofit corporation are sold to a qualified owner to be occupied as the qualified owners primary residence or rented to persons and families of low or moderate income.
(III)The land owned by the nonprofit corporation, on which a dwelling or unit sold to a qualified owner is situated, is leased by the nonprofit corporation to the qualified owner for the convenient occupation and use of that dwelling or unit for a renewable term of 99 years.
(iii)Limited equity housing cooperative has the same meaning as that term is defined in Section 817 of the Civil Code.
(iv)Persons and families of low or moderate income has the same meaning as that term is defined in Section 50093 of the Health and Safety Code.
(v)Qualified owner means persons and families of low or moderate income, including persons and families of low or moderate income that own a dwelling or unit collectively as member occupants or resident shareholders of a limited equity housing cooperative.
(b)There is a rebuttable presumption that restrictions will not be removed or substantially modified in the predictable future and that they will substantially equate the value of the land to the value attributable to the legally permissible use or uses.
(c)Grounds for rebutting the presumption may include, but are not necessarily limited to, the past history of like use restrictions in the jurisdiction in question and the similarity of sales prices for restricted and unrestricted land. The possible expiration of a restriction at a time certain shall not be conclusive evidence of the future removal or modification of the restriction unless there is no opportunity or likelihood of the continuation or renewal of the restriction, or unless a necessary party to the restriction has indicated an intent to permit its expiration at that time.
(d)In assessing land with respect to which the presumption is unrebutted, the assessor shall not consider sales of otherwise comparable land not similarly restricted as to use as indicative of value of land under restriction, unless the restrictions have a demonstrably minimal effect upon value.
(e)In assessing land under an enforceable use restriction wherein the presumption of no predictable removal or substantial modification of the restriction has been rebutted, but where the restriction nevertheless retains some future life and has some effect on present value, the assessor may consider, in addition to all other legally permissible information, representative sales of comparable lands that are not under restriction but upon which natural limitations have substantially the same effect as restrictions.
(f)For the purposes of this section the following definitions apply:
(1)Comparable lands are lands that are similar to the land being valued in respect to legally permissible uses and physical attributes.
(2)Representative sales information is information from sales of a sufficient number of comparable lands to give an accurate indication of the full cash value of the land being valued.
(g)It is hereby declared that the purpose and intent of the Legislature in enacting this section is to provide for a method of determining whether a sufficient amount of representative sales information is available for land under use restriction to ensure the accurate assessment of that land. It is also hereby declared that the further purpose and intent of the Legislature in enacting this section and Section 1630 is to avoid an assessment policy which, in the absence of special circumstances, considers uses for land that legally are not available to the owner and not contemplated by government, and that these sections are necessary to implement the public policy of encouraging and maintaining effective land use planning. This statute shall not be construed as requiring the assessment of any land at a value less than as required by Section 401 or as prohibiting the use of representative comparable sales information on land under similar restrictions when this information is available.
SEC. 2.If the Commission on State Mandates determines that this act contains costs mandated by the state, reimbursement to local agencies and school districts for those costs shall be made pursuant to Part 7 (commencing with Section 17500) of Division 4 of Title 2 of the Government Code.
(a)In the assessment of land, the assessor shall consider the effect upon value of any enforceable restrictions to which the use of the land may be subjected. These restrictions shall include, but are not limited to, all of the following:
(1)Zoning.
(2)Recorded contracts with governmental agencies other than those provided in Sections 422, 422.5, and 422.7.
(3)Permit authority of, and permits issued by, governmental agencies exercising land use powers concurrently with local governments, including the California Coastal Commission and regional coastal commissions, the San Francisco Bay Conservation and Development Commission, and the Tahoe Regional Planning Agency.
(4)Development controls of a local government in accordance with any local coastal program certified pursuant to Division 20 (commencing with Section 30000) of the Public Resources Code.
(5)Development controls of a local government in accordance with a local protection program, or any component thereof, certified pursuant to Division 19 (commencing with Section 29000) of the Public Resources Code.
(6)Environmental constraints applied to the use of land pursuant to provisions of statutes.
(7)Hazardous waste land use restriction pursuant to Section 25226 of the Health and Safety Code.
(8)(A)A recorded conservation, trail, or scenic easement, as described in Section 815.1 of the Civil Code, that is granted in favor of a public agency, or in favor of a nonprofit corporation organized pursuant to Section 501(c)(3) of the Internal Revenue Code that has as its primary purpose the preservation, protection, or enhancement of land in its natural, scenic, historical, agricultural, forested, or open-space condition or use.
(B)A recorded greenway easement, as described in Section 816.52 of the Civil Code, that is granted in favor of a public agency, or in favor of a nonprofit corporation organized pursuant to Section 501(c)(3) of the Internal Revenue Code that has as its primary purpose the developing and preserving of greenways.
(9)A solar-use easement pursuant to Chapter 6.9 (commencing with Section 51190) of Part 1 of Division 1 of Title 5 of the Government Code.
(10)(A)A contract where the following apply:
(A)(i)The contract is with a nonprofit corporation organized pursuant to Section 501(c)(3) of the Internal Revenue Code that has received a welfare exemption under Section 214.15 for properties intended to be sold to low-income families who participate in a special no-interest loan program.
(B)(ii)The contract restricts the use of the land for at least 30 years to owner-occupied housing available at affordable housing cost in accordance with Section 50052.5 of the Health and Safety Code.
(C)(iii)The contract includes a deed of trust on the property in favor of the nonprofit corporation to ensure compliance with the terms of the program, which has no value unless the owner fails to comply with the covenants and restrictions of the terms of the home sale.
(D)(iv)The local housing authority or an equivalent agency, or, if none exists, the city attorney or county counsel, has made a finding that the long-term deed restrictions in the contract serve a public purpose.
(E)(v)The contract is recorded and provided to the assessor.
(B)For real property subject to a contract that satisfies all the requirements of subparagraph (A), there shall be a rebuttable presumption that the value of the real property at the time of purchase is no greater than the sum of the value of the first mortgage and any applicable down payment.
(11)(A)A contract where the following apply:
(i)The contract is a renewable 99-year ground lease between a community land trust and the qualified owner of an owner-occupied single-family dwelling or an owner-occupied unit in a multifamily dwelling.
(ii)The contract subjects a single-family dwelling or unit in a multifamily dwelling, and the land on which the dwelling or unit is situated that is leased to the qualified owner by a community land trust for the convenient occupation and use of that dwelling or unit, to affordability restrictions.
(iii)One of the following public agencies or officials has made a finding that the affordability restrictions in the contract serve the public interest to create and preserve the affordability of residential housing for persons and families of low or moderate income:
(I)The director of the local housing authority or equivalent agency.
(II)The county counsel.
(III)The director of a county housing department.
(IV)The city attorney.
(V)The director of a city housing department.
(iv)The contract is recorded and is provided to the assessor.
(B)(i)For purposes of this paragraph, the sale or resale price of the dwelling or unit is rebuttably presumed to include both the dwelling or unit and the leased land on which the dwelling or unit is situated. This presumption may be overcome if the assessor establishes by a preponderance of the evidence that all or a portion of the value of the leased land is not reflected in the sale or resale price of the dwelling or unit.
(ii)Notwithstanding any other law, corrections of base year values and declines in value owing to the restrictions on properties assessed under this subparagraph shall apply to all lien dates occurring after September 27, 2016.
(C)For purposes of this paragraph, all of the following definitions shall apply:
(i)Affordability restrictions mean that all of the following conditions are met:
(I)The dwelling or unit can only be sold or resold to a qualified owner to be occupied as a principal place of residence.
(II)The sale or resale price of the dwelling or unit is determined by a formula that ensures the dwelling or unit has a purchase price that is affordable to qualified owners.
(III)There is a purchase option for the dwelling or unit in favor of a community land trust intended to preserve the dwelling or unit as affordable to qualified owners.
(IV)The dwelling or unit is to remain affordable to qualified owners by a renewable 99-year ground lease.
(ii)Community land trust means a nonprofit corporation organized pursuant to Section 501(c)(3) of the Internal Revenue Code that satisfies all of the following:
(I)Has as its primary purposes the creation and maintenance of permanently affordable single-family or multifamily residences.
(II)All dwellings and units located on the land owned by the nonprofit corporation are sold to a qualified owner to be occupied as the qualified owners primary residence or rented to persons and families of low or moderate income.
(III)The land owned by the nonprofit corporation, on which a dwelling or unit sold to a qualified owner is situated, is leased by the nonprofit corporation to the qualified owner for the convenient occupation and use of that dwelling or unit for a renewable term of 99 years.
(iii)Limited equity housing cooperative has the same meaning as that term is defined in Section 817 of the Civil Code.
(iv)Persons and families of low or moderate income has the same meaning as that term is defined in Section 50093 of the Health and Safety Code.
(v)Qualified owner means persons and families of low or moderate income, including persons and families of low or moderate income that own a dwelling or unit collectively as member occupants or resident shareholders of a limited equity housing cooperative.
(b)There is a rebuttable presumption that restrictions will not be removed or substantially modified in the predictable future and that they will substantially equate the value of the land to the value attributable to the legally permissible use or uses.
(c)Grounds for rebutting the presumption may include, but are not necessarily limited to, the past history of like use restrictions in the jurisdiction in question and the similarity of sales prices for restricted and unrestricted land. The possible expiration of a restriction at a time certain shall not be conclusive evidence of the future removal or modification of the restriction unless there is no opportunity or likelihood of the continuation or renewal of the restriction, or unless a necessary party to the restriction has indicated an intent to permit its expiration at that time.
(d)In assessing land with respect to which the presumption is unrebutted, the assessor shall not consider sales of otherwise comparable land not similarly restricted as to use as indicative of value of land under restriction, unless the restrictions have a demonstrably minimal effect upon value.
(e)In assessing land under an enforceable use restriction wherein the presumption of no predictable removal or substantial modification of the restriction has been rebutted, but where the restriction nevertheless retains some future life and has some effect on present value, the assessor may consider, in addition to all other legally permissible information, representative sales of comparable lands that are not under restriction but upon which natural limitations have substantially the same effect as restrictions.
(f)For the purposes of this section the following definitions apply:
(1)Comparable lands are lands that are similar to the land being valued in respect to legally permissible uses and physical attributes.
(2)Representative sales information is information from sales of a sufficient number of comparable lands to give an accurate indication of the full cash value of the land being valued.
(g)It is hereby declared that the purpose and intent of the Legislature in enacting this section is to provide for a method of determining whether a sufficient amount of representative sales information is available for land under use restriction to ensure the accurate assessment of that land. It is also hereby declared that the further purpose and intent of the Legislature in enacting this section and Section 1630 is to avoid an assessment policy which, in the absence of special circumstances, considers uses for land that legally are not available to the owner and not contemplated by government, and that these sections are necessary to implement the public policy of encouraging and maintaining effective land use planning. This statute shall not be construed as requiring the assessment of any land at a value less than as required by Section 401 or as prohibiting the use of representative comparable sales information on land under similar restrictions when this information is available.
SEC. 2.If the Commission on State Mandates determines that this act contains costs mandated by the state, reimbursement to local agencies and school districts for those costs shall be made pursuant to Part 7 (commencing with Section 17500) of Division 4 of Title 2 of the Government Code.
|
Date
|
Status
|
|---|---|
| Sep 25, 2024 | Chaptered by Secretary of State - Chapter 553, Statutes of 2024. |
| Sep 25, 2024 | Approved by the Governor. |
| Sep 11, 2024 | Enrolled and presented to the Governor at 4 p.m. |
| Aug 29, 2024 | Senate amendments concurred in. To Engrossing and Enrolling. (Ayes 76. Noes 0.). |
| Aug 29, 2024 | Assembly Rule 77 suspended. |
| Aug 28, 2024 | In Assembly. Concurrence in Senate amendments pending. May be considered on or after August 30 pursuant to Assembly Rule 77. |
| Aug 28, 2024 | Read third time. Passed. Ordered to the Assembly. (Ayes 38. Noes 0.). |
| Aug 26, 2024 | Read second time. Ordered to third reading. |
| Aug 22, 2024 | Read third time and amended. Ordered to second reading. |
| Aug 19, 2024 | Read second time. Ordered to third reading. |
| Aug 15, 2024 | From committee: Do pass. (Ayes 7. Noes 0.) (August 15). |
| Jun 24, 2024 | In committee: Referred to suspense file. |
| Jun 13, 2024 | Read second time and amended. Re-referred to Com. on APPR. |
| Jun 12, 2024 | From committee: Amend, and do pass as amended and re-refer to Com. on APPR. (Ayes 6. Noes 0.) (June 12). |
| May 22, 2024 | Referred to Com. on REV. & TAX. |
| May 9, 2024 | In Senate. Read first time. To Com. on RLS. for assignment. |
| May 9, 2024 | Read third time. Passed. Ordered to the Senate. (Ayes 66. Noes 0. Page 5153.) |
| May 2, 2024 | Read second time. Ordered to third reading. |
| May 1, 2024 | From committee: Do pass. (Ayes 14. Noes 0.) (May 1). |
| Apr 22, 2024 | Re-referred to Com. on APPR. |
| Apr 18, 2024 | Read second time and amended. |
| Apr 17, 2024 | From committee: Amend, and do pass as amended and re-refer to Com. on APPR. (Ayes 7. Noes 0.) (April 8). |
| Mar 11, 2024 | In committee: Set, first hearing. Hearing canceled at the request of author. |
| Mar 4, 2024 | In committee: Hearing postponed by committee. |
| Jan 29, 2024 | Referred to Com. on REV. & TAX. |
| Jan 19, 2024 | From printer. May be heard in committee February 18. |
| Jan 18, 2024 | Read first time. To print. |
|
Date
|
Description
|
Location
|
Votes
|
|
|---|---|---|---|---|
| Aug 29, 2024 | AB 1868 Friedman Concurrence in Senate Amendments | Assembly Floor |
Passed |
|
| Aug 28, 2024 | Assembly 3rd Reading AB1868 Friedman et al. By Dahle | Senate Floor |
Passed |
|
| Aug 15, 2024 | Do pass | Senate Standing Committee on Appropriations |
Passed |
|
| Jun 24, 2024 | Placed on suspense file | Senate Standing Committee on Appropriations |
Passed |
|
| Jun 12, 2024 | Do pass as amended, but first amend, and re-refer to the Committee on [Appropriations] | Senate Standing Committee on Revenue and Taxation |
Passed |
|
| May 9, 2024 | AB 1868 Friedman Assembly Third Reading | Assembly Floor |
Passed |
|
| May 1, 2024 | Do pass. | Assembly Standing Committee on Appropriations |
Passed |
|
| Apr 8, 2024 | Do pass as amended and be re-referred to the Committee on [Appropriations] | Assembly Standing Committee on Revenue and Taxation |
Passed |
This list shows positions taken on this bill by organizations on the date displayed, which is linked to the original source.
Positions by individuals are not included.
|
Organization
|
Position
|
Date
|
|---|---|---|
| California Assessors' Association | ** Against | |
| California State Board of Equalization | ** Support | |
| Habitat For Humanity | ** Support | |
| Housing Action Coalition | ** Support | |
| Livable California | ** Support | |
| Mission Street Neighbors | ** Support |
CONCURRENCE IN SENATE AMENDMENTS
CSA1 Bill Id:AB 1868
Author:(Friedman)
As Amended Ver:August 22, 2024
Majority vote
SUMMARY
Rebuttably presumes that an assessor shall not include the value of the deed of trust on certain affordability-restricted properties utilizing the community land trust (CLT) model.
Senate Amendments
Adopts chaptering out amendments to avoid a conflict with AB 2897 (Connolly), of this Legislative Session, and other technical, non-substantive provisions.
COMMENTS
Habitat model: Habitat differs from other low-income housing providers in that Habitat builds or rehabilitates housing for sale to low-income households. Thus, prior to 1999, Habitat properties were ineligible for the low-income rental housing welfare exemption. To address this, the Legislature authorized AB 1559 (Wiggins), Chapter 927, Statutes of 1999, which made Habitat properties eligible for the welfare exemption while the properties were being developed, if the property is primarily used for the rehabilitation or development of residential housing for sale at cost to low-income families, with a zero-interest loan as financing.
Current problem: Habitat has identified an issue with existing statutory provisions. Specifically, Habitat notes that certain assessors are including the value of subsidized financing encumbrances when assessing properties. While this has the effect of increasing the property taxes a low-income household purchasing a home from Habitat must pay, it appears these assessors are generally following the law, and appropriately including the value of those subsidizing encumbrances. Habitat notes that financing for each property can come from a number of sources, and the final form that financing takes can be varied. Thus, it appears assessors, in an attempt to consistently and fairly apply property tax law, are including the value of those encumbrances when the terms and conditions of those contracts appear to warrant their inclusion in the assessed value of the property.
This bill: Assessors would be required to rebuttably presume that a property's value does not include specified contracts that ensure compliance with the affordability provisions of a Habitat property. Thus, assessors would have flexibility to assess property in the manner they see fit, but this bill would provide greater consistency in the assessment of Habitat properties across counties.
According to the Author
California law provides a property tax exemption for property used exclusively for charitable purposes if it is owned by a non-profit entity. This is commonly known as a "welfare exemption" and currently includes property used for rental housing if there is an enforceable and verifiable agreement with a public agency, a recorded deed restriction, or other legal document that restricts the project's usage, and also provides that the units are sustainably designated for occupancy by lower income households.
Arguments in Support
The Legislature expanded the property tax welfare exemption to include eligible nonprofit corporations that build and rehabilitate affordable housing units for sale, subject to certain limitations, to low-income families. But, unlike rental properties, taxes are assessed on the home and paid by the low-income homebuyers, increasing their overall housing cost. Affordable rental and affordable ownership housing are not treated equally.
AB 1868 creates statewide uniformity in assessing deed-restricted properties sold to and occupied by low-income, first-time homebuyers, and applies the property tax assessment consistently and more proportionately, on deed-restricted properties sold to lower-income households.
Arguments in Opposition
None on file
FISCAL COMMENTS
According to its analysis of this bill, the Senate Committee on Appropriations states:
- The Board of Equalization (BOE) indicates that, though difficult to estimate, this bill would likely result in lower property tax revenues compared to current law. Reductions in local property tax revenues, in turn, can increase General Fund Proposition 98 spending by up to roughly 50 percent (the exact amount depends on the specific amount of the annual Proposition 98 guarantee, which in turns depends upon a variety of economic, demographic and budgetary factors). BOE would incur minor administrative costs to implement the provisions of the bill.
- By modifying how an assessor is to value property, this bill creates a state-mandated local program. To the extent the Commission on State Mandates determines that the provisions of this bill create a new program or impose a higher level of service on local agencies, local agencies could claim reimbursement of those costs. The magnitude is unknown (General Fund).
VOTES:
ASM REVENUE AND TAXATION: 7-0-0
YES: Irwin, Ta, Bains, Gipson, Grayson, Jim Patterson, Luz Rivas
ASM APPROPRIATIONS: 14-0-1
YES: Wicks, Sanchez, Arambula, Bryan, Calderon, Wendy Carrillo, Dixon, Mike Fong, Grayson, Haney, Hart, Pellerin, Ta, Villapudua
ABS, ABST OR NV: Jim Patterson
ASSEMBLY FLOOR: 66-0-14
YES: Addis, Aguiar-Curry, Alanis, Alvarez, Arambula, Bauer-Kahan, Bennett, Berman, Boerner, Bonta, Bryan, Calderon, Juan Carrillo, Wendy Carrillo, Chen, Connolly, Davies, Dixon, Essayli, Mike Fong, Vince Fong, Friedman, Gallagher, Garcia, Gipson, Hart, Holden, Hoover, Irwin, Jackson, Jones-Sawyer, Kalra, Lackey, Lee, Lowenthal, Maienschein, McCarty, McKinnor, Muratsuchi, Ortega, Pacheco, Papan, Jim Patterson, Joe Patterson, Pellerin, Quirk-Silva, Ramos, Rendon, Reyes, Rodriguez, Blanca Rubio, Sanchez, Santiago, Schiavo, Soria, Ta, Valencia, Villapudua, Waldron, Ward, Weber, Wicks, Wilson, Wood, Zbur, Robert Rivas
ABS, ABST OR NV: Bains, Cervantes, Megan Dahle, Flora, Gabriel, Grayson, Haney, Low, Mathis, Stephanie Nguyen, Petrie-Norris, Luz Rivas, Ting, Wallis
SENATE FLOOR: 39-0-1
YES: Allen, Archuleta, Ashby, Atkins, Becker, Blakespear, Bradford, Caballero, Cortese, Dahle, Dodd, Durazo, Eggman, Glazer, Gonzalez, Grove, Hurtado, Jones, Laird, Limón, McGuire, Menjivar, Min, Newman, Nguyen, Niello, Ochoa Bogh, Padilla, Portantino, Roth, Rubio, Seyarto, Skinner, Smallwood-Cuevas, Stern, Umberg, Wahab, Wiener, Wilk
ABS, ABST OR NV: Alvarado-Gil
UPDATED
VERSION: August 22, 2024
CONSULTANT: Harrison Bowlby / REV. & TAX. / (916) 319-2098 FN: 0004799
SENATE RULES COMMITTEE Office of Senate Floor Analyses (916) 651-1520 Fax: (916) 327-4478 | AB 1868 |
THIRD READING
Bill No: AB 1868
Author: Friedman (D), et al.
Amended: 8/22/24 in Senate
Vote: 21
SENATE REVENUE AND TAXATION COMMITTEE: 6-0, 6/12/24
AYES: Glazer, Dahle, Bradford, Dodd, Padilla, Skinner
NO VOTE RECORDED: Ashby
SENATE APPROPRIATIONS COMMITTEE: 7-0, 8/15/24
AYES: Caballero, Jones, Ashby, Becker, Bradford, Seyarto, Wahab
ASSEMBLY FLOOR: 66-0, 5/9/24 - See last page for vote
SUBJECT: Property taxation: assessments: affordable housing
SOURCE: Habitat for Humanity
DIGEST:
This bill enacts a rebuttable presumption that an assessor shall not include in taxable value the value of the deed of trust included as part of specified contracts.
Senate Floor Amendments of 8/22/24 resolve conflicts with AB 2897 (Connolly)
ANALYSIS:
Existing law:
- Provides that all property is taxable unless explicitly exempted by the Constitution or federal law (California Constitution, Article XIII, Section One).
- Limits the maximum amount of any ad valorem tax on real property to 1% of full cash value and directs assessors to only reappraise property when it is newly constructed or when ownership changes (California Constitution, Article XIIIA, as added by Proposition 13, 1978).
- Presumes a property’s purchase price is its full cash or fair market value, defined to include the total consideration provided by the purchaser, or on the purchaser’s behalf, valued in money, paid in money or otherwise.
- Directs assessors to consider enforceable restrictions, such as zoning and environmental restrictions, as well as recorded contracts with government entities when valuing property.
- Generally precludes assessors from considering as enforceable restrictions contracts with non-governmental entities, except in specified circumstances.
- Includes as an enforceable restriction contracts that meet all of the following requirements (AB 668, Gomez, Chapter 698, Statutes of 2015):
- The contract is with a 501(c)(3) nonprofit organization that has obtained a welfare exemption for property tax for properties intended to be sold to low-income families who participate in a special, no-interest loan program;
- The contract restricts the use of the land for at least 30 years to owner-occupied housing at affordable housing cost;
- The contract includes a deed of trust on the property in favor of the nonprofit corporation to ensure compliance with the terms of the program, which has no value unless the owner fails to comply with the covenants and restrictions of the terms of the home sale;
- The local housing authority or an equivalent agency, or, if none exists, the city attorney or county counsel, has made a finding that the long-term deed restrictions in the contract serve a public purpose; and
- The contract is recorded and provided to the assessor.
- Enacts a specific “Habitat for Humanity” welfare exemption from property tax to allow the welfare exemption to apply to property that, among other requirements:
- Is owned and operated by a nonprofit corporation, which is organized and operated for the specific and primary purpose of building and rehabilitating single or multifamily residences for sale at cost to low-income families; and
- The sale of which is financed by a zero interest rate loan without regard to religion, race, national origin, or the gender of the head of household.
This bill:
- Modifies AB 668’s provisions to enact a rebuttable presumption that at the time of purchase, an assessor shall not include the value of the deed of trust required by the contract when it has no value, unless the owner fails to comply with the covenants and restrictions of the terms of the home sale.
- Makes technical and conforming changes.
Background
A nonprofit corporation, Habitat for Humanity builds houses for low-income persons rent or own. After Habitat purchases the land, it can claim a welfare exemption for the property during the period in which it owns the home, which continues to apply if Habitat rents the property. However, once Habitat sells it to an income-eligible purchaser, it is taxable to its new owner. Habitat sells houses to individuals and families who qualify as low-income; however, they do so in a way that differs from a typical real estate transaction. Habitat builds the home and then picks a family to live in it through its family selection process. The family purchases the home through a down payment and a mortgage. Because Habitat does not require a purchaser to pay more than a specified percentage of gross family income on mortgage payments, there is usually a difference between its total development cost and the down payment and the face value of the mortgage. This difference is secured by a “silent second mortgage,” which is a deed covenant restriction that limits the conditions for resale and often requires that the property can only be resold to an income-eligible individual or family. Purchasers usually do not pay these silent-second mortgages, and they are generally forgiven if the purchaser satisfies the first mortgage. Instead, the restrictions ensure the purchaser does not profit from Habitat’s work and “run with the land,” so the site remains affordable should the initially selected family choose to sell the home and move somewhere else. Occasionally, other mortgages and restrictions are necessary to ensure Habitat’s development costs are met while keeping the sales price low enough so an income-eligible purchaser can buy it.
Assessors generally use a property’s purchase price in total consideration to calculate value; however, with Habitat, establishing value is less simple. The value of the property to the owner could be more than the purchase price because of the value secured by the silent second, but less than its value on the open market because of the covenant restrictions. However, the covenant restrictions and other contract terms can vary significantly from development to development, and purchaser to purchaser, as Habitat must ensure the price both is affordable to the purchaser and satisfies its development costs. Based on AB 668, the State Board of Equalization (BOE) advises assessors to determine purchase price by adding the down payment and the face value of the first mortgage, and then their estimate of the present economic value of the silent second mortgage by reflecting all the agreement’s terms and conditions. Such terms include whether the silent second mortgage will have to be repaid, repaid at the time of sale, or assumed by the next buyer.
While the Legislature enacted AB 668 to provide uniform statewide treatment regarding Habitat’s transactions, implementation of AB 668 has not been uniform, with the assessors in some counties asserting that some of Habitat’s deeds of trust have value that is not contingent on the owner failing to comply with covenants and restrictions. AB 1868 should promote uniformity and lead to more predictable valuations while also allowing sufficient flexibility for assessors to overcome the presumption to argue that the value of the deed of trust should be included in value.
FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: Yes
According to the Senate Appropriations Committee:
- The Board of Equalization (BOE) indicates that, though difficult to estimate, this bill would likely result in lower property tax revenues compared to current law. Reductions in local property tax revenues, in turn, can increase General Fund Proposition 98 spending by up to roughly 50 percent (the exact amount depends on the specific amount of the annual Proposition 98 guarantee, which in turns depends upon a variety of economic, demographic and budgetary factors). BOE would incur minor administrative costs to implement the provisions of the bill.
- By modifying how an assessor is to value property, this bill creates a state-mandated local program. To the extent the Commission on State Mandates determines that the provisions of this bill create a new program or impose a higher level of service on local agencies, local agencies could claim reimbursement of those costs. The magnitude is unknown (General Fund).
SUPPORT: (Verified 8/15/24)
Habitat for Humanity (source)
California State Board of Equalization
Housing Action Coalition
Livable California
Mission Street Neighbors
OPPOSITION: (Verified 8/15/24)
None received
ARGUMENTS IN SUPPORT: According to the author, “AB 1868 addresses this wide variance between jurisdictions about assessing the value of affordable homes sold to and occupied by low-income families that participate in low to no-interest mortgage programs. Specifically, this bill establishes, for purposes of valuing a Habitat for Humanity property, a rebuttable presumption that, at the time of purchase, an assessor shall not include the value of the deed of trust on the property that ensures compliance with the terms of a special no-interest loan program and has no value unless there is a violation of the covenants and restrictions of the terms of sale. The bill directs county assessors to not include the value of these subsidized financing encumbrances when assessing properties. Thus, assessors would have flexibility to assess property in the manner they see fit, but this bill would provide greater consistency in the assessment of Habitat properties across counties.”
ASSEMBLY FLOOR: 66-0, 5/9/24
AYES: Addis, Aguiar-Curry, Alanis, Alvarez, Arambula, Bauer-Kahan, Bennett, Berman, Boerner, Bonta, Bryan, Calderon, Juan Carrillo, Wendy Carrillo, Chen, Connolly, Davies, Dixon, Essayli, Mike Fong, Vince Fong, Friedman, Gallagher, Garcia, Gipson, Hart, Holden, Hoover, Irwin, Jackson, Jones-Sawyer, Kalra, Lackey, Lee, Lowenthal, Maienschein, McCarty, McKinnor, Muratsuchi, Ortega, Pacheco, Papan, Jim Patterson, Joe Patterson, Pellerin, Quirk-Silva, Ramos, Rendon, Reyes, Rodriguez, Blanca Rubio, Sanchez, Santiago, Schiavo, Soria, Ta, Valencia, Villapudua, Waldron, Ward, Weber, Wicks, Wilson, Wood, Zbur, Robert Rivas
NO VOTE RECORDED: Bains, Cervantes, Megan Dahle, Flora, Gabriel, Grayson, Haney, Low, Mathis, Stephanie Nguyen, Petrie-Norris, Luz Rivas, Ting, Wallis
Prepared by: Colin Grinnell / REV. & TAX. / (916) 651-4117
8/25/24 12:49:27
**** END ****
SENATE RULES COMMITTEE Office of Senate Floor Analyses (916) 651-1520 Fax: (916) 327-4478 | AB 1868 |
THIRD READING
Bill No: AB 1868
Author: Friedman (D), et al.
Amended: 6/13/24 in Senate
Vote: 21
SENATE REVENUE AND TAXATION COMMITTEE: 6-0, 6/12/24
AYES: Glazer, Dahle, Bradford, Dodd, Padilla, Skinner
NO VOTE RECORDED: Ashby
SENATE APPROPRIATIONS COMMITTEE: 7-0, 8/15/24
AYES: Caballero, Jones, Ashby, Becker, Bradford, Seyarto, Wahab
ASSEMBLY FLOOR: 66-0, 5/9/24 - See last page for vote
SUBJECT: Property taxation: assessments: affordable housing
SOURCE: Habitat for Humanity
DIGEST:
This bill enacts a rebuttable presumption that an assessor shall not include in taxable value the value of the deed of trust included as part of specified contracts.
ANALYSIS:
Existing law:
- Provides that all property is taxable unless explicitly exempted by the Constitution or federal law (California Constitution, Article XIII, Section One).
- Limits the maximum amount of any ad valorem tax on real property to 1% of full cash value and directs assessors to only reappraise property when it is newly constructed or when ownership changes (California Constitution, Article XIIIA, as added by Proposition 13, 1978).
- Presumes a property’s purchase price is its full cash or fair market value, defined to include the total consideration provided by the purchaser, or on the purchaser’s behalf, valued in money, paid in money or otherwise.
- Directs assessors to consider enforceable restrictions, such as zoning and environmental restrictions, as well as recorded contracts with government entities when valuing property.
- Generally precludes assessors from considering as enforceable restrictions contracts with non-governmental entities, except in specified circumstances.
- Includes as an enforceable restriction contracts that meet all of the following requirements (AB 668, Gomez, Chapter 698, Statutes of 2015):
- The contract is with a 501(c)(3) nonprofit organization that has obtained a welfare exemption for property tax for properties intended to be sold to low-income families who participate in a special, no-interest loan program;
- The contract restricts the use of the land for at least 30 years to owner-occupied housing at affordable housing cost;
- The contract includes a deed of trust on the property in favor of the nonprofit corporation to ensure compliance with the terms of the program, which has no value unless the owner fails to comply with the covenants and restrictions of the terms of the home sale;
- The local housing authority or an equivalent agency, or, if none exists, the city attorney or county counsel, has made a finding that the long-term deed restrictions in the contract serve a public purpose; and
- The contract is recorded and provided to the assessor.
- Enacts a specific “Habitat for Humanity” welfare exemption from property tax to allow the welfare exemption to apply to property that, among other requirements:
- Is owned and operated by a nonprofit corporation, which is organized and operated for the specific and primary purpose of building and rehabilitating single or multifamily residences for sale at cost to low-income families; and
- The sale of which is financed by a zero interest rate loan without regard to religion, race, national origin, or the gender of the head of household.
This bill:
- Modifies AB 668’s provisions to enact a rebuttable presumption that at the time of purchase, an assessor shall not include the value of the deed of trust required by the contract when it has no value, unless the owner fails to comply with the covenants and restrictions of the terms of the home sale.
- Makes technical and conforming changes.
Background
A nonprofit corporation, Habitat for Humanity builds houses for low-income persons rent or own. After Habitat purchases the land, it can claim a welfare exemption for the property during the period in which it owns the home, which continues to apply if Habitat rents the property. However, once Habitat sells it to an income-eligible purchaser, it is taxable to its new owner. Habitat sells houses to individuals and families who qualify as low-income; however, they do so in a way that differs from a typical real estate transaction. Habitat builds the home and then picks a family to live in it through its family selection process. The family purchases the home through a down payment and a mortgage. Because Habitat does not require a purchaser to pay more than a specified percentage of gross family income on mortgage payments, there is usually a difference between its total development cost and the down payment and the face value of the mortgage. This difference is secured by a “silent second mortgage,” which is a deed covenant restriction that limits the conditions for resale and often requires that the property can only be resold to an income-eligible individual or family. Purchasers usually do not pay these silent-second mortgages, and they are generally forgiven if the purchaser satisfies the first mortgage. Instead, the restrictions ensure the purchaser does not profit from Habitat’s work and “run with the land,” so the site remains affordable should the initially selected family choose to sell the home and move somewhere else. Occasionally, other mortgages and restrictions are necessary to ensure Habitat’s development costs are met while keeping the sales price low enough so an income-eligible purchaser can buy it.
Assessors generally use a property’s purchase price in total consideration to calculate value; however, with Habitat, establishing value is less simple. The value of the property to the owner could be more than the purchase price because of the value secured by the silent second, but less than its value on the open market because of the covenant restrictions. However, the covenant restrictions and other contract terms can vary significantly from development to development, and purchaser to purchaser, as Habitat must ensure the price both is affordable to the purchaser and satisfies its development costs. Based on AB 668, the State Board of Equalization (BOE) advises assessors to determine purchase price by adding the down payment and the face value of the first mortgage, and then their estimate of the present economic value of the silent second mortgage by reflecting all the agreement’s terms and conditions. Such terms include whether the silent second mortgage will have to be repaid, repaid at the time of sale, or assumed by the next buyer.
While the Legislature enacted AB 668 to provide uniform statewide treatment regarding Habitat’s transactions, implementation of AB 668 has not been uniform, with the assessors in some counties asserting that some of Habitat’s deeds of trust have value that is not contingent on the owner failing to comply with covenants and restrictions. AB 1868 should promote uniformity and lead to more predictable valuations while also allowing sufficient flexibility for assessors to overcome the presumption to argue that the value of the deed of trust should be included in value.
FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: Yes
According to the Senate Appropriations Committee:
- The Board of Equalization (BOE) indicates that, though difficult to estimate, this bill would likely result in lower property tax revenues compared to current law. Reductions in local property tax revenues, in turn, can increase General Fund Proposition 98 spending by up to roughly 50 percent (the exact amount depends on the specific amount of the annual Proposition 98 guarantee, which in turns depends upon a variety of economic, demographic and budgetary factors). BOE would incur minor administrative costs to implement the provisions of the bill.
- By modifying how an assessor is to value property, this bill creates a state-mandated local program. To the extent the Commission on State Mandates determines that the provisions of this bill create a new program or impose a higher level of service on local agencies, local agencies could claim reimbursement of those costs. The magnitude is unknown (General Fund).
SUPPORT: (Verified 8/15/24)
Habitat for Humanity (source)
California State Board of Equalization
Housing Action Coalition
Livable California
Mission Street Neighbors
OPPOSITION: (Verified 8/15/24)
None received
ARGUMENTS IN SUPPORT: According to the author, “AB 1868 addresses this wide variance between jurisdictions about assessing the value of affordable homes sold to and occupied by low-income families that participate in low to no-interest mortgage programs. Specifically, this bill establishes, for purposes of valuing a Habitat for Humanity property, a rebuttable presumption that, at the time of purchase, an assessor shall not include the value of the deed of trust on the property that ensures compliance with the terms of a special no-interest loan program and has no value unless there is a violation of the covenants and restrictions of the terms of sale. The bill directs county assessors to not include the value of these subsidized financing encumbrances when assessing properties. Thus, assessors would have flexibility to assess property in the manner they see fit, but this bill would provide greater consistency in the assessment of Habitat properties across counties.”
ASSEMBLY FLOOR: 66-0, 5/9/24
AYES: Addis, Aguiar-Curry, Alanis, Alvarez, Arambula, Bauer-Kahan, Bennett, Berman, Boerner, Bonta, Bryan, Calderon, Juan Carrillo, Wendy Carrillo, Chen, Connolly, Davies, Dixon, Essayli, Mike Fong, Vince Fong, Friedman, Gallagher, Garcia, Gipson, Hart, Holden, Hoover, Irwin, Jackson, Jones-Sawyer, Kalra, Lackey, Lee, Lowenthal, Maienschein, McCarty, McKinnor, Muratsuchi, Ortega, Pacheco, Papan, Jim Patterson, Joe Patterson, Pellerin, Quirk-Silva, Ramos, Rendon, Reyes, Rodriguez, Blanca Rubio, Sanchez, Santiago, Schiavo, Soria, Ta, Valencia, Villapudua, Waldron, Ward, Weber, Wicks, Wilson, Wood, Zbur, Robert Rivas
NO VOTE RECORDED: Bains, Cervantes, Megan Dahle, Flora, Gabriel, Grayson, Haney, Low, Mathis, Stephanie Nguyen, Petrie-Norris, Luz Rivas, Ting, Wallis
Prepared by: Colin Grinnell / REV. & TAX. / (916) 651-4117
8/18/24 8:51:03
**** END ****
SENATE COMMITTEE ON APPROPRIATIONS
Senator Anna Caballero, Chair
2023 - 2024 Regular Session
AB 1868 (Friedman) - Property taxation: assessments: affordable housing
Version: June 13, 2024 | Policy Vote: REV. & TAX. 6 - 0 |
Urgency: No | Mandate: Yes |
Hearing Date: June 24, 2024 | Consultant: Robert Ingenito |
Bill Summary:
AB 1868 would, for purposes of valuing property by county assessors, establish a rebuttable presumption that, at the time of purchase, the value of real property subject to a recorded contract that meets certain affordability requirements will exclude the deed of trust value, as specified.
Fiscal Impact:
- The Board of Equalization (BOE) indicates that, though difficult to estimate, this bill would likely result in lower property tax revenues compared to current law. Reductions in local property tax revenues, in turn, can increase General Fund Proposition 98 spending by up to roughly 50 percent (the exact amount depends on the specific amount of the annual Proposition 98 guarantee, which in turns depends upon a variety of economic, demographic and budgetary factors). BOE would incur minor administrative costs to implement the provisions of the bill.
- By modifying how an assessor is to value property, this bill creates a state-mandated local program. To the extent the Commission on State Mandates determines that the provisions of this bill create a new program or impose a higher level of service on local agencies, local agencies could claim reimbursement of those costs. The magnitude is unknown (General Fund).
Background:
Under the Constitution, all property is taxable unless explicitly exempted by itself or federal law. The Constitution limits the maximum amount of any ad valorem tax on real property to one percent of full cash value and directs assessors to only reappraise property when (1) it is newly constructed, or (2) when ownership changes. To determine value, current law generally presumes a property’s purchase price is its fair market value.
Habitat for Humanity, a nonprofit corporation, builds houses for low-income persons. After Habitat purchases the land, it can claim a welfare property tax exemption for the property during the period in which it owns the home, which continues to apply if Habitat rents the property. However, once Habitat sells a property to an income-eligible purchaser, it is taxable to the new owner. Habitat sells houses to individuals and families who qualify as low-income; however, they do so in a way that differs from a typical real estate transaction. Habitat builds the home and then selects a family to live in it. The family purchases the home at a price equal to its total development cost through a down payment and a mortgage. Habitat does not require a purchaser to pay more than a specified percentage of gross family income on mortgage payments. The difference between the total development cost and the fair market value is secured by a “silent second mortgage,” which is a deed covenant restriction that limits the conditions for resale and often requires that the property can only be resold to an income-eligible individual or family. Purchasers usually do not pay these silent-second mortgages, and they are generally forgiven if the purchaser satisfies the first mortgage. Instead, the restrictions ensure the purchaser does not profit from Habitat’s work, ensuring that the site remains affordable should the initially selected family choose to sell the home and move somewhere else.
As noted previously, assessors use a property’s purchase price in total consideration to calculate value; however, with Habitat, establishing value is more complicated. The value of the property to the owner is less than its value on the open market because of the covenant restrictions. However, the covenant restrictions and other contract terms can vary significantly from development to development, and purchaser to purchaser, as Habitat must ensure the price both is affordable to the purchaser and satisfies Habitat’s development costs.
In 2015, the Legislature sought to create uniform standards for assessing property subject to Habitat contracts by adding them onto the list of items assessors must consider when valuing property (AB 668, Gomez). The uniform stand for a contract specific to Habitat for Humanity must meet specified conditions.
Consequently, BOE advises assessors to estimate the present economic value of the silent second mortgage by reflecting all the agreement’s terms and conditions. Such terms include whether the silent second mortgage will have to be repaid, repaid at the time of sale, or assumed by the next buyer. The assessor then determines the effect the enforceable restriction.
However, implementation of AB 668 has not been uniform, with the assessors in some counties concluding that some of Habitat’s deeds of trust have value that is not contingent on the owner failing to comply with covenants and restrictions. When a county assessor’s valuation (and thus property tax liability and ensuring mortgage payment) are higher than expected, Habitat must secure additional financing to complete its transactions.
Proposed Law:
This bill would enact a rebuttable presumption that at the time of purchase, an assessor shall not include the value of the deed of trust required by the contract when it has no value unless the owner fails to comply with the covenants and restrictions of the terms of the home sale. Thus, it would modify provisions added by AB 668 regarding property value subject to contracts under the Habitat for Humanity affordable housing model.
Related Legislation:
AB 668 (Gomez, Chapter 698, Statutes of 2015) directs assessors to consider the value of contracts with nonprofit entities when determining taxable value.
Staff Comments:
BOE notes that it cannot determine the revenue loss that would result from this bill due to the number of unknown variables involved. BOE indicates that about 100 homes are sold annually by Habitat for Humanity affiliates across the State where individual county assessor practices may vary. Consequently, BOE staff would need to know (1) each county’s assessment practices, (2) the number of Habitat homes sold in each county per year, (3) the fair market value of each property, and (4) the value of any enforceable restrictions.
BOE estimates that the annual property tax revenue loss resulting from the bill could potentially exceed the high thousands of dollars per home. However, revenue loss would only occur with respect to homes being located in a county where current assessment practices differ from the approach specified in this bill.
-- END --
SENATE COMMITTEE ON REVENUE AND TAXATION
Senator Steven Glazer, Chair
2023 - 2024 Regular
Bill No: | AB 1868 | Hearing Date: | 6/12/24 |
Author: | Friedman | Tax Levy: | No |
Version: | 4/18/24 | Fiscal: | Yes |
Consultant: | Grinnell | ||
Property taxation: assessments: affordable housing
Enacts a rebuttable presumption that an assessor shall not include in taxable value the value of the deed of trust that is part of certain contracts that facilitate the sale of properties under specified programs.
Background
Article XIII of the California Constitution provides that all property is taxable unless explicitly exempted by the Constitution or federal law. The Constitution limits the maximum amount of any ad valorem tax on real property to 1% of full cash value and directs assessors to only reappraise property when it is newly constructed or when ownership changes (Proposition 13, 1978).
To determine value, the law effectively presumes a property’s purchase price is its full cash or fair market value. The law further defines the purchase price to include the total consideration provided by the purchaser, or on the purchaser’s behalf, valued in money, paid in money or otherwise. However, assessors must consider enforceable restrictions, such as zoning and environmental restrictions, as well as recorded contracts with government entities when valuing property. Additionally, assessors cannot consider contracts with non-governmental entities, except in specified circumstances. Assessors subsequently estimate the value of the property based on its legal uses.
A nonprofit corporation, Habitat for Humanity builds houses for low-income persons rent or own. After Habitat purchases the land, it can claim a welfare exemption for the property during the period in which it owns the home, which continues to apply if Habitat rents the property. However, once Habitat sells it to an income-eligible purchaser, it is taxable to its new owner. Habitat sells houses to individuals and families who qualify as low-income; however, they do so in a way that differs from a typical real estate transaction. Habitat, builds the home and then picks a family to live in it through its family selection process. The family purchases the home at a price equal to its total development cost through a down payment and a mortgage. Habitat does not require a purchaser to pay more than a specified percentage of gross family income on mortgage payments. The difference between the total development cost and the fair market value is secured by a “silent second mortgage,” which is a deed covenant restriction that limits the conditions for resale and often requires that the property can only be resold to an income-eligible individual or family. Purchasers usually do not pay these silent-second mortgages, and they are generally forgiven if the purchaser satisfies the first mortgage. Instead, the restrictions ensure the purchaser does not profit from Habitat’s work and “run with the land,” so the site remains affordable should the initially selected family choose to sell the home and move somewhere else. Occasionally, other mortgages and restrictions are necessary to ensure Habitat’s development costs are met while keeping the sales price low enough so an income-eligible purchaser can buy it.
As noted above, assessors use a property’s purchase price in total consideration to calculate value; however, with Habitat, establishing value is less simple. The value of the property to the owner is less than its value on the open market because of the covenant restrictions. However, the covenant restrictions and other contract terms can vary significantly from development to development, and purchaser to purchaser, as Habitat must ensure the price both is affordable to the purchaser and satisfies Habitat’s development costs.
In 2015, the Legislature sought to create uniform standards for assessing property subject to Habitat contracts by adding them onto the list of items assessors must consider when valuing property (AB 668, Gomez). The uniform stand for a contract specific to Habitat for Humanity must meet the following conditions:
- Is with a, 501(c)(3) nonprofit organization that has obtained a welfare exemption for property tax for properties intended to be sold to low-income families who participate in a special, no-interest loan program;
- Restricts the use of the land for at least 30 years to owner-occupied housing at affordable housing cost;
- Includes a deed of trust on the property in favor of the nonprofit corporation to ensure compliance with the terms of the program, which has no value unless the owner fails to comply with the covenants and restrictions of the terms of the home sale;
- The local housing authority or an equivalent agency, or, if none exists, the city attorney or county counsel, has made a finding that the long-term deed restrictions in the contract serve a public purpose; and
- Is recorded and provided to the assessor.
As a result, the State Board of Equalization (BOE) advises assessors to estimate the present economic value of the silent second mortgage by reflecting all the agreement’s terms and conditions. Such terms include whether the silent second mortgage will have to be repaid, repaid at the time of sale, or assumed by the next buyer. The assessor then determines the effect the enforceable restriction.
However, implementation of AB 668 has not been uniform, with the assessors in some counties asserting that some of Habitat’s deeds of trust have value that is not contingent on the owner failing to comply with covenants and restrictions. Habitat wants to enact a rebuttable presumption that an assessor shall not include the value of the deed of trust – the silent second mortgage - required by the contract, so long as it has no value unless the owner fails to comply with the covenants and restrictions of the terms of the home sale.
Proposed Law
Assembly Bill 1868 modifies provisions added by AB 668 regarding the valuation of property subject to contracts under the Habitat for Humanity affordable housing model. Specifically, the bill enacts a rebuttable presumption that at the time of purchase, an assessor shall not include the value of the deed of trust required by the contract when it has no value unless the owner fails to comply with the covenants and restrictions of the terms of the home sale.
State Revenue Impact
The BOE states it is difficult to estimate an accurate revenue impact, but could potentially exceed the high thousands of dollars per home built each year
Comments
1. Purpose of the bill. According to the author, “AB 1868 addresses this wide variance between jurisdictions about assessing the value of affordable homes sold to and occupied by low-income families that participate in low to no-interest mortgage programs. Specifically, this bill establishes, for purposes of valuing a Habitat for Humanity property, a rebuttable presumption that, at the time of purchase, an assessor shall not include the value of the deed of trust on the property that ensures compliance with the terms of a special no-interest loan program and has no value unless there is a violation of the covenants and restrictions of the terms of sale. The bill directs county assessors to not include the value of these subsidized financing encumbrances when assessing properties. Thus, assessors would have flexibility to assess property in the manner they see fit, but this bill would provide greater consistency in the assessment of Habitat properties across counties.”
2. Uniformity. The Legislature and BOE have sought to provide uniform guidance to assessors to consider the value of enforceable restrictions that are part of affordable housing programs. However, assessors in California’s 58 counties have a constitutional obligation to enroll a property’s fair market value and can come to different conclusions regarding valuation. Habitat is one of the country’s most well-known organizations for providing affordable housing and identified a lack of uniformity with regard to the valuation of the restrictions that are part of its sales. When a valuation, and therefore a property tax liability and ensuing mortgage payment end up higher than expected, Habitat must scramble to find additional financing to complete the transaction. By enacting a rebuttable presumptions, AB 1868 should promote uniformity and lead to more predictable valuations while also allowing sufficient flexibility for assessors to overcome the presumption to argue that the value of the deed of trust should be included in value. However, AB 1868 is specific only to properties subject to a contract with an organization that qualifies for the “Habitat for Humanity” welfare exemption (see Comment #4 below); assessors will continue to consider enforceable restrictions for other properties under current law and BOE advice.
3. Something different. Private nonprofit organizations often use deed restrictions and other covenants to provide housing for income-eligible persons, which is increasingly difficult to do given high construction and development costs. The specific terms and conditions of the restrictions can vary based on the organization that constructed the home, its location, and the economic circumstances of the buyer. Under current law and BOE guidance, the restrictive covenants must be binding on the purchaser, run with the land, and be enforceable for assessors to consider enrolling the restricted purchase price instead of looking at sales of comparable properties to determine the property’s value. BOE advises assessors to analyze the specific terms and conditions of each silent second mortgage separately and independently to determine their respective property tax implications.
4. Hello again. The Legislature enacted provisions regarding consideration of enforceable restrictions for Habitat in 2015. Many years before, the Legislature enacted a specific “Habitat for Humanity” exemption to allow the welfare exemption to also apply to property, among other requirements (AB 1559, Wiggins, 1999):
- Owned and operated by a nonprofit corporation, which is organized and operated for the specific and primary purpose of building and rehabilitating single or multifamily residences for sale at cost to low-income families; and
- The sale of which is financed by a zero interest rate loan without regard to religion, race, national origin, or the gender of the head of household.
Assembly Actions
Assembly Revenue & Taxation Committee: 7-0
Assembly Appropriations Committee: 14-0
Assembly Floor: 66-0
Support and Opposition
(6/7/24)
Support: Habitat for Humanity California (Sponsor)
Housing Action Coalition
New Livable California Dba Livable California
Opposition: None submitted.
-- END --
ASSEMBLY THIRD READING
ATR Bill Id:AB 1868
Author:(Friedman)
As Amended Ver:April 18, 2024
Majority vote
SUMMARY
Presumes, rebuttably, that an assessor shall not include the value of the deed of trust that ensures compliance with affordability restrictions on a property developed consistently with the Habitat for Humanity (Habitat) model.
Major Provisions
COMMENTS
Habitat model: Habitat differs from other low-income housing providers in that Habitat builds or rehabilitates housing for sale to low-income households. Thus, prior to 1999, Habitat properties were ineligible for the low-income rental housing welfare exemption. To address this, the Legislature authorized AB 1559 (Wiggins), Chapter 927, Statutes of 1999, which made Habitat properties eligible for the welfare exemption while the properties were being developed, if the property is primarily used for the rehabilitation or development of residential housing for sale at cost to low-income families, with a zero-interest loan as financing.
Current problem: Habitat has identified an issue with existing statutory provisions. Specifically, Habitat notes that certain assessors are including the value of subsidized financing encumbrances when assessing properties. While this has the effect of increasing the property taxes a low-income household purchasing a home from Habitat must pay, it appears these assessors are generally following the law, and appropriately including the value of those subsidizing encumbrances. Habitat notes that financing for each property can come from a number of sources, and the final form that financing takes can be varied. Thus, it appears assessors, in an attempt to consistently and fairly apply property tax law, are including the value of those encumbrances when the terms and conditions of those contracts appear to warrant their inclusion in the assessed value of the property.
This bill: Assessors would be required to rebuttably presume that a property's value does not include specified contracts that ensure compliance with the affordability provisions of a Habitat property. Thus, assessors would have flexibility to assess property in the manner they see fit, but this bill would provide greater consistency in the assessment of Habitat properties across counties.
According to the Author
California law provides a property tax exemption for property used exclusively for charitable purposes if it is owned by a non-profit entity. This is commonly known as a "welfare exemption" and currently includes property used for rental housing if there is an enforceable and verifiable agreement with a public agency, a recorded deed restriction, or other legal document that restricts the project's usage, and also provides that the units are sustainably designated for occupancy by lower income households.
The Legislature expanded the property tax welfare exemption to include eligible nonprofit corporations that build and rehabilitate affordable housing units for sale, subject to certain limitations, to low-income families. But, unlike rental properties, taxes are assessed on the home and paid by the low-income homebuyers, increasing their overall housing cost. Affordable rental and affordable ownership housing are not treated equally.
This bill creates statewide uniformity in assessing deed-restricted properties sold to and occupied by low-income, first-time homebuyers, and applies the property tax assessment consistently and more proportionately, on deed-restricted properties sold to lower-income households.
Arguments in Support
None on file.
Arguments in Opposition
None on file.
FISCAL COMMENTS
According to the Assembly Appropriations Committee:
- Annual property tax revenue loss of an unknown, but likely minor, amount (General Fund (GF) cost pressures). The State Board of Equalization (BOE) notes it is not possible to determine the revenue impact of this bill due to the number of unknown variables. Approximately 100 homes are sold annually by Habitat for Humanity affiliates across the state, where individual county assessor practices may vary. Thus, BOE staff would need to know each county's assessment practices, the number of Habitat homes sold in each county per year, the fair market value of the property, and the value of any enforceable restrictions. While BOE estimates that property tax revenue loss "could potentially exceed the high thousands of dollars per home built each year," which is accurate, such a scenario is likely predicated on homes being primarily located in a county where assessment practices differ from the approach specified in this bill. Committee staff has not received information to suggest this is the case.
- Costs of approximately $3,000 in fiscal year 2024-25 and $1,000 annually thereafter to BOE to revise informational materials and provide continued guidance (GF).
- By modifying how an assessor must value a property, this bill likely creates a state-mandated local program. If the Commission on State Mandates determines the provisions of this bill create a new program or impose a higher level of service for which the state must reimburse local costs, counties cold claim reimbursement from the state (GF). However, pursuant to the estimated revenue impact, reimbursable costs, if any, should be minor and absorbable.
VOTES
ASM REVENUE AND TAXATION: 7-0-0
YES: Irwin, Ta, Bains, Gipson, Grayson, Jim Patterson, Luz Rivas
ASM APPROPRIATIONS: 14-0-1
YES: Wicks, Sanchez, Arambula, Bryan, Calderon, Wendy Carrillo, Dixon, Mike Fong, Grayson, Haney, Hart, Pellerin, Ta, Villapudua
ABS, ABST OR NV: Jim Patterson
UPDATED
VERSION: April 18, 2024
CONSULTANT: Harrison Bowlby / REV. & TAX. / (916) 319-2098 FN: 0002836
Date of Hearing: May 1, 2024
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Buffy Wicks, Chair
ABPCA Bill Id:AB 1868
Author:(Friedman) – As Amended Ver:April 18, 2024
Policy Committee: | Revenue and Taxation | Vote: | 7 - 0 |
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Urgency: No State Mandated Local Program: Yes Reimbursable: Yes
SUMMARY:
This bill provides additional direction to an assessor when considering the effect of the value of an enforceable restriction on a Habitat for Humanity property.
Specifically, this bill establishes, for purposes of valuing a Habitat for Humanity property, a rebuttable presumption that, at the time of purchase, an assessor shall not include the value of a certain deed of trust on the property.
FISCAL EFFECT:
- Annual property tax revenue loss of an unknown, but likely minor, amount (General Fund (GF) cost pressures). The State Board of Equalization (BOE) notes it is not possible to determine the revenue impact of this bill due to the number of unknown variables. Approximately 100 homes are sold annually by Habitat for Humanity affiliates across the state, where individual county assessor practices may vary. Thus, BOE staff would need to know each county’s assessment practices, the number of Habitat homes sold in each county per year, the fair market value of the property, and the value of any enforceable restrictions. While BOE estimates that property tax revenue loss “could potentially exceed the high thousands of dollars per home built each year,” which is accurate, such a scenario is likely predicated on homes being primarily located in a county where assessment practices differ from the approach specified in this bill. Committee staff has not received information to suggest this is the case.
- Costs of approximately $3,000 in fiscal year 2024-25 and $1,000 annually thereafter to BOE to revise informational materials and provide continued guidance (GF).
- By modifying how an assessor must value a property, this bill likely creates a state-mandated local program. If the Commission on State Mandates determines the provisions of this bill create a new program or impose a higher level of service for which the state must reimburse local costs, counties cold claim reimbursement from the state (GF). However, pursuant to the estimated revenue impact, reimbursable costs, if any, should be minor and absorbable.
COMMENTS:
- Purpose. According to the author, under property tax law, “Affordable rental and affordable ownership housing are not treated equally.” The author intends this bill to create “statewide uniformity in assessing deed-restricted properties sold to and occupied by low-income, first-time homebuyers” and apply “property tax assessment consistently and more proportionately.”
- Support and Removal of Opposition. This bill is sponsored by Habitat for Humanity California, which argues this bill “will create a consistent standard that will give nonprofit builders, including Habitat for Humanity, greater clarity on the expected cost for their recipients and offer more affordable options for low-income homeowners who would otherwise be priced out of their programs.” This bill is also supported by other affordable housing groups.
The California Assessors Association removed their prior opposition to this bill after policy committee amendments struck the previously proposed valuation methodology. This bill now directs assessors to “not include the value of the deed of trust that contains compliance terms of the program. Such ‘silent seconds’ typically have no value and operate primarily as an enforcement mechanism to encourage compliance with the enforceable restrictions.” There is no registered opposition to this bill.
- Habitat for Humanity Model. When Habitat for Humanity provides a home to a low-income household, the property becomes subject to property tax, as a change in ownership has occurred. To facilitate such sales, Habitat for Humanity coalesces funding from different sources, which are sometimes applied as encumbrances on the property, for which the low-income purchaser is not liable when paying their mortgage, in addition to a recorded, enforceable deed restriction that ensures ongoing affordability. AB 668 (Gomez), Chapter 698, Statutes of 2016, allowed assessors to consider, when valuing a Habitat property, whether to exclude such encumbrances used to finance a home.
Habit for Humanity has since found that certain assessors are including the value of subsidized financing encumbrances when assessing Habitat property. As noted in the Assembly Revenue and Taxation Committee’s analysis of this bill, “While this has the effect of increasing the property taxes a low-income household purchasing a home from Habitat must pay, it appears these assessors are generally following the law” by “including the value of those encumbrances when the terms and conditions of those contracts appear to warrant their inclusion in the assessed value of the property.” This bill establishes a rebuttable presumption that an assessor shall not include the value of the deed of trust on the property that ensures compliance with the terms of a special no-interest loan program and has no value unless there is a violation of the covenants and restrictions of the terms of sale.
Analysis Prepared by: Irene Ho / APPR. / (916) 319-2081
Date of Hearing: April 8, 2024
ASSEMBLY COMMITTEE ON REVENUE AND TAXATION
Jacqui Irwin, Chair
ABPCA Bill Id:AB 1868 (
Author:Friedman) – As Introduced Ver:January 18, 2024
Majority vote. Fiscal committee.
SUBJECT: Property taxation: assessments: affordable housing
SUMMARY: Specifies the valuation for Habitat for Humanity properties. Specifically, this bill:
- Requires an assessor, when considering the effect on value of any enforceable restrictions on real property, to rebuttably presume that the value of real property is the sum of the value of the first mortgage and any applicable down payment, if that property complies with the Habitat for Humanity (Habitat) model.
- Provides that if the Commission on State Mandates determines that this bill contains costs mandated by the state, reimbursement to local agencies and school districts for those costs shall be made, pursuant to existing law.
EXISTING LAW:
- Provides that all property is taxable, shall be assessed at the same percentage of fair market value, and must be taxed in proportion to its full value. (California Constitution, Article XIII, Section 1.)
- Limits the amount of any ad valorem tax on real property to no more than 1% of the property's full cash value. The full cash value of real property is, generally, the appraised value when that property is purchased, newly constructed, or changes ownership. This value is referred to as the base year value, and may adjust upwards at an annual rate of 2% or inflation, whichever is less. (California Constitution, Article XIII A, Section 1.)
- Authorizes the Legislature to partially or fully exempt from taxation property used exclusively for charitable, among other, purposes if the property is owned or held in trust by corporations or other entities that are organized and operating for those purposes, that are non-profit, and where no part of net earning inures to the benefit of any private shareholder or individual. This is commonly referred to as the welfare exemption. Buildings under construction, land required for their convenient use, and equipment intended for the exempt use are exempt if the real property on which they are situated would otherwise qualify for the welfare exemption (California Constitution, Article XIII, Section 4 and 5.)
- Exempts from taxation, partially, real property that is owned by a qualifying non-profit, equal to the percentage of the number of low-income rental units relative to the total number of units, as specified. (Revenue and Taxation Code (R&TC) Section 214(g).)
- Provides that property that is owned by a qualifying non-profit that is organized and operated for the specific and primary purpose of building and rehabilitating single or multifamily residences for sale at cost to low-income families, with financing in the form of a zero interest rate loan, are within the welfare exemption, as provided. This is often referred to as the Habitat model. (R&TC Section 214.15.)
- Requires assessors to consider the effect upon value of any enforceable restrictions on the use of land, including a contract with a qualifying non-profit utilizing the Habitat model that:
- Restricts the use of the land for at least 30 years to owner-occupied housing available to low-income households, as defined;
- Includes a deed of trust on the property in favor of the non-profit to ensure compliance with the terms of the program, and that has no value unless the owner fails to comply with the covenants and restrictions of the terms of the home sale;
- The local housing authority, among other entities, has made a finding that the long-term deed restrictions in the contract serve a public purpose; and,
- Is recorded and provided to the assessor. (R&TC Section 402.1.)
FISCAL EFFECT: Staff from the State Board of Equalization (BOE) notes that a definitive revenue impact in indeterminable.
COMMENTS:
- The author has provided the following statement in support of this bill:
California law provides a property tax exemption for property used exclusively for charitable purposes if it is owned by a non-profit entity. This is commonly known as a "welfare exemption" and currently includes property used for rental housing if there is an enforceable and verifiable agreement with a public agency, a recorded deed restriction, or other legal document that restricts the project's usage, and also providing that the units are sustainably designated for occupancy by lower income households.
The Legislature expanded the property tax welfare exemption to include eligible nonprofit corporations that build and rehabilitate affordable housing units for sale, subject to certain limitations, to low-income families. But, unlike rental properties, taxes are assessed on the ownership home and paid by the low-income homebuyers, increasing their overall housing cost. Affordable rental and affordable ownership housing are not treated equally.
AB 1868 creates statewide uniformity in assessing deed-restricted properties sold to and occupied by low-income, first-time homebuyers, and applies the property tax assessment consistently and more proportionately, on deed-restricted properties sold to lower-income households.
- Habitat for Humanity, writing as sponsors of this bill, note, in part, the following:
In 2015, the legislature passed AB 668 (Gomez) which requires consideration of the long-term deed restrictions and justifies this reduction in the assessed value. As a result, most assessors have applied the initial property tax assessment proportionally on the first mortgage paid by the low-income families that participate in low to no-interest mortgage programs. Unfortunately, some assessors continue to assess deed-restricted homes at fair market value, especially in very expensive parts of the state where the average home price and fair market value exceeds $800,000.
- Housing Action Coalition, writing in support of this bill, notes, in part:
Current law provides property tax exemptions for property used exclusively for charitable purposes if it is owned by a nonprofit entity. The Legislature previously expanded the property tax welfare exemption to include eligible nonprofit corporations that build and rehabilitate affordable housing units for sale, but taxes on these units are assessed on the ownership home and paid by the low-income homebuyers, which increases overall housing costs for these low-income buyers. AB 1868 will create a uniform standard for assessing deed-restricted property to increase affordability for low-income, first-time homebuyers.
- The California Assessors' Association (CAA), writing in opposition to this bill, notes, in part:
The CAA believes that [this] proposal is likely unconstitutional because the prescribed methodology is not supported by California's Constitutional property tax provisions that require assessors to base assessments on a property's "full cash value" or "fair market value" […] by establishing a rebuttable presumption that the fair market value is the sum of the down payment and first deed of trust, values that are completely controlled and determined by private parties, this bill would arbitrarily restrict how the total consideration is determined […] Existing law requires assessors to consider the effect upon value of any enforceable restriction to which the use of the land may be subjected […] Assessors review agreements that are nuanced, and that may include terms where loans must be repaid, repaid at the time of sale, or assumed by the next buyer. Several deeds of trust beyond the first deed of trust are considered in the assessment, including silent second forgivable loans, deferred payments, grants, and other sources.
- Committee Staff Comments:
- California housing market and residential affordability: The state's current housing market is severely imbalanced. California's extraordinarily high housing costs are the result of decades of underproduction, leading to far more demand for homes than there is supply. According to data published by the Legislative Analyst's Office, the state should have been building 70,000 to 110,000 more housing units annually between 1980 and 2010 than was built. According to the Public Policy Institute of California, this trend has been exacerbated since 2010, with annual production falling from 147,000 units in the first decade of this century, to 71,000 units produced annually since. As a result, the LAO has found that from January 2020 to December of 2023, the average monthly cost for homeownership, including mortgage payments, taxes, and homeowners' insurance, has risen by 80% to 85%, depending on the price of the home.
- Low-income rental housing welfare exemption: As noted above, the California Constitution permits the Legislature to exempt from taxation, in part or wholly, property owned by a nonprofit that is used for a charitable purpose, also known as the welfare exemption. The Legislature has applied this authority in the context of low-income rental housing. Thus, property owned by a nonprofit on which residential units are rented to low-income individuals is exempt from taxation in a proportion equal to the number of units rented to low-income households relative to the total number of units on the property. For a property to be eligible, it must have a recorded deed restriction, or other legal document, that restricts the project's usage for exempt eligible purposes. If a nonprofit owner intends to develop property that does not currently contain residential units, then that property may only be exempt if construction has begun, and the property is ultimately used for an exempt eligible purpose.
- Habitat model: Habitat differs from other low-income housing providers in that Habitat build or rehabilitates housing for sale to low-income households. Thus, prior to 1999, Habitat properties were ineligible for the low-income rental housing welfare exemption. To address this, the Legislature authorized AB 1559 (Wiggins), Chapter 927, Statutes of 1999, which made Habitat properties eligible for the welfare exemption while the properties were being developed, if the property is primarily used for the rehabilitation or development of residential housing for sale at cost to low-income families, with a zero-interest loan as financing.
Pursuant to existing law, when Habitat sells a home to a low-income household, that property becomes subject to taxation, as a change in ownership has occurred. To facilitate that sale, Habitat, especially in recent years, must work to coalesce funding from different sources to make a project viable. These funding sources are sometimes applied as encumbrances on the property, in addition to the recorded, enforceable deed restriction that ensures ongoing affordability. These encumbrances are private, rather than governmental, and before 2016, they were not authorized to be considered by assessors when valuing property. In other words, encumbrances that may help finance the home, but for which the low-income purchaser is not liable when paying their mortgage, could not be considered for exclusion from the value of the property by assessors. To correct this deficiency, the Legislature passed, and Governor signed, AB 668 (Gomez), Chapter 698, Statutes of 2016, which permitted assessors to consider the impact on a property's value of restrictions placed on a Habitat property.
- Current problem: While AB 668 permitted assessors to consider private encumbrances on Habitat properties, Habitat has identified an issue with existing statutory provisions. Specifically, Habitat notes that certain assessors are including the value of subsidized financing encumbrances when assessing properties. While this has the effect of increasing the property taxes a low-income household purchasing a home from Habitat must pay, it appears these assessors are generally following the law, and appropriately including the value of those subsidizing encumbrances. Habitat notes that financing for each property can come from a number of sources, and the final form that financing takes can be varied. Thus, it appears assessors, in an attempt to consistently and fairly apply property tax law, are including the value of those encumbrances when the terms and conditions of those contracts appear to warrant their inclusion in the assessed value of the property.
- This bill: To address the above issue, this bill would limit the assessed value of a Habitat property to only the amount of the sum of the down payment and first mortgage, which may be unconstitutional. Assessors, pursuant to the California Constitution, are required to use the full cash value or fair market value as the basis for an assessment. As currently drafted, this bill would limit an assessor from considering any encumbrances beyond the down payment and first mortgage, even if additional encumbrances not related to the affordability of the property should properly be included in the value. For instance, if an encumbrance is applied to a property for which the purchaser has unconditionally agreed to pay under its terms and conditions, an assessor must consider the value of that encumbrance. Ultimately, the type of encumbrance, and varying terms and conditions of those encumbrances, can result in different valuation for properties that would otherwise appear similar.
- Suggested committee amendment: To address the concerns of the CAA, and questions of this bill's constitutionality, the author has agreed to delete, on Page 3, Line 40, and Page 4, Lines 1 and 2, the phrase "the value of the real property at the time of purchase is not greater than the sum of the value of the first mortgage and any applicable down payment" and insert in its stead "at the time of purchase, an assessor shall not include the value of the deed of trust reference in clause (iii) of subparagraph (A) of this paragraph."
REGISTERED SUPPORT / OPPOSITION:
Support
Habitat for Humanity, California (Sponsor)
Housing Action Coalition (UNREG)
Livable California
Opposition
California Assessors' Association
Analysis Prepared by: Harrison Bowlby / REV. & TAX. / (916) 319-2098
Discussed in Hearing
1MIN
Assembly Floor
1MIN
Senate Floor
5MIN
Senate Standing Committee on Revenue and Taxation
55SEC
Assembly Floor
6MIN
Assembly Standing Committee on Appropriations
8MIN
Assembly Standing Committee on Revenue and Taxation
Bill Author
