Act 68 subsidized rental housing certification

Background

On June 18, 2003, the Vermont State Legislature approved Act 68 (formerly Act 60), which divided all Vermont properties into homestead (residential) and non-homestead (non-residential) properties. This division meant that the state will tax non-homestead properties at a higher rate per $100 of assessed value, while it taxes homestead properties at a lower rate per $100 of assessed value. As of Jan. 1, 2004, these changes were codified as 32 V.S.A. § 5404a(a)(6) (71 KB; PDF) to apply to fiscal year 2005 and after.

Subsidized housing buildings are categorized as non-homestead properties and therefore may be charged the higher tax rate. Because of the importance of affordable housing to Vermont, the law does allow certain subsidized housing properties to reduce their assessment so that the effective tax burden is closer to those of properties with the homestead (residential rate).

Developments with federal and/or state funding that have affordable residential rental restrictions on units may qualify for this discount. Depending on the ratio of subsidized units to total units on the land parcel this could mean a reduction of up to 10 percent of a building's assessed value and may have the effect of reducing the tax burden of the project.

Eligible properties

Eligible properties must have active covenants from federal or state housing programs that restrict the rents charged in units, subject to some limited exclusions. These programs may include:

• Community Development Block Grant
• Federal Home Loan Bank's Affordable Housing Program
• HOME Investment Partnership
• Housing Opportunities for Persons with AIDS (HOPWA)
• HUD's Section 202 Supportive Housing for the Elderly
• HUD's Section 811 Supportive Housing for the Disabled
• Low Income Housing Tax Credit
• McKinney/Vento Section 8 Moderate Rehabilitation for Single Room Occupancy
• McKinney/Vento Shelter Plus Care
• McKinney/Vento Supportive Housing Program (if the money is for leasing, acquisition, rehabilitation, or new construction)
• Public Housing
• Rural Development's Section 515 loan guarantee (combined with rental assistance or Housing Credits)
• Section 8 Moderate Rehabilitation (combined with rental assistance or Housing Credits)
• Section 8 New Construction/Substantial Rehabilitation
• Vermont Housing and Conservation Board loan
• Vermont Housing Finance Agency bond-financed tax credits

Only buildings where the owner signed a legal agreement to restrict rents on that unit for at least one year, regardless of the current tenant, qualify. All properties with tenants who hold tenant-based rental vouchers — such as Section 8 Housing Credit Vouchers — which have no other rental restrictions, do not qualify.

The process for becoming "certified"

Housing owners, if they believe any of their properties may be eligible for this tax break, must apply to VHFA to receive a certification form that can be taken to the local town clerk for a re-calculation of the property tax. VHFA works with the Vermont Department of Taxes and certifies all qualified subsidized housing projects, ensuring that they are eligible under 32 V.S.A. § 5404a(a)(6) (71 KB; PDF).

Last winter VHFA mailed every project that was certified under their Act 68 certification. New projects, or those that have not applied previously and have been restricted for the entire preceding calendar year, can apply in February each year by downloading an application from the VHFA website. (The application is only available during the open certification timeframe, which is during the first quarter of each calendar year.)