In March of 2023, Governor Ron DeSantis signed Senate Bill (SB) 102, also known as the “Live Local Act,” into law, representing the largest investment for housing efforts in Florida history. As of May 16, SB 102 was officially amended under House Bill 7073 and Senate Bill 328, which provided clarity on several key components of the original Live Local Act.
We have summarized the major section of the bill and recent legislative changes specifically related to the property tax exemption that provides incentives aimed toward developers constructing affordable housing and existing multifamily owners in Florida.
The “Missing Middle” (Section 8 of SB 102)
Affordable housing developers shall receive what is being commonly referred to as a “Missing Middle” ad valorem tax exemption for portions of a multifamily project up to:
- 75% of the assessed value if the project provides housing to natural persons or families whose annual household income is greater than 80% but no more than 120% area median income (AMI), or
- 100% of the assessed value if the project provides housing to natural persons or families whose annual household income does not exceed 80% AMI.
Qualifications:
- Project must be “newly constructed,” meaning that the improvements were substantially completed within five years before the earlier of 1) the date of an applicant’s first submission of a request of certification, or 2) an application for an ad-valorem exemption.
- Project must contain more than 70 units dedicated to persons or households whose household incomes do not exceed 120% AMI.
- Units must not be subject to an agreement with Florida Housing and Finance Corporation (FHFC).
- The “missing middle” exemption cannot be used with Section 9 of the SB 102 exemption as detailed below.
To receive an exemption, the property owner must apply to the FHFC to receive a certification notice, which will be sent with an application form and required documents to the property appraiser.
The application requires several documents, including but not limited to a rental market study (completed within three years before the submission) and the rent received for each unit for which the property owner is requesting the exemption. The property owner must submit the application form and certification notice from the FHFC to the property appraiser by March 1. If granted, the exemption will apply to the respective tax year and sunsets on December 31, 2059.
In summary, all developers can now receive a property tax exemption on the portions of their properties used for affordable housing if their properties qualify, including market rate developers.
House Bill 7073 “Missing Middle” Key Update
- Amends the property exemption to allow the taxing authority to opt out of the exemption used for persons or families whose annual household income is greater than 80% AMI, but not more than 120% AMI.
- The election to opt out must be made by a taxing authority through an ordinance/resolution approved by a two-thirds vote of the governing body.
- An owner who was granted the 75% exemption before the adoption or renewal of the ordinance/resolution may continue to receive the exemption for each subsequent consecutive year that the property owner applies for and is granted the exemption.
- A taxing authority must make a finding in the ordinance/resolution that the latest published Shimberg Center for Housing Studies Annual Report of the county’s respective jurisdiction shows the number of affordable and available units is greater than the number of renter households in the category entitled “0-120 Percent AMI.”
- The ordinance/resolution is for a one-year term that will apply the year after the ordinance is passed but may be renewed before expires.
- The taxing authority proposing the election must advertise the ordinance/resolution or renewal pursuant to Florida statute prior to its adoption.
- The taxing authority must provide the county property appraiser the adopted ordinance, resolution, or renewal by the effective date of the ordinance, resolution, or renewal.
This means individual taxing authorities can opt out from the “75% Exemption” by passing an ordinance/resolution meeting certain conditions. This new language in the bill becomes effective for the 2025 tax year and beyond.
Senate Bill 328 “Missing Middle” Key Updates
- Clarifies that if a unit in a previous year received the exemption and is now vacant on January 1, the vacant unit is still eligible for the exemption, provided the unit is restricted to providing affordable housing that otherwise meets the requirements of the program and a reasonable effort is made to lease the unit to eligible persons or families.
- Requires the property appraiser to include in the valuation of a unit the proportionate share of the residential common areas, including the land, fairly attributable to such unit.
These changes provide clarity on vacant unit eligibility for subsequent filing of the application as well as guidance to the property appraiser when handling the calculation of the exemption. These amendments are intended to be remedial and clarifying in nature and apply retroactively to January 1, 2024.
The local tax specialists at Ryan have implemented a comprehensive range of proactive strategies designed to address future reassessments and tax mitigation strategies. Please don’t hesitate to reach out with any questions you may have as we can help navigate the application process for you.
TECHNICAL INFORMATION CONTACTS:
Marcus Capouano
Principal
Ryan
321.251.2922
marcus.capouano@ryan.com
Randy Harmer
Senior Manager
Ryan
321.306.2385
randy.harmer@ryan.com
The material presented in this communication is intended to provide general information only and should solely be seen as broad guidance and not directed to the particular facts or circumstances of any individual who may read this publication. No liability is accepted for acts or omissions taken in reliance upon the content of this piece. Before taking (or not taking) any action, readers should seek professional advice specific to their situation from Ryan, LLC or other tax professionals. For additional information about this topic, please contact us at info@ryan.com