Tax incentives for the maintenance and rehabilitation of unsubsidized affordable rental properties overview

Even in cases where market rents are rising, owners may be reluctant to raise rents (or unable to do so without upgrading the property). Property tax relief can provide an option for the owner to maintain affordability while strengthening the building’s bottom line. Moreover, property tax relief can prevent owners from being deterred from making improvements by shielding them from higher property taxes based on the cost incurred in improving the property. Eligibility for the incentive may be contingent on an agreement to maintain affordable rents for a specified period of time or to put the property under rent regulation that slows escalation of rent levels.

By allowing owners of older unsubsidized affordable rentals to operate profitably, these policies may slow the rate of growth in rents of properties located in strong rental markets by reducing the likelihood that the properties are substantially rehabilitated and repositioned to rent at much higher levels (or demolished to make way for luxury multifamily units).  However, these policies alone will not stop owners from raising rents when the market conditions would allow them do so. In markets where rents are rapidly becoming less affordable or are likely to do so in the future, the locality may want to preserve these units as dedicated affordable housing, either by working with the current owner or by facilitating the transfer of the property to a mission-driven owner. In this case, see the array of tools for creating and preserving dedicated affordable housing.