2025 tax preference review: Nonprofit Low-Income Housing Development
25-10 final report | December 2025
Eric Whitaker, Aline Meysonnat, research analysts
Pete van Moorsel, tax review coordinator; Eric Thomas, legislative auditor
Legislative Auditor's conclusion
Nonprofit developers are building homes for low-income households as the Legislature intended. Focusing the metric on housing outcomes instead of spending would better reflect the Legislature's objectives.
Key points
- The preference provides a property tax exemption for up to seven years on land that nonprofit developers own and hold for future low-income housing.
- In 2025, beneficiaries will save $512,000. Half of the parcels will have savings under $651.
- The Legislature aimed to encourage development of affordable homes for low-income households. Through January 2025, developers had sold 333 properties to qualifying households.
- The Legislature intends to continue the preference if developers increase the share of revenues spent on low-income housing. Most developers have not achieved this metric despite an overall increase in spending on low-income housing.
- Metrics such as the number of housing units sold may better capture the Legislature's intent.
- Department of Revenue (DOR) does not consistently receive documentation from assessors and beneficiaries. Most other nonprofit property tax exemptions require annual renewal, which simplifies administration for DOR.
Legislative Auditor’s recommendations
The Legislative Auditor makes two recommendations.
Recommendation #1
The Legislature should determine whether to continue the preference.
- It provides tax relief and helps nonprofit developers to build homes intended for low-income households.
- However, it does not meet the criteria for the Legislature Auditor to recommend continuing the preference.
Legislation required: Yes.
Fiscal impact: Depends on Legislature's policy choice.
Implementation date: 2027 legislative session.
Commission recommendation: Endorse with comment (HTML)
Recommendation #2
If the Legislature chooses to continue the preference, it should consider modifying it.
Options may include:
- Adopting performance metrics that better align with the objective of providing additional housing opportunities for low-income households. It may wish to work with nonprofit developers in doing so.
- Requiring nonprofit developers to renew the preference annually, like most other nonprofit property tax exemptions. This may help facilitate more consistent communication between DOR, county assessors, and developers. It could also help alleviate data collection and reporting challenges that complicated this review.
Legislation required: Yes.
Fiscal impact: Depends on Legislature's policy choice.
Implementation date: 2027 legislative session.
Commission recommendation: Endorse with comment (HTML)
Video summary
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Nonprofit Low-Income Housing Development (HTML)