Conveying property to housing organization for low- and moderate-income homeownership | Community and Economic Development

It is not uncommon for charitable housing organizations, such as Habitat for Humanity, to request land from local governments with the intent of developing housing on the property and then selling it to low- and moderate-income homebuyers. Unfortunately, North Carolina local governments sometimes convey the property incorrectly, perhaps due to forgetting that the North Carolina Constitution does not permit a local government to “donate” real property to a charity, or perhaps by relying on the wrong statutes for the conveyance. Any taxpayer has standing to sue the local government for an improper conveyance. This creates risk for the charity and for the future homeowner because the remedy often used by the courts is simply voiding the conveyance.

To help local governments avoid such a result, this post offers legal guidance and practical tips on conveying real property to an intermediary organization for development into housing for eventual sale (not rental) to low- and moderate-income (LMI) households. Low-income households earn no more than 60% of local area median income; moderate-income households earn no more than 80% of local area median income. The income eligibility of homebuyers is a crucial element in determining local government legal authority to convey property for housing. These distinctions around income, and other details related to real property conveyance for affordable housing, are described in more detail below.

Background on real property conveyance by North Carolina local governments

We start with the general rule that, unless an exception is authorized by statute, North Carolina local governments are required to dispose of real property through one of three competitive bidding procedures: sealed bid (G.S. 160A-268), upset bid (G.S. 160A-269), or public auction (G.S. 160A-270). In addition, case law generally prohibits local governments from placing conditions on competitive bidding that will depress the price that a buyer would pay (Puett v. Gaston County).

However, the General Assembly understands that local governments can only facilitate the creation of LMI housing if they possess authority to (1) choose who buys government-owned property, through private negotiation, to ensure a capable and experienced affordable housing organization is selected as the buyer, and (2) impose conditions on the sale to ensure the buyer uses the property for LMI housing. This authority, with some important limitations, has been granted to North Carolina local governments.

Choosing the buyer and imposing conditions does not mean that local governments can give property away for free. Local governments are not permitted to “donate” public property or money—not even to charitable nonprofits. As Frayda Bluestein explains in her blog post, the North Carolina Supreme Court expounded on the state constitution’s exclusive emoluments clause in Brumley v. Baxter, 251 N.C. 691 (1945), with two important conclusions. First, if a conveyance of property occurs without full monetary consideration (meaning, payment is less than fair market value), then there must be consideration in the form of an enforceable promise to provide public services for the jurisdiction. Second, if the consideration is in the form of public service, the conveyance must be conditioned on the continued use for that purpose by the recipient, and the property must revert back to the local government if the recipient ceases to use it for that purpose.

In the context of affordable housing, this means that any conveyance of property to a private developer of affordable housing, for less than fair market value, must be subject to covenants and conditions to ensure the property is used for affordable housing for LMI households in perpetuity. Once the property is no longer used by the recipient for that purpose, it reverts back to the government. (Many federal programs impose a similar requirement per 2 CFR 200.311.)

What happens when real property is conveyed to an intermediary housing organization and then sold to an LMI household with no further restrictions, as typically done by Habitat for Humanity? In that case, the essence of the transaction is that the housing intermediary (such as Habitat) serves as merely a go-between, holding the property temporarily until it is conveyed to the LMI household. If the property was originally conveyed by the local government at a discounted price—a subsidized conveyance—then that subsidy must return to the local government or, if allowed by law, must flow to the LMI household. The subsidy cannot be retained by the intermediary organization.

What makes conveyances for LMI housing challenging is that constitutional law and multiple interconnected statutes are implicated. Sometimes a local government can act directly in its capacity as a county or municipality, and sometimes—such as a subsidized conveyance—the local government must instead exercise the powers of a housing authority. This post attempts to untangle the legal thicket by laying out the appropriate statutes to use for conveyance depending on the type of homeownership project proposed.

Providing housing for LMI households is a constitutional public purpose

As explained in a prior blog post on local government support of private affordable housing, the North Carolina Supreme Court long ago determined that providing affordable housing to persons of low income serves a constitutional public purpose. Indeed, the state constitution declares that it is “one of the first duties of a civilized and a Christian state” to aid “the poor, the unfortunate, and the orphan.” G.S. 157-3(15a) defines “low-income” as households earning 60% of the local area median income or less, using the most recent figures published by the U.S. Department of Housing and Urban Development (HUD) and adjusted for family size.

Most of the public purpose cases on low-income housing pertain to the expansive Housing Authorities Law, North Carolina General Statutes Chapter 157, which was enacted in 1935 to authorize the creation of “dwelling accommodations for persons of low income.” See, for example, Wells v. Hous. Auth. of City of Wilmington, 213 N.C. 744 (1938) (holding that the Housing Authorities Law serves a constitutional public purpose); Mallard v. E. Carolina Reg’l Hous. Auth., 221 N.C. 334 (1942) (holding that the Housing Authorities Law serves a public purpose in rural as well as urban areas); In re Hous. Auth. of City of Charlotte, 233 N.C. 649 (1951) (holding that eminent domain may be exercised for the purpose of constructing “low-rent dwellings” despite the fact that the area to be condemned may not be a “slum area”).  If an expenditure serves a public purpose, then it satisfies the exclusive emoluments clause as well.

Government action in this arena must be necessary and cannot supplant private activity. Housing activities serve a public purpose “only when the planning, construction, and financing of decent residential housing is not otherwise available” to “persons and families of low income” because “private enterprise is unable to meet the need.” Martin v. N.C. Hous. Corp., 277 N.C. 29 (1970). For a high level assessment of whether private enterprise is meeting the housing needs of low income persons in a particular community, see the North Carolina Housing Finance Agency’s “housing snapshot.”

As for households earning “moderate income” (reasonably defined as no more than 80% area median income), a state loan program was tested back in the 1980s when interest rates were in the high double digits. The North Carolina Supreme Court approved low-interest loans (with an interest rate of 14.5%!) not only for low income persons, but also for moderate income persons, because the General Assembly was “acting with the same public purpose in mind” as when assisting persons of low income, with the goal “to make available decent, safe and sanitary housing” to another group “who cannot otherwise obtain such housing accommodations.” In re Denial of Approval to Issue $30,000,000.00 of Single Family Hous. Bonds & $30,000,000.00 of Multi-Family Hous. Bonds for Persons of Moderate Income, 307 N.C. 52 (1982).

Thus, so long as local governments limit their activities to supporting households earning 80% area median income or below, and private enterprise is unable to meet the housing need, then a constitutional public purpose is served when government provides (i) housing and housing aid for low income persons and (ii) low interest loans for housing for low and moderate income (LMI) persons. It is reasonable to conclude that these holdings cover a wide range of programs and subsidies for moderate-income households earning no more than 80% area median income, so long as the moderate-income households are integrated into a low-income program, “with the same public purpose in mind” as assisting low-income persons earning 60% area median income or below.

Constitutional authority for housing aid does not extend to those earning more than 80% area median income. Under current law, it is not a constitutional public purpose for local governments to provide housing or housing aid for households earning more than 80% of area median income (AMI). (See later in this post for options when the goal is housing for “middle income” earners over 80% AMI.)

Statutory authority for conveying property to a housing organization for LMI housing

Meeting the constitutional threshold described above is not sufficient; in addition, statutory authority must be identified for any action by a local government. As already noted, multiple interconnected statutes (in pari materia) are implicated when conveying property for LMI housing, and each must be given purpose and effect, as explained in a prior blog post.[1]

The various applicable statutes and their associated limitations are summarized in a reference chart, Local Government Tools for Private Affordable Housing. The first page of the reference chart contains a flowchart with threshold questions related to constitutionality. Once the constitutional threshold has been reached, the flowchart then directs the reader to the appropriate table depending on the tenancy of the housing—e.g., rental or ownership—and whether the local government will make arrangements directly with income-eligible households or will use an intermediary such as Habitat for Humanity. This blog post addresses the situation in which an intermediary is used to create homeownership opportunities, and in those situations, the flowchart directs the reader to Table 2. This blog post expands on the information contained in Table 2 of the reference chart.

There are only two scenarios in which a local government may convey property to an intermediary housing organization by private negotiation and sale (also known as “private sale”) to develop housing for LMI homeownership:

1. For a housing project where all housing units are reserved for those earning 80% AMI or below, and no household earning more than 80% AMI is served, OR
2. For a housing project where one or more housing units will serve households earning over 80% AMI, and at least 20% of the units will be set aside for those earning 60% AMI or below.

Each scenario’s permutations will be addressed below. Outside of those two scenarios, there is no constitutional or statutory authority to convey property “at private sale” for homeownership.

Scenario 1: Conveyance for housing project with all housing units reserved for those earning 80% AMI or below

When all housing units in the project will be reserved for households earning 80% AMI or below, the statutory authority for property conveyance depends on whether the property is conveyed with or without subsidy.

Scenario 1A: All units reserved for 80% AMI or below; conveyance by sale or lease without subsidy

A conveyance without subsidy means the buyer, such as Habitat for Humanity, pays no less than fair market value for the property. So long as all of the housing units are reserved for households earning 80% AMI or less, G.S. 160D-1316(3) authorizes a local government “to convey property by private sale to any public or private entity” using “procedures and standards established by the local government.”  As a practical matter, most local governments simply follow the procedures set forth for private sale at G.S 160A-267. The local government must include “covenants or conditions that assure the property will be developed by the entity for sale or lease to persons of low or moderate income.” G.S. 160D-1316(3).

Although no subsidy is authorized under this statute, and therefore the property must be sold at fair market value, the property value might be affected by the “covenants or conditions that assure the property will be developed … for sale or lease to persons of low or moderate income.” In other words, a requirement for property to be used for LMI housing may reduce the revenue potential of the property and thereby lower the fair market value somewhat. So long as the LMI restrictions are binding on the property, the restrictions can be fairly considered by an appraiser when determining the fair market value of the property. If the appraiser finds that the property’s value is lower as a result of LMI restrictions, the determination is valid.[2] This lower fair market value is not a subsidy to the buyer—it is a reflection of the market value of the property after considering the restrictions imposed on the use of the property.

The same goes with determining a fair lease value. A lease that requires the lessee to use the property for income-restricted housing may reduce the income-earning potential of the property, and thus, LMI restrictions in a lease are fairly considered by an appraiser when determining a fair market value lease payment.

One might ask, why would a local government charge fair market value for property to be used for LMI housing? There are several reasons. First, and perhaps most obviously, a governing board may wish to support LMI housing but faces budget constraints. Second, some LMI housing developers can afford to pay fair market value for land because the LMI homebuyers who buy their homes can afford it in some cases, especially when subsidized from other sources. Third, there are procedural requirements, such as designating the governing board to exercise housing authority powers, that might be avoided if the conveyance is not subsidized.

There’s one more important reason a county, in particular, would want to make an unsubsidized conveyance using G.S. 160D-1316 (formerly G.S. 153A-378): the statute allows counties to avoid holding a public referendum. State law requires counties to hold a public referendum when they expend state or local tax revenues for housing projects unless “expressly authorized by G.S. 153A‑149.” See G.S. 160D-1311. An unsubsidized conveyance pursuant to G.S. 160D-1316 is explicitly authorized by G.S. 153A-149(c)(15b), and therefore no referendum is required.[3]

Scenario 1B: All units reserved for 80% AMI or below; conveyance by sale or lease at a price below fair market value

Should a local government wish to convey property to an intermediary organization for LMI housing at a price below fair market value (e.g., subsidized), it must exercise the powers of a housing authority. G.S. 160D-1311(b) authorizes a governing board to “exercise directly those powers granted by law to … local government housing authorities and may do so whether or not a … housing authority is in existence in such local government.”

A local government exercising the powers of a housing authority must first designate itself to exercise the powers of housing authority. Once so designated, the local government is empowered by G.S. 157-9 to convey property for a “housing project,” as that term is defined in G.S. 157-3, to include conveying property to developers of housing for LMI persons. No particular procedures need be followed for the property conveyance, though as a practical matter, many local governments simply follow the procedure for private sale set forth in G.S. 160A-267. Restrictions must be imposed on the conveyance to ensure the property will be used for a “housing project” for LMI persons and to ensure that all subsidy flows to the LMI households, not the intermediary. Additional guidance for boards exercising housing authority powers is provided later in this post in the section, Exercising the powers of a housing authority for subsidized conveyance.

As noted at the end of Scenario 1A above, counties must hold a public referendum (typically a bond referendum) to use state or local tax revenues to subsidize a conveyance. See G.S. 160D-1311(d) (formerly G.S. 153A-376(e)) and G.S. 159-48(c)(6). No referendum is required when using federal funds.

Scenario 2: Conveyance for housing project serving one or more households earning over 80% AMI, where at least 20% of the units are set aside for those earning 60% AMI or below

Whenever one or more units in a housing project will serve households earning over 80% AMI, then any local government conveyance by lease or sale, whether subsidized or not, must impose a requirement for at least 20% of the units to be reserved for the “exclusive use” of households earning 60% AMI or below. We will refer to this category of housing projects as mixed income 20% set-aside projects.

The definition of a housing project, found at G.S. 157-3, matters here because it imposes the 20% set-aside requirement. Sometimes developers will ask if they can meet the 20% set-aside by subdividing the property and placing the set-aside units on a separate tract under different ownership and management. This is not permitted. A housing project must be a “single plan or undertaking” with common ownership, management, and financing. The definition of a housing project in state law (in North Carolina and other states) is taken from federal law. To understand its meaning, see 2 C.F.R. § 92.2, where Project is defined as a “site or sites together with any building (including a manufactured housing unit) or buildings located on the site(s) that are under common ownership, management, and financing and are to be assisted with [federal] funds as a single undertaking under this part.” [emphasis added]

Even without referring to the federal definition, it’s clear this requirement is necessary to avoid an absurd result. A local government could not, for example, sell 50 acres of prime property to a preferred developer for 100 housing units, requiring a 20-unit apartment building for low-income households on 2 acres, and leaving the other 48 acres to be developed separately into 80 luxury or market-rate homes. The potential for abuse of this special conveyance authority is self-evident—without a “single undertaking” requirement, this provision could be used to circumvent traditional competitive sale methods that are designed to ensure all private homebuilders get a fair shot at buying land.

With definitions out of the way, we can now describe the statutory authority for conveyances under this scenario. For explanation purposes, it is once again helpful to distinguish between conveyances with and without subsidy.

Scenario 2A: Property conveyed by sale or lease for a mixed income 20% set-aside project without subsidy

When real property is conveyed by a local government for a mixed income 20% set-aside project without subsidy, leasing and sale rely upon different statutes.

For lease of real property for a mixed income 20% set-aside project at fair market value, the statutory authority is G.S. 160A-278 for municipalities and, through the operation of G.S. 153A-176, for counties as well. The local government may act directly under this statute—there’s no need to exercise the powers of a housing authority. The lease “may be made by private negotiation and may extend for longer than 10 years.” The local government must authorize execution of the lease at a regular council meeting upon 10 days’ public notice, and the notice “shall be given by publication describing the property to be leased, stating the value of the property, stating the proposed consideration for the lease, and stating the council’s intention to authorize the lease.”

A lease that requires the lessee to reserve at least 20% of the units for those earning 60% AMI or below could affect the revenue potential of the project. An appraiser could fairly consider such a restriction when determining a fair market value lease payment. The statute contemplates this; the notice must disclose the market value of the property separately from the “proposed consideration for the lease,” which is the lease payment plus a binding requirement to provide the income-restricted units.

To sell real property at fair market value for a mixed income 20% set-aside project, even though no subsidy is being provided, the only available statutory authority is G.S. Chapter 157. This means the local government must designate itself to exercise the powers of housing authority. Once so designated, it is empowered by G.S. 157-9 to convey property for a “housing project,” as that term is defined in G.S. 157-3. To qualify as a “housing project” under G.S. Chapter 157, restrictions must be imposed on the conveyance to ensure that the single undertaking under common ownership and management sets aside 20% of the units for the “exclusive use” of those earning 60% AMI or below, and to ensure that all subsidy flows to the LMI households, not the intermediary organization. No particular procedures need be followed for the property conveyance, though as a practical matter many local governments simply follow the procedure for private sale set forth in G.S. 160A-267.

The 20% set-aside may reduce the revenue potential of the property and thereby lower the fair market value. So long as the 20% (or higher) set-aside is binding on the property, the income restrictions can be fairly considered by an appraiser when determining the fair market value of the property. If the appraiser finds that the property’s value is lower as a result of the set-aside, this is not a subsidy to the buyer—it is a reflection of the market value of the property after considering the restrictions.

As explained at the end of Scenario 1A, a county must evaluate whether a public referendum is required by G.S. 160D-1311. A conveyance for a mixed income 20% set aside project is not authorized by G.S. 160D-1316, so a county must hold a public referendum unless the conveyance is made without expending state or local tax revenues.

Scenario 2B: Property conveyed by sale or lease for mixed income 20% set-aside project at a price below fair market value

When conveying real property at a price below fair market value (e.g., subsidized) for a mixed income 20% set-aside project, a local government must exercise the powers of a housing authority. Once the governing board is properly designated to exercise those powers, no particular procedures need be followed for the property conveyance, so long as the property is used for a “housing project” as defined in G.S Chapter 157. Accordingly, restrictions must be imposed on the conveyance to ensure that, within the single undertaking, at least 20% of the units will be set aside for the “exclusive use” of those earning 60% AMI or below, and that all subsidy flows to the LMI households, not the intermediary organization. Additional guidance for boards exercising housing authority powers is provided later in this post in the section, Exercising the powers of a housing authority for subsidized conveyance.

Counties must hold a public referendum in order to use state or local tax revenues to make a subsidized conveyance by this method. See G.S. 160D-1311(d) and G.S. 159-48(c)(6), and note also the separate 40% set-aside requirement for bond issuances. No referendum is required when using federal funds.

Process and Practice Tips

This final section contains additional considerations:

• Be precise with restrictions imposed on the intermediary
• Exercising the powers of a housing authority for subsidized conveyance
• Must the intermediary be a nonprofit?
• Can local governments convey property for middle-income housing (households earning over 80% AMI) without requiring the 20% set-aside?
• Is there any property tax relief for LMI housing?
• Other scenarios

Be precise with use restrictions imposed on the intermediary

In all of the scenarios described above, restrictions must be imposed on the conveyance to ensure that the constitutional and statutory purposes are achieved. The most common mechanisms include deed restrictions (or covenants running with the land), deeds of trust, and ground leases. The key restrictions to impose on any conveyance for LMI housing include the following:

• Set-aside of affordable units: How many units will be set aside for LMI persons? This can be expressed as a percentage (“no less than 20% of the units in the project”) or as a fixed number of units.
• Qualifying households: Who is eligible to purchase the housing? Qualifying households are usually expressed in terms of a percentage of area median income—but in any event, to remain consistent with G.S. 157-3(15a)-(15b), the LMI threshold should be set no higher than 80% of the local area median family income as defined by the most recent figures published by the U.S. Department of Housing and Urban Development.
• Affordability level: How much will be charged to LMI persons for each unit sold? The generally accepted definition of “affordable” is that the household spends no more than 30% of its gross income on housing-related costs. Note, however, that North Carolina law does not impose any affordability standard for homeownership programs.
• Timing and phasing: When will the affordable units be constructed and made available for purchase? If affordable units will be developed concurrently with market-rate units (as part of a single undertaking under common ownership, management, and financing), then it is advisable to impose phasing requirements so that affordable units are constructed and made available concurrently with or prior to market-rate units.
• Eligibility and transfer controls: When a LMI household moves out of an affordable unit, will the unit be made available to another LMI household? What entity is responsible for marketing the units and determining whether a household is eligible to purchase an affordable unit? How will these processes be managed?
• Control period: For how long must the units remain affordable to eligible households? If the restrictions will be extinguished upon sale to the first LMI household, how will that fact be recorded? If not extinguished, what is the effect of the 30-year limitation in the Real Property Marketable Title Act, G.S. Chapter 47B?
• Accounting for subsidies to LMI households: When property is conveyed to an intermediary with a subsidy or discount from the fair market value, the subsidy must flow to the LMI household. The intermediary should be required to submit documentation of all costs and the price paid by the LMI household, and those costs should be evaluated for reasonableness. See, for example, 24 CFR 92.250. It would not be permissible, for example, for an intermediary to show that land conveyed to the LMI household at no cost, but built improvements were sold for more than the amount dictated by costs plus reasonable overhead.
• No guarantee of suitability: The conveyance of property by the local government is no guarantee that the property is suitable for the intended development, and the conveyance documents should state that explicitly.
• Reverter if not developed: Within what time period must the property be developed and sold to a LMI household? As a constitutional matter, the property should revert back to the local government if the intermediary has not accomplished the public purpose within a defined period of time.
• Practice tip—don’t convey until all financing lined up: To avoid having to act on a reverter, or foreclose on a deed of trust, or file suit to enforce a covenant, it’s a good practice for the local government to wait to execute a conveyance of property until financing is lined up to complete the entire development project (or at least the first and most critical phase of it). An interim step could be executing a purchase and sale agreement in which conveyance is conditioned on a financial closing for the entire development.

Exercising the powers of a housing authority for subsidized conveyance

When exercising housing authority powers to convey property at a price below fair market value, the following factors should guide the process.

• Governing board must designate itself to exercise the powers of a housing authority. A governing board may exercise the powers of a housing authority directly even if a separate housing authority already exists in the jurisdiction. The process for a governing board to designate itself to exercise housing authority powers is set forth in G.S. 157-4.1 (cities) and G.S. 157-33 (counties).
• Property conveyance procedures. G.S. 157-9 provides: “No provisions with respect to the acquisition, operation or disposition of property by other public bodies shall be applicable to an authority unless the legislature shall specifically so state.” Thus, a local government that has designated itself to exercise the powers of a housing authority is exempt from following standard property disposition procedures. As a practical matter, many local governments simply follow the private sale procedures of G.S. 160A-267 in order to provide some structure for the conveyance.
• Public subsidy must flow to LMI households only, not the intermediary and not higher-income households. “No housing authority may construct or operate its housing projects so as to provide revenues for other activities of the city [or, by extension, developers or other entities].” G.S. 157-29. In addition, there is no authority to provide financial aid to households earning more than 80% of area median income. As noted above in the subsection entitled, “Accounting for subsidies to LMI households,” a local government must exercise oversight to ensure that all public subsidy goes to LMI households and not toward ineligible households or other activities of the intermediary organization. See, for example, 24 CFR 92.250.
• No fee waivers. No fee waivers are permitted as part of the conveyance. If a local government agrees to pay fees on behalf of the LMI household, this amounts to an additional subsidy, over and above the conveyance of property. Such subsidies must flow to the LMI household and must be approved by a local government exercising the powers of a housing authority. For more on (prohibited) fee waivers and how to handle fee offset payments, see my prior blog post on local government support of privately-owned affordable housing.

Must the intermediary be a nonprofit?

The statutory authority described in this blog post makes no distinction between for-profit and not-for-profit organizations, unlike G.S. 160A-279 which excludes “for-profit” corporations. Indeed, G.S. 160A-279 is not appropriate for the conveyances described in this post because that statute requires the property to be used “by the recipient entity” for a “public use.” Were a local government to rely on G.S. 160A-279 for conveyance, then at the time that the intermediary sold the property to a private LMI household, the property would neither be used “by the recipient [intermediary] entity” nor for a “public use.” Arguably, this would trigger a reversion of the property back to the local government, at which point the local government would need to follow the statutes described earlier in this post.

There is one instance where G.S. 160A-279 could be an appropriate statute: providing land to a nonprofit for a “land trust” for LMI housing. A land trust (described in an earlier blog post here) is a unique structure in which a nonprofit housing organization owns the land permanently, and the homes on the land are subject to a ground lease. The homeowner purchases only the built structure, not the land, making the overall price more affordable. The nonprofit retains ownership of the land to ensure it is reserved for lower-income households in perpetuity, thus the land is “used by the recipient” nonprofit for a “public use,” and no recapture is triggered so long as the nonprofit continues to operate the land trust for LMI housing.

Can local governments convey property for middle-income housing (households earning over 80% AMI) without requiring the 20% set-aside?

The General Assembly may at any time approve local acts or general laws to enable local governments to convey property at private sale to developers of middle-income housing, so long as the local government receives a fair market value price. However, even if the General Assembly enacted broad enabling authority for conveyance (or provided similar authority through local acts), no subsidy or discounted price would be permissible, as it would not serve a constitutional public purpose to aid middle-income households or developers of middle-income housing.

Even in the absence of a local act, charter provision, or other statutory authority, local governments still have some tools available to encourage middle-income housing. Although no subsidy is permitted and competitive bidding would be required, a local government could establish zoning conditions for middle-income housing—and perhaps even conditional zoning—prior to disposing of property through normal Article 12 competitive sale procedures. If developers can’t afford to construct and dedicate public infrastructure for development, local governments could share in the cost of public-owned infrastructure through reimbursement agreements. Paying the cost of constructing public-owned infrastructure is not a subsidy to a private developer—it’s simply paying for public infrastructure rather than expecting the developer to donate it to the jurisdiction.

Is there any property tax relief for LMI housing?

Options for offering property tax relief to intermediaries or to LMI homeowners are explored in a blog post by Chris McLaughlin here.

Rental units and other scenarios

This post focuses on homeownership where an intermediary is involved. For rental development and other scenarios, see other tables in the reference chart and a prior blog post on local government support for privately-owned affordable housing.

 

 

[1] The LMI housing statutes—G.S. Chapter 157, G.S. 160A-278, G.S. 160D-1311, and G.S. 160D-1316—must be read together as a unified statutory scheme. To illustrate the point, G.S. 160D-1311(b) authorizes a governing board to exercise the powers of housing authority under G.S. Chapter 157, and G.S. 160D-1311 also limits county expenditure authority for LMI housing except when using G.S. 160D-1316. G.S. 160A-278 relies on terms that are defined only in G.S. Chapter 157. All of these statutes are explicitly connected to each other through internal references. “It is a fundamental rule of statutory construction that sections and acts in pari materia, and all parts thereof, should be construed together and compared with each other.” [citations omitted] Redevelopment Comm’n of Greensboro v. Sec. Nat. Bank of Greensboro, 252 N.C. 595 (1960). “When two statutes apparently overlap, it is well established that the statute special and particular shall control over the statute general in nature, even if the general statute is more recent, unless it clearly appears that the legislature intended the general statute to control.” [citations omitted] Trustees of Rowan Tech. Coll. v. J. Hyatt Hammond Associates, Inc., 313 N.C. 230 (1985).  Because the statutes related to affordable housing refer to each other and are connected, each statute must be given effect. “In ascertaining the intent of the legislature, the presumption is that it acted with full knowledge of prior and existing laws.” [citations omitted] Sugar Creek Charter Sch., Inc. v. State, 214 N.C. App. 1 (2011).

[2] How is fair market value determined? The winning bid in a properly conducted competitive bidding process is, according to North Carolina case law, the fair market value. However, in the affordable housing context, competitive bidding is not appropriate; local governments wish to choose their buyer to ensure that the buyer is capable and qualified to construct and manage the housing. Because there is no bidding process that results in fair market value, the local government must make a formal determination about the fair market value and charge no less than that amount. Appraising the fair market value of property is a licensed activity in North Carolina (e.g., G.S. Chapter 93E); thus, a licensed professional should be engaged to determine property value at the time of conveyance.

[3] Compare G.S. 153A-149(c)(15b) and G.S. 159-48(c)(6), where the latter (but not the former) expressly authorizes grants and financial aid (subsidy) for LMI persons after approval of a bond referendum. Both provisions were enacted by S.L. 1999-366 and should be read together and compared. The idea of granting authority to support housing for persons of low income—without subsidy—is not unique to this provision. S.L. 1979-690 is entitled, “An Act to Allow Housing Authorities to Give Mortgages without Government Subsidy.”