Herschlag: The Never Ending Shifting of Property Taxes

Today I offered testimony on Senate Bill 475. This bill allows municipalities the option to provide a tax break on a portion of the educational part of the property tax for densely built workforce housing developments.

http://gencourt.state.nh.us/bill_status/Results.aspx?q=1&txtbillnumber=sb475&txtsessionyear=2020 (click on Bill text)

Concord and New Hampshire, we are told, need significantly more housing and the bulk of this housing needs to be workforce and lower income housing. With vacancy rates at 1 percent and rents and housing prices spiraling upwards, it is hard to argue that there is a need for more housing.

Understanding that Concord does far more to provide affordable housing than our adjacent neighbors, still doesn’t relieve the fact that significantly more housing is needed.

With housing prices in the $300,000 range and good luck finding a two bedroom apartment for anything in the $1,200 range (and many significantly higher) it is hard to argue against affordable housing. But what exactly is affordable housing and what exactly does this bill have to do with it?

Affordable housing comes in many shapes and forms. For some affordable housing is market rate or higher. For others it may be workforce housing, low income housing or subsidized housing.

Communities surrounding Concord in the past have had what is referred to as exclusionary zoning. Making it too expensive to build affordable housing or multi family housing. The state now requires communities to provide for affordable housing.

In 2008, the New Hampshire Legislature passed a law that requires every community to provide “reasonable and realistic opportunities” for the development of workforce housing. New Hampshire’s workforce housing statute (NH RSA 674: 58-61). The statute defines “workface (sp) housing” and what is considered “affordable.” (From NH Housing Finance Authority - https://www.nhhfa.org/housing-challenges-solutions/workforce-housing/).

I support affordable housing and support using density bonuses and mixed income development projects for certain types of housing in certain zoning districts. But I am also aware of the costs to communities. I would like to see those costs recognized and balanced by commercial development and to have funding from the state to ensure that communities are not being required to support unfunded mandates.

This is what the NH Constitution says about unfunded mandates:

[Art.] 28-a. [Mandated Programs.] The state shall not mandate or assign any new, expanded or modified programs or responsibilities to any political subdivision in such a way as to necessitate additional local expenditures by the political subdivision unless such programs or responsibilities are fully funded by the state or unless such programs or responsibilities are approved for funding by a vote of the local legislative body of the political subdivision. November 28, 1984

Here’s what the bill will do. A developer who builds workforce housing can apply to the town for a tax break on a portion of the state and local education property tax. It is important to remember that for a project to be considered workforce housing at least 51 percent of the units have to be two bedrooms. That usually means children and children go to schools.

Understanding that the cost to educate a child is in the $18,000 range when you add transportation and meals, and understanding that the education tax on properties is only a portion of the overall property tax you pay, it is rare that a household would pay enough in taxes to cover the costs of even one child in school. The difference is made up by a paltry payment from the state and spreading out the costs to commercial properties and residential property owners that don’t have children in the school system.

Here’s a quick example for those who live in Concord and send their children to the MVSD. Penacook has the sixth highest overall tax rate and sixth highest school tax in the state. At $34.10 a $250,000 house pays $8,650 and $4,910 goes to the school.

Back to SB475. This bill allows for a portion of the school tax to be waived for up to 10 years, for certain workforce housing projects. Guess who makes up the difference? You do.

So while we can agree on the need for more housing and agree on the need for affordable housing, can we agree that those already paying taxes shouldn’t be once again asked to pay a disproportionate share because we don’t live in a preferred form of housing as defined by the state?

About that unfunded mandate thing. While SB 475 is not technically a mandate, because each community can determine if they want to offer the tax break, the bottom line is not so clear. There are a number of bills pending in the State House that require communities to provide affordable housing and make it easier for developers to appeal land use board determinations and easier for land use board’s determinations to be overturned.

With the threat of a community winding up in Superior Court or before the Housing Appeals Board, if a developer states they can’t make their project work without tax relief, will communities yield to the pressure to avoid a potentially costly appeals process.

Oh yeah, I spoke in opposition to SB475.

And yes we do need to have a discussion on how we pay for schools, community, county and state services.