HB3965 102ND GENERAL ASSEMBLY

LRB102 16799 HLH 22201 b

102ND GENERAL ASSEMBLY
State of Illinois
2021 and 2022
HB3965

Introduced 2/22/2021, by Rep. Marcus C. Evans, Jr.

SYNOPSIS AS INTRODUCED:

35 ILCS 200/15-178 new

Amends the Property Tax Code. Provides that each county shall implement a special assessment program to reduce the equalized value for affordable rental housing construction or rehabilitation. Effective immediately.

FISCAL NOTE ACT MAY APPLY

HOUSING AFFORDABILITY IMPACT NOTE ACT MAY APPLY

A BILL FOR

AN ACT concerning revenue.

Be it enacted by the People of the State of Illinois, represented in the General Assembly:

Section 5. The Property Tax Code is amended by adding Section 15-178 as follows:

(35 ILCS 200/15-178 new)

Sec. 15-178. Reduction in assessed value for affordable rental housing construction or rehabilitation.

(a) The General Assembly finds that:

(1) there is a shortage of high quality affordable rental homes for low-income and very low-income households in Illinois;

(2) owners and developers of rental housing face significant challenges building newly-constructed apartments or undertaking rehabilitation of existing properties that result in rents that are affordable for low-income and very low-income households; and

(3) developing a Statewide policy to determine the assessed value for newly-constructed and rehabilitated affordable rental housing that both encourages investment and incentivizes property owners to keep rents affordable will help Cook County and other parts of Illinois address the extreme shortage of affordable housing.

(b) Each county shall implement a special assessment program to reduce the equalized value of all eligible newly-constructed residential real property, qualified substantial rehabilitation to all eligible existing residential real property, or qualified moderate rehabilitation to existing residential real property in accordance with this Section. Any county with less than 3,000,000 inhabitants may opt-out of this special assessment program upon passage of an ordinance by a majority vote of the county board. If a county with less than 3,000,000 inhabitants chooses to opt-out of this special assessment program, that county may subsequently implement this special assessment program upon passage of an ordinance by a majority vote of the county board. Property is eligible for the program if and only if all of the following factors have been met:

(1) at the conclusion of the new construction or rehabilitation, the property will consist of a newly-constructed multifamily building containing 7 or more rental dwelling units or an existing multifamily building that has undergone a qualifying substantial rehabilitation or a qualifying moderate rehabilitation containing 7 or more rental dwelling units;

(2) for incentives under subsection (c) or (d), the property exercises a waitlist preference for veterans for a minimum of 10% of total development units; for the purposes of this paragraph (2), a waitlist preference means that, if there is a veteran on the property waitlist, the veteran's application shall be considered before any non-veteran applicant; if there is not a veteran on the property waitlist, the unit may be filled with a qualified applicant who is not a veteran; if 10% of a property's units are occupied by veterans, the property will not be required to exercise the preference until veteran occupancy drops below the 10% minimum, though properties may elect to apply the preference for more than 10% of units;

(3) for incentives under subsection (c) or (d), except as defined in subparagraphs (D), (E), and (F) of paragraph (4) of subsection (f) of this Section, prior to the newly-constructed residential real property or substantial rehabilitation to existing residential real property being put in service, the owner of the residential real property commits that, for a period of 30 years after the newly-constructed residential real property or rehabilitation to existing residential real property is put in service, at least 20% of the multifamily building's units will have rents as defined in this Section that are at or below maximum rents and are occupied by households with household incomes at or below maximum income limits;

(4) for incentives under subsection (e), except as defined in subparagraphs (D), (E), and (F) of paragraph (4) of subsection (f) of this Section, the owner of the residential real property makes commitments with respect to maximum rents and household incomes as provided in subsection (e); and

(5) the property meets the application requirements set forth in this Section.

(c) For new construction and substantial rehabilitation, the incentives shall be calculated as follows:

(1) during the construction period, the property is entitled to a reduction in its equalized assessed value in an amount equal to the difference between the equalized assessed value in the year for which the incentive is sought and the equalized assessed value for the property in the base year;

(2) for the first through tenth taxable years after the property or improvements are placed in service, the property is entitled to a reduction in its equalized assessed value in an amount equal to 50% of the difference between the equalized assessed value in the year for which the incentive is sought and the equalized assessed value for the property in the base year;

(3) except as provided in subsection (d), for the eleventh through twentieth taxable years after the property or improvements are placed in service, the property is entitled to a reduction in its equalized assessed value in an amount equal to 40% of the difference between the equalized assessed value in the year for which the incentive is sought and the equalized assessed value for the property in the base year; and

(4) for the twenty-first through thirtieth taxable years after the property or improvements are placed in service, the property is entitled to a reduction in its equalized assessed value in an amount equal to 30% of the difference between the equalized assessed value in the year for which the incentive is sought and the equalized assessed value for the property in the base year.

(d) New construction or qualified substantial rehabilitation that meets 35% blended participation of certified disadvantaged business enterprises and certified underrepresented business enterprises owned by minorities, women, veterans, LGBT, and persons with disabilities during construction is entitled to a reduction in equalized assessed value in an amount equal to 50% of the difference between the equalized assessed value in the year for which the incentive is sought and the equalized assessed value for the property in the base year for the eleventh through twentieth taxable years after the property or improvements are placed in service. For the purposes of this subsection (d), the chief county assessment officer shall require all contractors and subcontractors to comply with the requirements of Section 30-22 of the Illinois Procurement Code as they apply to responsible bidders and present satisfactory evidence of compliance to the chief county assessment officer. For those seeking certification by the Department of Central Management Services under this subsection, the Department of Central Management Services shall require the contractor to provide evidence of a fully executed project labor agreement with the applicable local building trades council.

(e) For qualified moderate rehabilitation, the amount of the reduction shall be calculated as follows:

(1) if the owner of the residential real property commits for a period of at least 10 years that at least 15% but fewer than 35% of the multifamily building's units have rents at or below maximum rents and are occupied by households with household incomes at or below maximum income limits, the assessed value of the property used to calculate the tax bill shall be reduced by an amount equal to 25% of the assessed value of the property as initially determined by the assessor for the property in the current taxable year for the newly-constructed residential real property or based on the improvements to an existing residential real property; and

(2) if the owner of the residential real property commits for a period of at least 10 years that at least 35% of the multifamily building's units have rents at or below maximum rents and are occupied by households with household incomes at or below maximum income limits, the equalized assessed value of the property used to calculate the tax bill shall be reduced by an amount equal to 35% of the assessed value of the property as initially determined by the assessor for the property in the current assessment year for the newly constructed residential real property or based on the improvements to an existing residential real property.

(e) Property receiving a reduction outlined in this subsection (e) shall be eligible for an initial reduction period of up to 10 years, which shall be extended for up to 2 additional 10-year periods if the property continues to meet the requirements of this subsection (e).

(f) Application requirements.

(1) In order to receive benefits under this Section, the owner must submit the following information to the chief county assessment officer for review in the form required by the chief county assessment officer:

(A) the owner's name;

(B) the postal address and permanent index number of the parcel;

(C) a deed or other instrument conveying the parcel to the current owner;

(D) written evidence that the new construction, qualifying substantial rehabilitation, or qualifying moderate rehabilitation has been completed with respect to the residential real property, including, but not limited to, copies of building permits, a notarized contractor's sworn affidavit, and photographs of the interior and exterior of the building after new construction or substantial rehabilitation is completed;

(E) written evidence that the residential real property meets local building codes, or, if there are no local building codes, Housing Quality Standards, as determined by the United States Department of Housing and Urban Development;

(F) a list identifying the affordable units in the residential real property and a written statement that the affordable units are comparable to the market rate units in terms of unit type, number of bedrooms per unit, quality of exterior appearance, energy efficiency, and overall quality of construction;

(G) a written schedule certifying the rents in each affordable unit and a written statement that these rents do not exceed the maximum rents allowable for the area in which the residential real property is located;

(H) documentation from the administering agency verifying the owner's participation in a qualifying income-based rental subsidy program as defined in subsection (d) of this Section if units receiving rental subsidies are to be counted among the affordable units in order to meet the thresholds defined in this Section;

(I) a written statement identifying the household income for every household occupying an affordable unit and certifying that the household income does not exceed the maximum income limits allowable for the area in which the residential real property is located;

(J) a written statement that the owner has verified and retained documentation of household income for every household occupying an affordable unit; and

(K) any additional information as reasonably required by the chief county assessment officer, including, but not limited to, any information necessary to ensure compliance with applicable local ordinances and to ensure that the owner is complying with the provisions of subparagraph (E) of paragraph (4) of this subsection.

(2) The chief county assessment officer shall notify the owner as to whether the property meets the requirements of this Section. If the property does not meet the requirements of this Section, the chief county assessment officer shall provide written notice of any deficiencies to the owner, who shall then have 30 days from the date of notification to provide supplemental information showing compliance with this Section. If the owner does not exercise this right to cure the deficiency, or if the information submitted, in the sole judgment of the chief county assessment officer, is insufficient to meet the requirements of this Section, the chief county assessment officer shall provide a written explanation of the reasons for denial.

(3) The chief county assessment officer may charge a reasonable application fee to offset the administrative expenses associated with the program.

(4) The benefit conferred by this Section is limited as follows:

(A) The owner is eligible to apply for the benefit conferred by this Section from June 1, 2020 through December 31, 2029. If approved, the reduction will be effective for the current taxable year, which will be reflected in the tax bill issued in the following taxable year.

(B) In the year prior to the final year of eligibility for the reduction in assessed value, written notice must be provided to tenants informing them of the date of the termination.

(C) If the property is sold or transferred, the purchaser or transferee must comply with all requirements of this Section in order to continue receiving the reduction in assessed value.

(D) The owner may apply for the benefit if the newly-constructed residential real property or improvements to existing residential real property were put in service on or after June 6, 2015. However, the eligibility period shall be reduced by the number of years between the placed in service date and the date the owner first receives this benefit.

(E) The owner may apply for the benefit within 2 years after the newly-constructed residential real property or improvements to existing residential real property are put in service. However, the eligibility period shall be reduced for the number of years between the placed in service date and the date the owner first receives this benefit.

(F) Owners of a multifamily building receiving a benefit through the Cook County Class 9 program on May 31, 2020 shall be deemed automatically eligible for the benefit defined in this Section in terms of meeting the criteria for new construction or substantial rehabilitation for a specific multifamily building regardless of when the newly-constructed residential real property or improvements to existing residential real property were put in service. If a Cook County Class 9 owner had Class 9 status revoked on or after June 1, 2017 but can provide documents sufficient to prove that the revocation was in error or any deficiencies leading to the revocation have been cured, the chief county assessment officer may deem the owner to be eligible. However, owners may not receive the both the benefits defined in this Section and the Cook County Class 9 program in any single taxable year. In addition, the number of years during which an owner has participated in the Class 9 program shall count against the number of remaining years eligible for the benefit as defined in this Section.

(G) At the completion of the assessment reduction period described in this Section, the entire parcel shall be assessed as otherwise provided in State law.

(g) For the purposes of this Section:

"Affordable units" means units that have rents that do not exceed the maximum rents as defined in this Section.

"Base year" means the taxable year prior to the first year of the construction period.

"Construction period" means a period of not more than 3 consecutive tax years during which the dwelling units are being newly-constructed or the qualifying substantial rehabilitation is taking place.

"Household income" includes the annual income for all the people who occupy a housing unit that is anticipated to be received from a source outside of the family during the 12-month period following admission or the annual recertification, including related family members and all the unrelated people who share the housing unit. Household income includes the sum total of the following income sources: wages, salaries, and tips before any payroll deductions; net business income; interest and dividends; payments in lieu of earnings, such as unemployment and disability compensation, worker's compensation and severance pay; Social Security income, including lump sum payments; payments from insurance policies, annuities, pensions, disability benefits and other types of periodic payments; alimony, child support, and other regular monetary contributions; and public assistance, except for assistance from the Supplemental Nutrition Assistance Program (SNAP). "Household income" does not include: earnings of children under age 18; temporary income such as cash gifts; reimbursement for medical expenses; lump sums from inheritance, insurance payments, settlements for personal or property losses; student financial assistance paid directly to the student or to an educational institution; foster child care payments; receipts from government-funded training programs; assistance from the Supplemental Nutrition Assistance Program (SNAP).

"Maximum income limits" means the maximum regular income limits for 60% of the area median income for the geographic area in which the multifamily building is located for multifamily programs, as determined by the United States Department of Housing and Urban Development and published annually by the Illinois Housing Development Authority.

"Maximum rent" means the maximum regular rent for 60% of the area median income for the geographic area in which the multifamily building is located for multifamily programs, as determined by the United States Department of Housing and Urban Development and published annually by the Illinois Housing Development Authority. To be eligible for the benefit defined in this Section, maximum rents are to be reduced by the owner based on the Illinois Housing Development Authority's rules regarding tenant payment of utilities; or, if the owner is leasing an affordable unit to a household with an income at or below the maximum income limit who is participating in qualifying income-based rental subsidy program, "maximum rent" means the maximum rents allowable under the guidelines of the qualifying income-based rental subsidy program.

"Primary building systems" means the following, together with their related rehabilitations, specifically approved for this program:

(1) Electrical. All electrical work must comply with applicable codes; it may consist of a combination of any of the following alternatives:

(A) installing individual equipment and appliance branch circuits as required by code (the minimum being a kitchen appliance branch circuit);

(B) installing a new emergency service, including emergency lighting with all associated conduits and wiring;

(C) rewiring all existing feeder conduits ("home runs") from the main switchgear to apartment area distribution panels;

(D) installing new in-wall conduits for receptacles, switches, appliances, equipment, and fixtures;

(E) replacing power wiring for receptacles, switches, appliances, equipment, and fixtures;

(F) installing new light fixtures throughout the building including closets and central areas;

(G) replacing, adding, or doing work as necessary to bring all receptacles, switches, and other electrical devices into code compliance;

(H) installing a new main service, including conduit cables, into the building and main disconnect switch; and

(I) installing new distribution panels, including all panel wiring, terminals, circuit breakers, and all other panel devices.

(2) Heating. All heating work must comply with applicable codes; it may consist of a combination of any of the following alternatives:

(A) installing a new system to replace one of the following heat distribution systems:

(i) piping and heat radiating units, including new main line venting and radiator venting; or

(ii) duct work, diffusers, and cold air returns; or

(iii) any other type of existing heat distribution and radiation/diffusion components; or

(B) installing a new system to replace one of the following heat generating units:

(i) hot water/steam boiler;

(ii) gas furnace; or

(iii) any other type of existing heat generating unit.

(3) Plumbing. All plumbing work must comply with applicable codes. Replace all or a part of the in-wall supply and waste plumbing; however, main supply risers, waste stacks and vents, and code-conforming waste lines need not be replaced.

(4) Roofing. All roofing work must comply with applicable codes; it may consist of either of the following alternatives, separately or in combination:

(A) replacing all rotted roof decks and insulation; or

(B) replacing or repairing leaking roof membranes (10% is the suggested minimum replacement of membrane); restoration of the entire roof is an acceptable substitute for membrane replacement.

(5) Exterior doors and windows. Replace the exterior doors and windows. Renovation of ornate entry doors is an acceptable substitute for replacement.

(6) Floors, walls, and ceilings. Finishes must be replaced or covered over with new material. Acceptable replacement or covering materials are as follows:

(A) floors must have new carpeting, vinyl tile, ceramic, refurbished wood finish, or a similar substitute;

(B) walls must have new drywall, including joint taping and painting; or

(C) new ceilings must be either drywall, suspended type, or a similar system.

(7) Exterior walls.

(A) replace loose or crumbling mortar and masonry with new material;

(B) replace or paint wall siding and trim as needed;

(C) bring porches and balconies to a sound condition; or

(D) any combination of (A), (B), and (C).

(8) Elevators. Where applicable, at least 4 of the following 7 alternatives must be accomplished:

(A) replace or rebuild the machine room controls and refurbish the elevator machine (or equivalent mechanisms in the case of hydraulic elevators);

(B) replace hoistway electro-mechanical items, including: ropes, switches, limits, buffers, levelers, and deflector sheaves (or equivalent mechanisms in the case of hydraulic elevators);

(C) replace hoistway wiring;

(D) replace door operators and linkage;

(E) replace door panels at each opening;

(F) replace hall stations, car stations, and signal fixtures; or

(G) rebuild the car shell and refinish the interior.

(9) Health and safety.

(A) install or replace fire suppression systems;

(B) install or replace security systems; or

(C) environmental remediation of lead-based paint, asbestos, leaking underground storage tanks, or radon.

(10) Energy conservation improvements undertaken to limit the amount of solar energy absorbed by a building's roof or to reduce energy use for the property, including any of the following activities:

(A) installing or replacing reflective roof coatings (flat roofs);

(B) installing or replacing R-49 roof insulation;

(C) installing or replacing R-19 perimeter wall insulation;

(D) installing or replacing insulated entry doors;

(E) installing or replacing Low E, insulated windows;

(F) installing or replacing WaterSense labeled plumbing fixtures;

(G) installing or replacing 90% or better sealed combustion heating systems;

(H) installing or replacing direct exhaust hot water heaters;

(I) installing or replacing mechanical ventilation to exterior for kitchens and baths;

(J) installing or replacing Energy Star appliances;

(K) installing low VOC interior paints on interior finishes;

(L) installing or replacing Energy Star certified lighting in common areas; or

(M) installing or replacing grading and landscaping to promote on-site water retention.

(11) Accessibility improvements. All accessibility improvements must comply with applicable codes. An owner may make accessibility improvements to residential real property to increase access for people with disabilities. As used in this paragraph (11), "disability" has the meaning given to that term in the Illinois Human Rights Act. As used in this paragraph (11), "accessibility improvements" means a home modification listed under the Home Services Program administered by the Department of Human Services (Part 686 of Title 89 of the Illinois Administrative Code) including, but not limited to: installation of ramps, grab bars, or wheelchair lifts; widening doorways or hallways; re-configuring rooms and closets; and any other changes to enhance the independence of people with disabilities.

"Qualifying income-based rental subsidy program" means a Housing Choice Voucher issued by a housing authority under Section 8 of the United States Housing Act of 1937, a tenant voucher converted to a project-based voucher by a housing authority or any other program administered or funded by a housing authority, the Illinois Housing Development Authority, or another State agency, or a unit of local government where participation is limited to households with incomes at or below the maximum income limits as defined in this Section and the tenants' portion of the rent payment is based on a percentage of their income or a flat amount that does not exceed the maximum rent as defined in this Section.

"Qualifying moderate rehabilitation" means, at a minimum, compliance with local building codes and the replacement or renovation of at least 2 primary building systems. Although the cost of each primary building system may vary, to be approved for the benefit under this Section, the combined expenditure for making the building compliant with local codes and replacing primary building systems must be at least $8 per square foot for work completed between June 1, 2020 and December 31, 2020 and, in subsequent years, $8 adjusted by the Consumer Price Index for All Urban Consumers, as published annually by the U.S. Department of Labor. To be approved for the reduced valuation under paragraph (2) of subsection (e) of this Section, the combined expenditure for making the building compliant with local codes and replacing primary building systems must be at least $12.50 per square foot for work completed between January 1, 2020 and December 31, 2020 and in subsequent years, $12.50 adjusted by the Consumer Price Index for All Urban Consumers, as published annually by the U.S. Department of Labor.

"Qualifying substantial rehabilitation" means, at a minimum, compliance with local building codes and the replacement or renovation of at least 4 primary building systems. Although the cost of each primary building system may vary, to be approved for the benefit under this Section, the combined expenditure for making the building compliant with local codes and replacing primary building systems must be at least $20 per square foot for work completed between June 1, 2020 and December 31, 2020 and, in subsequent years, $20 adjusted by the Consumer Price Index for All Urban Consumers, as published annually by the U.S. Department of Labor. Any applicant who has purchased the property in an arm's length transaction not more than 90 days before applying for this benefit may use the cost of rehabilitation or repairs required by documented code violations, up to a maximum of $2 per square foot, to meet the qualifying substantial rehabilitation requirements.

Section 99. Effective date. This Act takes effect upon becoming law.