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Washington DC. Property Tax Updates

Updated december 2019

Capitalization Rates for Low Income Housing Tax Credit Properties

Beginning this past year, the District of Columbia’s Office of Tax & Revenue began adding 15 basis points to the capitalization rates for Low-Income Housing Tax Credit (“LIHTC”) apartment buildings. Although we view the 15 basis point increase as insufficient, we have argued for years that the District should make an adjustment to its base capitalization rates, which are used on market-rate apartment buildings, when valuing LIHTC properties. LIHTC properties are unique because of the restrictions imposed on the rents, the administrative oversight and regulation of the properties, and the fact that they tend to have higher operating expenses than market rate apartments.  Additionally, LIHTC properties have rarely sold in the District and deriving a capitalization rate for LIHTC properties based on the sale of market-rate apartment is improper because it fails to account for the risk associated with operating a LIHTC property.  We plan to continue to press the District’s assessors to correctly value LIHTC properties instead of treating them like market rate apartment buildings.

Jonathan L. Cloar, Esq.
Wilkes Artis, Chartered
American Property Tax Counsel (APTC)

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