Valuation models for low-income housing: How does income approach reduce ambiguity of assessing property tax?
Property tax valuation and assessment for low-income housingremain a challenge for real estate assessors, developers, property managers, andlocal governments. This paper reported the research findings on the use of valuationmethods for real estate tax abatement in low-income properties gathered fromreal data. Based on data from income statements and balance sheets of client’sproperties, valuation models for low-income housing versus market-price housingwere proposed and the major variances were compared. From the examination ofthe major valuation methods used by states and localities, evidence was found toexplain 1) How the fair market value method failed to apply to the tax assessmentin Massachusetts that requires market-price value for property assessment purpose,and 2) why the income approach is pre-ferred in the asset valuation of low incomehousing. The findings showed the effectiveness of income approach in the absenceof statutory mandates in the State of Massachusetts where a disparate body ofcase law is used. The paper shined light on valuing real estate encumbered withrestrictions for assessment purposes, especially for properties vulnerable to changes in property taxes. It further suggested the need for a legislative resolution for clarity and consistency in valuation of low income housing.
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