Ohio Supreme Court Analyzes Low-Income Housing Tax Valuations and Clarifies Woda OpinionBy Christopher G. Hawley | June 13, 2017
The Ohio Supreme Court addressed the issue of low-income housing tax valuations in its Columbus City Schools Bd. of Edn. v. Franklin Cty. Bd. of Revision decision last month. In its opinion, the Ohio Supreme Court stated that low-income housing must be valued-based on market rent instead of actual rent paid. Id. at ¶2. Additionally, the Court clarified that government subsidies need to be removed from any such valuation. Id. In coming to its decision, the Court reversed the decision of the Board of Tax Appeals due to an erroneous interpretation of Woda Ivy Glen Ltd. Partnership v. Fayette Cty. Bd. of Revision, the applicable case law governing the issue. Id.
The owner of the low-income residential property, Network Restorations III, LLC, submitted an appraisal for its property and its valuation was appealed by the Columbus City Schools Board of Education. Id. at ¶1. The Board of Education valued the property one million dollars higher than the property owner’s valuation. Id. at ¶9-10. The Board of Tax Appeals sided with the Board of Education and valued the property at the higher appraisal. Id. at 11. The Ohio Supreme Court, however, reversed the Board of Tax Appeals decision and in doing so relied on prior case law for three standards for tax valuation: (1) market rents and expenses, rather than actual rents of the properties, should be used in any valuation; (2) government subsidies should not be taken into account such that the value of the property is increased; and (3) any cost approach to a valuation should be disfavored. Id. at ¶16-18. Additionally, the Court clarified that its Woda decision does not require an actual-rent income approach to valuation. Id. at ¶19.
Moving forward, low-income housing property owners should be sure that any appraisal of their property for tax purposes should be done using market rents and expenses, rather than actual rents paid at the property. Any attempt to value the property using actual rents paid, a cost approach, and/or including subsidies could stand in contract to this recent Ohio Supreme Court decision.