MS 2025-02-P-Watkins-and-D-ODonnell-February-19-2025-Tax-Assessment-of-Affordable-Housing February 19, 2025

Can a Mississippi county tax assessor use the affordable housing appraisal method on a property qualified under a city's local affordable housing ordinance alone?

Short answer: Maybe. Section 27-35-50(4)(d) applies only if a development meets the statutory definition of 'affordable rental housing' (income-and-rent restricted under federal programs or a similar program). Whether the City of Oxford's affordable housing ordinance counts as a 'similar program' is a fact question the AG will not decide; it depends on whether the ordinance restricts both occupancy and maximum rental rates based on resident income.

Disclaimer: This is an official Mississippi Attorney General opinion. AG opinions are persuasive authority but not binding precedent. This summary is for informational purposes only and is not legal advice. Consult a licensed Mississippi attorney for advice on your specific situation.

About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official AG opinion. The original opinion (linked at the bottom of this page, or PDF in the sidebar) is the authoritative source for any reliance.

View original AG opinion (PDF)

Plain-English summary

Oxford adopted an Affordable Housing Ordinance offering developers incentives (waivers or reductions of development fees, bonding, tree mitigation, stormwater requirements) for residential projects that reserve at least 10% of units for households below 80% of area median income (AMI) for at least 15 years. Oxford and Lafayette County wanted to know whether the county tax assessor could apply the favorable appraisal procedure in Section 27-35-50(4)(d) to those qualifying developments, even when the developments are not enrolled in any of the federal affordable housing programs the statute lists.

The AG declined to give a yes-or-no answer. Section 27-35-50(4)(d) prescribes a special appraisal: net operating income capitalized at a market cap rate, adjusted for the income-restriction effect on cash flow. But that procedure applies only if the development meets the statutory definition of "affordable rental housing" in Section 27-35-50(4)(d)(i). The definition lists Section 42 LIHTC projects, HOME Program projects, and FHLB Affordable Housing Program projects, plus a catch-all for "any other federal, state or similar program intended to provide affordable housing to persons of low or moderate income" where occupancy and maximum rental rates are restricted based on resident income.

Whether Oxford's ordinance qualifies as a "similar program" is a fact question. The AG explicitly noted it cannot interpret municipal ordinances or federal law (citing Section 7-5-25 and prior opinions). The AG did sketch the test: if (1) the city's ordinance is a similar program intended to provide affordable housing to low- or moderate-income persons, and (2) occupancy and maximum rental rates of the subject housing are restricted based on resident income, the assessor may apply the appraisal procedure. The county and assessor have to make those factual determinations.

What this means for you

For county tax assessors

Before applying the Section 27-35-50(4)(d) appraisal procedure to a property that is not enrolled in a named federal program, document the factual basis. Get the recorded covenant or land-use regulation that ties the property's occupancy and rent to resident income. Confirm that both restrictions exist (occupancy plus maximum rent), not just one. If you only see an occupancy restriction with no rent cap tied to income, the property likely does not meet the statutory definition.

For city councils designing local affordable housing ordinances

If you want your local incentive program to also unlock the favorable property tax appraisal, draft the ordinance to include both an occupancy restriction tied to resident income and a maximum rental rate restriction tied to resident income. The Oxford ordinance described in the request restricts which units count as "affordable" but the AG's analysis hinges on whether the rental-rate cap is income-keyed. A flat-rate cap that is not income-indexed may not satisfy the statute.

For affordable housing developers

The favorable appraisal can materially reduce property tax exposure on a qualifying development. If your project is enrolled in LIHTC, HOME, or FHLB Affordable Housing Program, the path is clear. If you are relying on a municipal affordable housing ordinance instead, plan ahead: get a written opinion from the assessor (or, if needed, escalate to the State Tax Commission) before underwriting your pro forma on the favorable appraisal. The AG will not bind the assessor, and reversal at appraisal time can blow up your numbers.

For municipal attorneys and housing advocates

This opinion leaves unresolved how a municipal ordinance qualifies as a "similar program" under Section 27-35-50(4)(d)(i). Push for clarity. Options include: (a) drafting the ordinance to mirror the structural features the AG flagged (income-restricted occupancy plus income-keyed rent caps), (b) seeking guidance from the Department of Revenue on its appraisal manual treatment, or (c) seeking a legislative clarification. Without one of those, assessors will treat applications case-by-case, and projects will face inconsistent tax outcomes across counties.

Common questions

What is the practical difference between regular appraisal and the Section 27-35-50(4)(d) procedure?
Regular appraisal looks at market value as if the property were unrestricted (often using sales comparison or replacement cost). The affordable-housing procedure capitalizes the actual net operating income at a market cap rate, then adjusts for the cash-flow drag of recorded land-use restrictions. For income-restricted properties, the second method usually produces a lower assessed value, because the restrictions cap rent below market.

Does enrollment in LIHTC automatically qualify?
Section 42 LIHTC projects are explicitly named in Section 27-35-50(4)(d)(i). If the project is in compliance with Section 42 and has the recorded extended low-income housing agreement, the procedure applies.

Does the 10% set-aside in Oxford's ordinance count?
The AG would not say. The opinion identifies the analytical structure (income-keyed occupancy cap plus income-keyed rent cap) and leaves the application to the assessor and county.

What is a "land use regulation" under the statute?
Section 27-35-50(4)(d)(ii) defines it as a restriction "imposed by an extended low-income housing agreement or other covenant recorded in the applicable land records or by applicable law or regulation restricting the maximum income of residents and/or the maximum rental rate" in the affordable rental housing.

Can a developer challenge an assessor who refuses to apply the procedure?
Yes, through the standard property tax appeal process: county board of supervisors as the board of equalization, then chancery court appeal. Document the program structure and rent-cap mechanism in detail.

Background and statutory framework

Section 27-35-50(4)(d) sets a special appraisal method for "affordable rental housing":

In arriving at the true value of affordable rental housing, the assessor shall use the appraisal procedure set forth in land appraisal manuals of the Department of Revenue. Such procedure shall prescribe that the appraisal shall be made according to actual net operating income attributable to the property, capitalized at a market value capitalization rate prescribed by the Department of Revenue that reflects the prevailing cost of capital for commercial real estate in the geographical market in which the affordable rental housing is located adjusted for the enhanced risk that any recorded land use regulation places on the net operating income from the property.

Section 27-35-50(4)(d)(i) defines "affordable rental housing" as:

residential housing consisting of one or more rental units, the construction and/or rental of which is subject to Section 42 of the Internal Revenue Code (26 USC 42), the Home Investment Partnership Program under the Cranston-Gonzalez National Affordable Housing Act (42 USC 12741 et seq.), the Federal Home Loan Banks Affordable Housing Program established pursuant to the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA) of 1989 (Public Law 101-73), or any other federal, state or similar program intended to provide affordable housing to persons of low or moderate income and the occupancy and maximum rental rates of such housing are restricted based on the income of the persons occupying such housing.

Section 27-35-50(4)(d)(ii) defines "land use regulation" as a restriction recorded in the land records or imposed by law that caps the maximum income of residents or the maximum rental rate.

The AG's office cannot interpret municipal ordinances or federal law. Under Section 7-5-25, AG opinions address only prospective questions of state law. Whether Oxford's ordinance is a "similar program" within the catch-all is a factual determination for the county; whether the program restricts occupancy and rent based on income is also a question of fact.

Citations

Miss. Code Ann. § 27-35-50(4)(d) (affordable rental housing appraisal procedure)
Miss. Code Ann. § 27-35-50(4)(d)(i) (definition of affordable rental housing)
Miss. Code Ann. § 27-35-50(4)(d)(ii) (definition of land use regulation)
Miss. Code Ann. § 7-5-25 (scope of AG opinions)
26 USC § 42 (Low-Income Housing Tax Credit, federal)
42 USC § 12741 et seq. (HOME Investment Partnership Program, Cranston-Gonzalez)
Pub. L. 101-73 (FIRREA, FHLB Affordable Housing Program authority)
MS AG Op., Tullos (Aug. 27, 2018) (AG cannot interpret municipal ordinances)
MS AG Op., Snell (Mar. 16, 2018) (AG cannot interpret federal law)

Source

Original opinion text

February 19, 2025

Paul B. Watkins, Esq.
Attorney, City of Oxford

David D. O'Donnell, Esq.
Attorney, Lafayette County

2094 Old Taylor Road, Suite 200
Oxford, Mississippi 38655

Re: Tax Assessment of Affordable Housing

Dear Mr. Watkins and Mr. O'Donnell:

The Office of the Attorney General has received your request for an official opinion.

Background

According to your request, Oxford (the "City") has adopted an Affordable Housing Ordinance that makes certain incentives available to developers of affordable housing developments. The ordinance defines "affordable housing" as "housing, available either for rent or purchase, that is affordable to those with household incomes below 80 percent of the standard area median income ('AMI') as defined by the most current AMI schedule published by the U.S. Department of Housing and Urban Development" and "affordable housing development" as a residential development that guarantees "at least ten percent of its dwelling units will be available as affordable housing for at least 15 years." Qualified developments may apply to the City's governing authorities for waivers or reductions of development fees, site restoration bonding, tree mitigation requirements, and stormwater management requirements. The City believes its Affordable Housing Ordinance qualifies as a "similar program," as referenced in Mississippi Code Annotated Section 27-35-50(4)(d), because it is intended to increase the supply of affordable housing within the City and because it restricts the occupancy and rental rates of affordable units.

Question Presented

May the county tax assessor apply the appraisal procedure described in Section 27-35-50(4)(d) to a residential development that qualifies as an "affordable housing development" under the City's Affordable Housing Ordinance, regardless of whether the development is subject to any other housing program listed or described in that statute?

Brief Response

To apply the appraisal procedure set forth in Section 27-35-50(4)(d), a residential development must meet the definition of "affordable rental housing" as set forth in Section 27-35-50(4)(d)(i). Whether a residential development that qualifies as an "affordable housing development" under the City's Affordable Housing Ordinance would be considered "affordable rental housing" as set forth in Section 27-35-50(4)(d)(i) is a question of fact upon which this office may not opine.

Applicable Law and Discussion

We first note that this office may not interpret municipal ordinances or federal law. See MS AG Op., Tullos at 1 (Aug. 27, 2018); MS AG Op., Snell at 2 (Mar. 16, 2018).

Section 27-35-50(4)(d) provides in part:

In arriving at the true value of affordable rental housing, the assessor shall use the appraisal procedure set forth in land appraisal manuals of the Department of Revenue. Such procedure shall prescribe that the appraisal shall be made according to actual net operating income attributable to the property, capitalized at a market value capitalization rate prescribed by the Department of Revenue that reflects the prevailing cost of capital for commercial real estate in the geographical market in which the affordable rental housing is located adjusted for the enhanced risk that any recorded land use regulation places on the net operating income from the property. . . . As used in this paragraph:

(i) "Affordable rental housing" means residential housing consisting of one or more rental units, the construction and/or rental of which is subject to Section 42 of the Internal Revenue Code (26 USC 42), the Home Investment Partnership Program under the Cranston-Gonzalez National Affordable Housing Act (42 USC 12741 et seq.), the Federal Home Loan Banks Affordable Housing Program established pursuant to the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA) of 1989 (Public Law 101-73), or any other federal, state or similar program intended to provide affordable housing to persons of low or moderate income and the occupancy and maximum rental rates of such housing are restricted based on the income of the persons occupying such housing.

(ii) "Land use regulation" means a restriction imposed by an extended low-income housing agreement or other covenant recorded in the applicable land records or by applicable law or regulation restricting the maximum income of residents and/or the maximum rental rate in the affordable rental housing.

(emphasis added).

In sum, to apply the appraisal procedure set forth in Section 27-35-50(4)(d), a residential development must meet the definition of "affordable rental housing" as set forth in Section 27-35-50(4)(d)(i).

You ask if the county tax assessor may apply the appraisal procedure described in Section 27-35-50(4)(d) to a residential development that qualifies as an "affordable housing development" under the City's Affordable Housing Ordinance, regardless of whether the development is subject to any other housing program listed or described in that statute. Pursuant to Section 7-5-25, this office may only opine upon matters of state law. Whether a residential development that qualifies as an "affordable housing development" under the City's Affordable Housing Ordinance would be considered "affordable rental housing" as set forth in Section 27-35-50(4)(d)(i) is a question of fact upon which this office may not opine. However, if the determination is made that (1) the City's Affordable Housing Ordinance is a "similar program [to those listed] intended to provide affordable housing to persons of low or moderate income," and (2) "the occupancy and maximum rental rates of [the subject] housing are restricted based on the income of the persons occupying such housing," then the county tax assessor may apply the appraisal procedure described in Section 27-35-50(4)(d) to the subject residential development.

If this office may be of any further assistance to you, please do not hesitate to contact us.

Sincerely,
LYNN FITCH, ATTORNEY GENERAL
By: /s/ Maggie Kate Bobo
Maggie Kate Bobo
Special Assistant Attorney General