California law opens the charity property tax exemption to new moderate-income rentals in three counties
Assembly Bill 1294, approved Sept. 29 and in effect at once, lets nonprofit owners of rental housing built or converted from 2027 through 2029 in Alameda, Sacramento and San Francisco counties exempt the units they keep for moderate-income tenants, for 15 years.
Sacramento. Nonprofits building rental housing in Alameda, Sacramento and San Francisco counties can now claim California's welfare exemption from property tax for apartments kept for moderate-income tenants, not only for lower-income ones. The change comes from Assembly Bill 1294, a law that took effect Sept. 29, when Gov. Gavin Newsom approved it.
The bill, by Assemblymember Matt Haney, a San Francisco Democrat, became Chapter 778 of the Statutes of 2026 the same day and, as a tax levy, took effect at once. San Francisco Mayor Daniel Lurie sponsored it, the Senate floor analysis says.
Who qualifies
The welfare exemption covers property used for religious, hospital, scientific or charitable purposes and owned and operated by qualifying nonprofits. Its general rule for rental housing has covered only the share of units serving lower-income households. The new law adds a partial exemption equal to the value of the units serving low- and moderate-income households, which Mr. Haney describes as households earning up to 120 percent of area median income.
It applies only where units are newly built, or converted from commercial use, on or after Jan. 1, 2027, and before Jan. 1, 2030, in the three counties. Limited partnerships whose managing general partner is an eligible nonprofit, and veterans organizations, can also qualify. Each exemption lasts 15 consecutive lien dates.
The owner must certify a recorded deed restriction, an agreement with a public agency or another legal document keeping the units for low- and moderate-income households for at least 55 years. The first rent must be below the federal Small Area Fair Market Rent for the ZIP code, and while the same household stays, increases may not exceed the rise in the county's area median income. A tenant whose income grows to 140 percent of that median still counts, and the tax saved must go to keeping the units affordable.
Support, opposition and cost
The Senate passed the bill 28 to 8 on Aug. 26, and the Assembly agreed to the Senate's version 64 to 5 on Aug. 31. SPUR, the Bay Area planning group, supported it. The Sacramento County assessor, the California Assessors' Association and the California Association of Realtors opposed it. The assessor warned that "newly constructed" is left undefined and could reach renovations; the Realtors said moderate-income housing already has other incentives.
The State Board of Equalization estimated that the exemption would cut property tax revenue by $18 million to $26 million a year, according to the Senate Appropriations Committee. The board must collect figures from county assessors and report to the Legislature by Jan. 1, 2033.
“While we have programs that support low-income housing, we continue to underbuild housing for middle-income residents who earn too much to qualify for affordable housing but cannot afford market-rate rents.”
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