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Real Estate Tax Relief Working GroupProgram Alternatives RecommendationsJanuary 8, 2017PRIORITY RECOMMENDATIONSThe following recommendations constitute the Working Group’s priorities and are recommended for near-term for consideration by the County Board. By implementing these recommendations, the key challenges of the Real Estate Tax Relief Program—the application process and outreach, eligibility criteria, and program alternatives—will be addressed.ChallengeRecommendationAdditional InformationApplication Process(#1) Explore utilizing the Board of Equalization, the County’s Resident Ombudsman, or a newly-established Advisory Group to perform several key functions for RETR applicants or program participants.The Board of Equalization/Resident Ombudsman/Advisory Group will: examine hardship cases;provide appeals oversight; consider allowing for extension of deferral when house is transferred to family member(s) living in the house, if necessary;provide a liaison between applicants and the county government when necessary; andparticipate in RETR program reviews as needed.Program Structure(#2) Limit the amount of home value that is eligible for exemption to the median assessed home value or a multiplier of the median assessed home value within Arlington Co.Limiting the amount of home value that is eligible for exemption will:ensure the RETR program’s exemption benefits are provided to homeowners most in need; andallow participants to defer taxes on the value of their home above the median assessed home value (or selected multiplier of the median assessed home value). Other(#3) Designate revenue received through the RETR program (deferral repayments) to support housing opportunities for older residents and residents with disabilities.In addition to assisting older residents to age in place in their current homes, another key recommendation of the Affordable Housing Master Plan (Objective 2.4) is to enable Arlington residents to age “in their communities.” To meet this objective, the RETR Working Group recommends that revenue received by the County through the deferral process should be specifically allocated for housing programs that serve both older residents and residents with disabilities.Program Structure, Income Limits(#4) Establish an additional exemption level for program participants, and make several changes to income eligibility criteria.Arlington has three levels of exemptions: 25%, 50%, and 100%. Some neighboring jurisdictions have four levels of exemptions, which help to lessen the effect of the “notch problem,” in which a small increase in income could potentially cost a household much more in lost real estate tax relief. The Working Group recommends that Arlington County:expand the number of exemption levels to four, to include 25%, 50%, 75%, and 100% exemptions;change the income limits for each exemption level to be more in line with other jurisdictions, and to help ensure that benefits are provided to homeowners most in need. See below chart:Adjusted Income Level Per HouseholdPercent of ExemptionMore than $72,0000%$64,001 to $72,00025%$56,001 to $64,00050%$48,001 to $56,00075%$0 to $48,000100%use one income limit for each exemption level, as is done in all neighboring jurisdictions, rather than establishing different income limits for different household sizes; and ensure that income levels are reviewed and adjusted annually, in accordance with applicable state and local codes.Income Limits, Asset Limits(#5) Use the following eligibility criteria when determining eligibility for the RETR program:“combined adjusted income” (rather than the current “combined gross income”); and “adjusted assets” (rather than the current “combined assets”).To align with nearby jurisdictions and to consider a variety of households’ circumstances, the Working Group recommends incorporating the following into the program’s eligibility criteria:Combined Adjusted Income to include (1) the total income of all owners and owners’ spouses; (2) the income of non-spouse relatives living in the household minus the first $10,000 of their incomes; and (3) a deduction for owners (and sometimes spouses) who have disabilities.Adjusted Assets to include the total assets of the owners and owners’ spouses (not owners’ non-spouse relatives) minus any approved deductions (liabilities/debts), such as notes payable, accounts payable (to include outstanding medical bills that must be paid out-of-pocket, and emergency home repairs exceeding $1,000), credit cards, personal loans, state or federal taxes due, real estate mortgages (other than the house for which the applicant is seeking relief), and other non-luxury debts. After the approved deductions are subtracted from the gross assets of the owner and spouse, the resulting adjusted assets (net worth) cannot exceed $340,000 to participate in the program. Program Management(#6) Include questions related to the RETR program in the regular Resident Satisfaction Survey, and/or some other countywide feedback mechanism.Integrating the RETR program into a regular county satisfaction survey and/or other feedback mechanism would provide the general public (including potential RETR participants) with insight and raise awareness about the program. These mechanisms could also serve to collect feedback from current program participants.Unintended/Unanticipated Consequences of Deferrals(#7) Create a Task Force to investigate and address mortgage lenders’ opposition to the deferral portion of the RETR program. The unintended and unanticipated consequences of the use of deferrals to deliver tax relief are known to potentially impact both mortgaged homes and those covered by reverse mortgages. Mortgage lenders may refuse to accept real estate tax deferrals for properties with an outstanding mortgage balance, as many lenders view the deferral as a threat to their first lien rights to, as well as their equity in, the property. First-hand accounts suggest that at least some mortgage lenders servicing homeowners in Arlington deny real estate tax deferrals on the grounds that they are a violation of the Deed of Trust’s requirement to keep all taxes current, leaving older homeowners and homeowners with disabilities who wish to defer their real estate taxes without an alternative option for relief. Federal statute denies reverse mortgage homeowners the option to defer. In some instances, this may even impact program participants’ credit rating and financial access to home equity, and lead to threatened or actual foreclosure.While the number of homeowners participating in the RETR program who also have a mortgage is currently unknown, 2010-2012 American Community Survey data indicate that approximately 45% of Arlington homeowners age 65 or older have a mortgage. Given this high percentage, and in light of other recommendations that may increase the number of homeowners pursuing a deferral, the Working Group recommends that the County create a Task Force to investigate and address local mortgage lenders’ opposition to deferrals, so that deferrals are a viable option for all qualified homeowners wishing to pursue them. Questions for consideration include: What can the County do in order to forestall, protect, and redress these unintended and unanticipated consequences? What can the County learn from other jurisdictions, and networks of Elder Care lawyers, County, and State Attorneys? What changes to local and state code need to be made in order to adequately protect homeowners?MID-TERM RECOMMENDATIONSThe following recommendations are for mid-term consideration by the County Board. These recommendations, building on the outcomes of the priority recommendations listed previously, would continue to address the key elements of the Real Estate Tax Relief Program, including the application process and outreach, eligibility criteria, and program alternatives.ChallengeRecommendationAdditional InformationOther(#8) Explore options for expanding the dedicated funding stream for development and services associated with housing for seniors and persons with disabilities.Senior housing remains a priority within Arlington County. A key recommendation of the Affordable Housing Master Plan (Objective 2.4) is to enable Arlington residents “to age…in their communities.” To meet this Objective, as stated in Recommendation #3, the RETR Task Force recommends that revenue received by the County through the deferral process should be specifically allocated for senior housing programs. Additionally, the County would:work with non-profit housing developers to identify opportunities to improve affordable housing for seniors and persons with disabilities in Arlington; andfocus on older renters and renters with disabilities who are at 40-80% of Area Median Income.Other(#9) Explore options to provide real estate tax credits to owners of rental dwellings that provide reduced rent to older renters and renters with disabilities.A well-implemented tax credit program would:ensure that older renters and renters with disabilities can continue to live in Arlington County; andbenefit owners of rental dwellings and encourage them to rent to older renters and renters with disabilities.Program Management(#10) Evaluate whether the Department of Human Services or the Commissioner of Revenue should oversee the RETR program.While this is a key point of discussion within the Arlington County Government, the RETR Working Group has not heard a definitive argument for why the program should be moved from its current location in DHS to the Commissioner of Revenue’s office. The implementation of the priority recommendations will allow for additional consideration of this key programmatic question.Other(#11) Recommend that the County staff review options related to the U.S. Department of Housing and Urban Development’s reverse mortgage option, which is known as a Home Equity Conversion Mortgage (HECM) and is only available through a Federal Housing Administration (FHA) lender. Arlington County could play a more educational/vetting role in Arlington’s reverse mortgage industry so it is a safe and viable option for homeowners interested in pursuing that option.LONG-TERM RECOMMENDATIONSThe following recommendations are for long-term (5-10 years) consideration by the County Board. These recommendations, building on the outcomes of the priority and mid-term recommendations listed previously, would continue to address the key elements of the Real Estate Tax Relief Program, including the application process and outreach, eligibility criteria, and program alternatives.ChallengeRecommendationAdditional InformationOther(#12) Conduct an extensive review and reevaluation of the RETR program. To determine the quantitative and qualitative return on investment associated with the RETR Program, the County should:initiate and evaluate a comprehensive study of the RETR Program.In addition, this review or other periodic reviews could:explore options for revising the eligibility categories, both with regard to income and adjusted asset levels (net worth) (ongoing);review the median assessed home value multiplier to ensure that the RETR program is targeting the neediest homeowners; andevaluate the location of the program within the Arlington County Government (DHS or Commissioner of Revenue).Other(#13) Explore ways to enable seniors to age in the community in multi-age multi-unit developments with accessibility. Recent studies have documented the benefits of multi-generational housing. Such a program could include partnerships with local colleges and universities (including George Mason Law School and Marymount University) to provide students and older Arlington residents the opportunity to live in multi-generational developments, achieving both companionship and reduced housing costs.Program Structure(#14) Explore the feasibility, cost, and benefits of establishing separate real estate tax classes specifically for older homeowners and homeowners with disabilities in lieu of the RETR program,?similar to the system of tax classes for business taxes.Establishing separate real estate tax classes specifically for older homeowners and homeowners with disabilities could provide Arlington County with greater flexibility around how the real estate tax relief benefit is offered to participants. As is offered in other states, possibilities include:freezing a homeowner’s real estate tax bill when the homeowner becomes eligible for the benefit; limiting a homeowner’s real estate tax liability to a certain percentage of their income; and/orrequiring a certain term of residency in order to qualify for admission into the real estate classes. ................
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