Section 42 Housing
Section 42 refers to that section of the IRS tax code, which provides tax credits to investors who build affordable housing.
Investors receive a reduction in their tax liability in return for providing affordable housing to persons with fixed or lower incomes.
In return for this tax credit, investors provide important equity to insure that quality housing can be constructed with rents that remain affordable.
This program has proven to be successful nationwide and is quoted to be driving 70% of the new construction of multi-family housing nationwide.
This program is administered in Iowa by the Iowa Finance Authority. The resident who
lives in a Section 42 unit must be income eligible, however this program is not a subsidized rental program.
Section 42 Housing Assessment Procedures
Iowa Administrative Code section 701-71.5 provides for special valuation methods when assigning value to Section 42 Housing projects. This does
not affect the classification, only the valuation of the parcel. In general terms, these properties must be assessed based upon the income approach.
After a parcel is determined to be a valid Section 42 Housing Project, you can expect to receive an Income and Expense spreadsheet detailing three
years of information before March 1 each year.
- Value is based on submitted income and expense forms and guidelines
- Unless there is a dramatic change in value or some unusual circumstance (such as new construction) properties do not need to be reassessed in off years (even number years)
