Tennessee House OKs local option to cut property tax on federally subsidized low‑income housing

The Tennessee House on April 22 passed Senate Bill 539, a measure giving local governments the option to exclude from property assessments the value created by federal low‑income housing tax credits, supporters said would encourage affordable housing projects in rural communities.

Championing the measure, Chairman Fasen said the bill is permissive and intended to expand development beyond the state’s largest urban markets. “If we give the local government the option of opting in, saying, ‘you know what, we’re not going to tax this incentive,’ I think you’re going to see that happen in rural Tennessee,” Fasen said.

Supporters said the change would work alongside existing federal Low‑Income Housing Tax Credit programs and local pilot incentives. Representative Pal argued small margins make some projects possible: “When you pencil these deals out … having this extra money can give you the leverage … to maybe choose a different area, to not concentrate it,” he said.

Opponents and some colleagues urged caution about unintended consequences. Representative Dixie, who said she would vote for the bill, warned that some developers historically concentrate subsidized projects in lower‑value neighborhoods and urged guardrails to avoid pockets of persistent poverty. Representative Butler asked how the bill would interact with limited federal tax credits and whether the measure would simply shift where projects land.

The sponsor replied the measure would not change existing pilots or federal credit allocations and described it as “another tool in the belt” for local governments that choose to use it. After debate the bill was put to a recorded vote and the clerk announced the measure had received the constitutional majority and was passed.

The House recorded no amendment changes on the floor and substituted the Senate version before passage. Next steps are routine enrollment and transmission to the governor for signature or veto.

The House’s action makes the local opt‑in available to counties and cities but does not mandate adoption; local governments would still need to adopt the option to gain the tax treatment.