Overview

The Low-Income Housing Property Tax Exemption Program helps low-income individuals by providing a property tax exemption for housing owned by charitable and nonprofit organizations. This program is authorized by the Oregon legislature and is available for qualifying properties located in Salem. It aims to support individuals earning 60 percent or less of the area median income. The specific rules for this program are outlined in the Salem Revised Code Sec. 2.850 to 2.910.

Importance of the Program

This program is important because it helps ensure that low-income individuals have access to affordable housing. By offering tax exemptions to nonprofit organizations, the City of Salem encourages the development and maintenance of housing for those in need. This support is crucial for creating a community where everyone has a safe and stable place to live. 

Application Guidelines

Eligibility Requirements

Charitable and nonprofit organizations that provide housing to low-income individuals can apply for this program. To qualify, the organization must be certified by the Internal Revenue Service as a 501(c)(3) or 501(c)(4). 

Organizations must own or have a leasehold interest in the property. A nonprofit organization can also qualify if it is the general partner in a limited partnership that owns the property, as long as the nonprofit is responsible for managing the property. In this case, the limited partnership must be listed as the owner. 

Occupancy Requirements

The property must show that it will be occupied during the eligible tax year by households that meet the income requirements. Vacant land intended for low-income housing development is also eligible for this exemption, with a maximum exemption period of three years. 

Leaseholder Requirements

Applicants who are leaseholders must have a signed lease agreement by the application deadline. Applications for new exemptions and renewals of existing exemptions must be submitted each year. Renewal applications for properties that have previously received tax exemptions will be evaluated based on the same criteria used for the original exemption. 

Ownership Changes

The application for tax exemption is for property that is owned or leased from July 1 through June 30 of the year for which the exemption is requested. If the property changes ownership during this period, the applicant must inform the City of Salem to evaluate the property's continued eligibility. 

Property Eligibility

Only the residential portion of properties used to house low-income individuals or properties held for future low-income housing development can qualify for the exemption. For example, commercial spaces in mixed-use buildings are not eligible. 

Residential properties may qualify for a complete exemption if governing bodies and service districts representing 51 percent of the taxes levied on the property agree to the exemption. The City requires an annual capital reserve contribution of $450 per unit per year for the length of the exemption. The maximum exemption is 10 years.

Subcontractor Transparency

Contractors must submit documentation for transparency compliance when paying for permits, as required by the City Council's motion of July 8, 2024. To ensure transparency, documentation must identify each contractor, subcontractor and sole proprietorship working on projects that have received Low-Income Housing Property Tax Exemption (LIHTEP), Multi-Unit Housing Tax Incentive Programs (MUHTIP), or Urban Renewal Area (URA) grants. This documentation must be filed with the City when obtaining building permits. The Subcontractor Transparency Form must be displayed at the job site and kept updated until the project is complete. 

Subcontractor Transparency Form

City of Salem FY2027 Fee Schedule