HB 1042 — Affordable Housing Exemption Modifications.

GENERAL ASSEMBLY OF NORTH CAROLINA SESSION 2025 H 21 HOUSE BILL 1042 Committee Substitute Favorable 5/12/26 Short Title:

Representatives Paré, Howard, Setzer, and Schietzelt (Primary Sponsors).

For a complete list of sponsors, refer to the North Carolina General Assembly web site.

Finance, if favorable, Rules, Calendar, and Operations of the House April 27, 2026 A BILL TO BE ENTITLED AN ACT TO UPDATE AND MODIFY THE NONPROFIT LOW- OR MODERATE-INCOME HOUSING PROPERTY TAX EXEMPTION.

(8) A nonprofit organization providing housing for individuals or families with low or moderate incomesincomes, other than rental housing.housing, which is subject to G.S.

This105-278.7A. subdivision does not apply to rental housing, which must qualify under G.S.

105-278.7A to be eligible for an exemption.

*H1042-v-2**H1042-v-1* General Assembly Of North Carolina Session 2025 (e) Real property held by an organization described in subdivision (a)(8) for a charitable purpose under this section as a future site for housing housing, other than affordable rental housingas defined in G.S.

– Eighty percent (80%) of area median income, adjusted for family size, as set and most recently published by the U.S.

Department of Housing and Urban DevelopmentDevelopment. as of January 1 of the year the application was submitted under this section.

(8) PublicQualifying agency.unit.

– Anyof the following agencies, if overseeing a program listed in sub-subdivision b.

of subdivision (2) of subsection (c) of this section:

a.

A county government.

b.

A municipal government.

Page 2 House Bill 1042-Second Edition General Assembly Of North Carolina Session 2025 c.

A housing authority.

d.

A State agency or department.

e.

A federal agency or department.

(9) Qualifying unit.

Page 2 House Bill 1042-First Edition General Assembly Of North Carolina Session 2025 b.

(10)(9) Rent limit.

Such government support must require the execution of a deed restriction or an enforceable, verifiable regulatory agreement with a public agency requiring that the property be operated as affordable rental housing in accordance with this section for a period of at least 15 years from the date the financing or financial assistance was initially provided.

IfGovernment thesupportdoesnotincludepaymentsmadetotheownerunderthefederal publicHousing agencyChoice isVoucher aProgram municipal government, a housing authority, or aother countygovernment,local, thedeedrestrictionsState, or regulatoryagreementfederal shallvoucher beprogram. recorded with the register of deeds for each county in which the property is located.

The rights of a public agency under the deed restrictions or regulatory agreement shall endure for the full term of the agreement and are not defeasible without the written agreement of the public agency.

Government support does not include payments made to the owner under the federal Housing Choice Voucher Program or other local, State, or federal voucher program.

House Bill 1042-Second Edition Page 3 General Assembly Of North Carolina Session 2025 (1) The property is one hundred percent (100%) owned and operated by an eligible nonprofit corporation that has owned and operated affordable rental housing for at least five years.

For purposes of this subdivision, the term "one hundred percent (100%) owned" means (i) the eligible nonprofit corporation is the sole record owner of the property or (ii) if title to the property is held by a single-purpose entity, the eligible nonprofit corporation, either directly or through one or more wholly owned disregarded entities, owns one hundred percent (100%) of the legal and equitable ownership interest in the title-holding entity, and no other person or entity holds any membership interest, partnership interest, shareholder interest, economic interest, profits interest, capital interest, beneficial interest, or other direct or indirect ownership interest in that entity.

The House Bill 1042-First Edition Page 3 General Assembly Of North Carolina Session 2025 restriction must require that the owner provide the reporting required under subsection (g) of this section annually to all grantees for the term of the deed restriction.

A transition period of one taxable year applies to improved and occupied rental housing property purchased by an eligible owner for which the eligible owner cannot provide the total household income for each qualifying unit at the time of application but that otherwise meets the requirements of this section.

During the transition period, a "qualifying unit" is an affordable rental housing unit for which the rent charged is at or below the rent limit for purposes of determining the exemption amount.

Page 4 House Bill 1042-Second Edition General Assembly Of North Carolina Session 2025 2.

– PursuantAn eligible owner that has been granted an exemption under this section must, on an annual basis by January 31 following the initial exemption, certify that it remains in compliance with this section and provide to G.S.the taxing unit the items listed in subdivision (3) of subsection (f) of this section, as of the previous December 31, including any supporting documentation required by the taxing unit.

105-282.1,Failure anto eligiblemeet ownerthese mustrequirements resubmitwithin anthe applicationtime annuallylimits withsubjects the informationproperty set forth in subsection (f) of this section to maintaindiscovery eligibility.under G.S.

For105-312. the first year that verified income eligibility is required, such household income verification shall have occurred within the previous year.

AfterFor thepurposes initialof householdsatisfying incomethis verification,requirement, the household income provided for each qualifying unit must be verified at least every two years.years following initial verification of the tenant's income.