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1. How is an Affordable Dwelling Unit assessed for tax purposes?

Sales prices of affordable dwelling units are established by the Affordable Dwelling Unit Advisory Board and form the basis of the real estate assessment in the year of sale to the original purchaser. Thereafter, a Consumer Price Index factor is annually applied to the prior year value resulting in the new assessed value. Properties that are resold are assessed at their new sales price plus a daily proration from the date of sale based on a Consumer Price Index factor.

2. How is an affordable dwelling unit’s assessment affected if it is improved with a new deck, bath, addition or finished basement?

The value of upgrades necessitating a construction permit will increase the assessed value of the property. The value attributable to the alteration will be added to the assessment the following year and will vary depending on the scale and type of improvement.

3. Why is an affordable dwelling unit assessed for less than other similar homes?

Affordable dwelling units are subject to covenants which restrict refinancing and transfer of the property. One such restriction written into the deed for an affordable dwelling unit limits the sales price of the unit during a 15-year control period beginning with its initial sale to an amount established by the Affordable Dwelling Unit Advisory Board. As a result, these units that are subject to such deed restrictions have an impaired fair market value because of this contractual limitation on the sales price and potential purchaser pool and are assessed, for tax purposes, substantially lower than other similar units which do not have such restrictions.

4. How can I determine when the 15-year control period on an affordable dwelling unit expires?

Beginning in 2018, the annual “Real Estate Assessment Change Notice” will display the affordable dwelling unit 15-year control period expiration date. The control period expiration date will also be displayed on the property’s record available online at www.loudoun.gov/parceldatabase. The 15-year control period begins at the time of the unit’s initial sale and ends 15 years after the date that the deed of conveyance from the declarant (usually the builder or developer) to the first purchaser of the unit is recorded. For example, if an affordable dwelling unit was first purchased and the deed was recorded on July 1, 2003, then the 15-year control period ends on July 1, 2018.

5. How will an affordable dwelling unit be assessed after the expiration of the 15-year control period?

Beginning the year after the expiration of the 15-year control period, the property will be assessed and taxed as of January 1 based on market sales prices of similar properties within the unit’s neighborhood occurring during the reassessment review period which is generally the 12 months immediately prior to the valuation date of January 1. This change in value caused by the lifting of restrictions will result in a significant increase to the property’s assessment. Affordable dwelling unit owners are encouraged to contact their mortgage company concerning their tax escrow accounts since it may be necessary to increase their monthly payment to cover the upcoming year’s increase.

6. When will an affordable dwelling unit assessment be available after the 15-year control period ends?

Final assessed values will be available around February 1 the year following the control period expiration date. Unit owners are encouraged to review their Real Estate Assessment Change Notice which will contain the new assessed value and instructions for requesting a review of the valuation.

7. After the 15-year control period ends, Affordable Dwelling Units must share the profits upon resale with Loudoun County, does that impact the assessment?

Although owners of Affordable Dwelling Units are required to share the profits upon sale after the 15-year control period, it has no bearing on the sales price of the property or the property’s value for tax assessment purposes. Market sales prices of Affordable Dwelling Units that have sold after the expiration of the 15-year control period do not reflect any negative impact on the sales price attributed to the seller’s requirement to split profits with Loudoun County.

The Office of the Commissioner of the Revenue has a statutory responsibility to assess real property at 100% of fair market value. The monetary amount one may or may not gain from the sale of real property is not considered when estimating fair market value. This holds true regardless of whether the property is an affordable dwelling unit or not. This is analogous to the need to pay off the outstanding mortgage on a property, which also has no bearing on the property’s valuation for tax assessment purposes.

8. Where can I find out more information about Affordable Dwelling Units?

The Affordable Dwelling Unit program is administered by the Department of Family Services – Housing & Community Development. An overview of the program can be found on their website at www.loudoun.gov/housing.