Tennessee Senate Bill SB0539

Tennessee 2025-2026 Regular Session

• Introduced: 1/30/25
• Engrossed: 4/22/26
• Enrolled: 4/29/26
• Passed: 5/22/26
• Chaptered: 5/27/26

Caption

AN ACT to amend Tennessee Code Annotated, Title 7; Title 13; Title 48; Title 49; Title 67 and Title 68, relative to low-income housing.

Summary

SB0539 creates a new property tax assessment method for multi-unit rental housing that is subject to government restrictions on use, such as affordable housing developments receiving low-income housing tax credits, subsidized financing, rent subsidies, grants, guarantees, or payments in lieu of taxes. For qualifying properties, assessors must value the property using an income-based approach that reflects actual income, stabilized operating expenses, and a capitalization rate tied to the risks and market conditions of restricted housing. The bill also requires that low-income housing tax credits themselves not be counted in determining value. The bill sets detailed rules for how the capitalization rate is to be determined, including a required range above national multifamily capitalization rates and consultation with the Tennessee Housing Development Agency. Beginning with tax year 2026, the Division of Property Assessments must publish the applicable capitalization rate range on its website. The act also requires property owners to notify assessors when a property becomes or stops being subject to use restrictions, or when foreclosure is filed, and to provide information needed for the special assessment method. Failure to notify can make the owner liable for delinquent taxes, interest, and penalties. The law applies only in cities or counties that opt in by ordinance or resolution, and it generally applies to residential projects developed on or after July 1, 2026.

Impact

The bill amends Tennessee property tax law in Title 67 by adding a new section governing the assessment of restricted multi-unit rental housing. It creates a local-option framework for counties and cities to adopt, changes how assessors value qualifying affordable housing properties, and directs state agencies to publish guidance and forms. It also defines key terms such as government restriction on use, low-income, and multi-unit rental housing, while excluding assisted living facilities and most duplexes or single-family units unless part of a larger qualifying project.

Sentiment

The bill appears to have received generally favorable support, especially on the Senate floor, where it passed overwhelmingly after amendment. The committee vote was closer, suggesting some reservations about the policy or its implementation, but the final floor votes indicate broad agreement on the need to address how restricted affordable housing is assessed for property tax purposes. The absence of transcript discussion limits insight into specific arguments, but the voting pattern suggests the measure was ultimately viewed as a technical but important housing-tax adjustment.

Contention

The main points of contention likely centered on how to value subsidized housing fairly without overstating its market value, and on the complexity of the required appraisal methodology. The bill’s use of a prescribed capitalization-rate range, reliance on national survey data, and consultation with the Tennessee Housing Development Agency may have raised concerns among assessors or local governments about administrative burden and valuation discretion. Another possible point of debate is the local-option structure, which means the bill does not apply statewide unless a city or county adopts it, potentially creating uneven treatment across jurisdictions.