A growing number of apartment complex owners in Wake County and elsewhere in North Carolina are taking advantage of a state law that grants property tax exemptions to nonprofits that provide affordable housing to low-and moderate-income residents, Wake County officials say.
In a scheme that one longtime affordable-housing developer refers to as a “rent-a-nonprofit structure,” for-profit apartment complex owners can hand over fractions of ownership to nonprofits to qualify for generous tax exemptions. The move can result in significant reductions in property tax value for cities and counties, sometimes tens of millions of dollars.
“This is a huge leak in your tax base, and the City of Raleigh’s also,” Wake County Tax Administrator Marcus Kinrade told county commissioners during a recent meeting. “Most of these things are occurring in the city, so it’s affecting them even worse than it’s affecting the county.”
Lower tax values mean less revenue for counties to fund schools, libraries, public safety and health and human services, which can force local governments to reduce services or raise taxes.
Exemptions in Wake County have nearly doubled — from 66 in 2020 to 136 in 2025, Kinrade said. The exemptions for low-and moderate-income housing account for a projected $776 million reduction in taxable property value, the equivalent of $4 million in revenue. he said.
“This is, in my opinion, the biggest threat to the revenue stream in this county that I could ever imagine,” Kinrade said.
This year, the county received about 170 applications for exemptions before the Feb. 1 deadline. The taxable value of those properties is $1.2 billion, which would result in a loss of $6.2 billion in county tax dollars, Kinrade said.
Wake County isn’t alone when it comes to losing taxable value this way. Cities and counties across the state are having billions of dollars worth of formerly taxable properties wiped from the tax rolls as a result of the “loophole” in state law.
How we got here
The law was adopted in 2010 to help increase the supply of low-and moderate-income housing by giving owners a break on property taxes. Such housing generally offers rents at or below 80% of area median income.
The loophole was created in 2013 when the NC Court of Appeals ruled that Cane Creek Village, a low-income housing project in Mitchell County owned by a for-profit limited liability company but controlled by a nonprofit, was entitled to a property tax exemption.
Northwestern Housing Enterprises, Inc., the nonprofit in that case, owned 0.1% of Blue Ridge Housing, which held the title to the property. A for-profit partnership, North Carolina Equity Fund III Limited Partnership, owned 99.9% of Blue Ridge Housing.
Although the loophole has existed since 2013, Kinrade said apartment owners began to take advantage of it in greater numbers starting in 2023 after several law firms and real estate brokers began marketing it to apartment owners.
Properties receiving exemptions are generally older apartment complexes, Kinrade said. Because of their age and condition, owners can rent them to tenants earning 80% of area median income or less, he said. Eighty percent of area median income or less is generally accepted as the standard for low-and moderate-income housing.
An analysis by Durham-based Self Help, the nonprofit developer and lender that coined the “rent-a-nonprofit” phrase, estimates that 94% of multi-family units in Wake County could eventually be exempted from property taxes because they provide rents at 80% of area median income or below, Kinrade said.
If Self Help’s analysis proves true, Kinrade said, the amount of property removed from the county’s tax base would cost $140 million in revenue.
“Just doing a little work on the ownership structure can qualify these properties for full exemption based on the Blue Ridge Housing model,” Kinrade said.
To illustrate how the loophole works, Kinrade used the Village at Broadstone Station Apartments in Apex, which was built in 2013. The apartment’s website bills it as a luxury apartment community.
Kinrade said the owner paid property taxes until 2024 when the apartments were sold to an investment group in Beverly Hills, California for $66.2 million that year. He said the investment firm partnered with an Oregon nonprofit called the Foundation for Affordable Housing and used the loophole to qualify for a property tax exemption.
“To my knowledge, they didn’t change the rents,” Kinrade said. “The rents are the same as they were prior to the purchase. It just so happens that because incomes are high in Wake County, 80% of median income is pretty high too.”
NC Newsline was unable to reach the foundation or the complex’s owners for comment.
Fixing the problem
County leaders’ concerns have gotten the attention of lawmakers. State Rep. Erin Paré (R-Wake) has pledged to work to close the loophole.
“Closing the “loophole” in the law will recover forgone revenue (tax revenue lost) that would otherwise go to funding schools and other essential services,” Paré said in a social media post.
Paré co-chairs the House Select Committee on Property Tax Reduction and Reform that House Speaker Destin Hall created to review the factors contributing to rising local property taxes and to identify ways to reduce the burden on homeowners.
In January, Self Help told the House Select Committee on Property Tax Reduction that property tax exemptions for affordable housing are critical to alleviating the state’s affordable housing crisis, but the current wording of the law is too vague, ripe for abuse and “deviates from the original spirit.”
Self Help recommended lawmakers require qualifying properties to be 100% nonprofit-owned and operated as affordable housing. It also wants properties to have federal, state and local government financial support, long-term affordability restrictions and a nonprofit general partner with control and a long-term ownership option.
The North Carolina Association of County Commissioners made similar recommendations to the committee, but also said the state should require an annual application process in which owners would report the number of low-income units it has in an apartment complex.
Kinrade said lawmakers must change the law to clearly define low-and moderate-income housing.
“We’re not against affordable housing, but we want it to be in the classic form of affordable housing and not this rent-a-nonprofit structure we think is just taking advantage of taxpayers,” Kinrade said.
He said there must be more oversight to ensure owners who receive exemptions provide housing to residents earning 80% or less of area median income.
“There’s really no ability to ensure that the residents who are receiving these affordable rents qualify based on their income unless the tax office gets in the business of auditing these properties every year, which is going to strain our resources,” Kinrade said.
State Senate Leader Phil Berger has also formed a committee to take a look at property tax concerns.
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