NEW ORLEANS –The Louisiana Supreme Court has reversed a lower court’s decision regarding Orleans Parish Assessor Errol Williams’ fair market value assessments of an affordable housing development. 

The Supreme Court’s March 13 opinion overturned the Fourth Circuit Court of Appeal’s ruling and reinstated the Louisiana Tax Commission’s decision that modified William’s $4 million assessment of Opportunity Homes Limited’s properties to $1.52 million.

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At issue was whether a “market approach” or “income approach” should be used to determine the fair market value of affordable housing. The tax commission recommends an income-based approach, evaluating the property based on the income it generates. But Williams used a market approach, basing its value on the recent sale prices of nearby, comparably sized properties. 

As a result, the Opportunity Homes properties were assessed at $4,200,900 and $4,083,610 for the 2014 and 2015 tax year respectively. But the Louisiana Tax Commission, which used the income-based approach, said the actual fair market value was $1,525,000. 

Opportunity Homes, the developer of affordable housing units on 32 scattered sites around New Orleans, argued that Williams overvalued its properties, failing to account for the vast income difference between market-rate and rent-restricted properties. The Louisiana Tax Commission, which administers tax policy for the state, agreed with the developer and joined the suit, concluding that Williams “erred in failing to utilize the recommended income approach.”

They won at the district court trial, but the Fourth Circuit Court of Appeals reversed the lower court decision, saying “a plain reading of the statute supports the assessor’s position that he may use any of the three (3) generally-accepted methodologies in assessing affordable housing.” Those methodologies include the market, cost and income approaches. 

The Supreme Court disagreed, saying, “the income approach was the more appropriate method for determining fair market value in this case. Consequently, the appellate court erred in holding that the Commission’s decisions were in violation of statutory provisions, in excess of its authority.”

 

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