The General Assembly passed legislation earlier this year to give builders and developers an exemption on property taxes for newly constructed unoccupied single family detached homes. Effective this fall, newly constructed homes can’t be added to the tax rolls until they are occupied. Some say the new law provides a tax break for builders and developers, however Home Builders Association of South Carolina Executive Director Mark Nix says the measure actually provides for the proper interpretation of a law that is already on the books.”What we were seeing was that the builder was not pulling the c-o (certificate of occupancy), but the tax assessor in some areas across the state adding a certificate obviously even though the house was not habitable and there was no air conditioning unit or anything else, just to get a leg up on collecting taxes. I think some people see it as a tax credit , but it is not a true tax credit. it’s just correcting what was already on the books to tell you the truth.”
Nix says The rationale for the new law is that new unoccupied homes are not using the services of the local government, so they should not have to pay for these services. “You don’t pay taxes on the new home until the new home is actually occupied or sold. Therefore while you don’t see local government services used on a house with no residents in it, the law is basically saying until you have residents in a home and they’re using those services that additional taxes will not be paid until it’s occupied.”
Nix says this law will actually help keep a number of home builders in business. “Most of our home builders in South Carolina are what we call small builders, because they only build a few houses. I t would be a complete hardship for them to actually pay thousands of dollars on a house that is not being occupied that is coming out of their own pockets that are on the line for foreclosure anyway. This law should keep these companies in business for a while longer.”
Nix says members of the Home Builders Association have complained in the past about the practice of being taxed on unoccupied new homes and how much of a hardship these taxes placed on their business. Nix cites one example of one home builder in the Charleston area.
“He was paying $1600 a lot in taxes and he had several houses that were unoccupied and unsold and when the tax bill came across they automatically added a certificate of occupancy to his houses. His taxes would actually go up around $8000 or $9000 per unit. When you add all that together, that’s his full time job and business going forward so he would have lost all of his employees and at that time he had six employees.”
Nix says the new law will allow the home builder to remain viable and do other parts of the business until the housing market rebounds.
the state estimates 500 homes will be taken off the tax rolls, costing about $1.5 million in revenue. Nix says what is more significant is the law will not only help home builders stay in business, but it will help stabilize housing market values. “Keeping new construction out of foreclosure actually benefits an entire community. Basically what happens is a foreclosed house suppresses the value of that houses and the surrounding homes in that community. Keeping that house on the books actually helps maintain the housing market in that community.”