North Carolina House Takes Aim at Property Tax Loophole and Approves Significant UNC Construction Funding

RALEIGH, NC – The North Carolina House of Representatives has taken decisive action on two key pieces of legislation, unanimously advancing a bill designed to close a significant property tax loophole impacting local government revenue and approving a substantial funding package for construction projects across the University of North Carolina system. These votes mark a critical step forward in addressing fiscal concerns and bolstering educational infrastructure within the state.

Closing a Lucrative Property Tax Loophole

In a move met with bipartisan support, the House voted unanimously on Tuesday to advance legislation aimed at rectifying a property tax exemption that has been costing local governments tens of millions of dollars annually. This loophole, primarily exploited by for-profit entities partnering with nonprofits for affordable housing initiatives, has led to a considerable reduction in tax revenues for municipalities and counties across North Carolina.

Estimates from the General Assembly’s Fiscal Research Division project that closing this loophole will inject an additional $22 million into local government coffers in the upcoming fiscal year. By fiscal year 2030-31, this figure is expected to climb to $32.6 million, providing much-needed financial relief and resources for local services.

House Bill 1042, titled “Affordable Housing Exemption Mods,” seeks to implement stricter criteria for such partnerships. Under the proposed changes, for-profit organizations collaborating with nonprofits to qualify for tax benefits would be required to demonstrate government funding to ensure the genuine affordability of the housing projects. This measure is a direct response to a notable surge in the utilization of existing low- and moderate-income tax breaks over the past five years, as highlighted by the bill’s primary sponsor, Rep. Erin Paré (R-Wake).

“The trajectory forward is particularly problematic as applications rise and the foregone revenue burden gets passed on to other mostly residential taxpayers,” Rep. Paré stated, emphasizing the inequitable distribution of the tax burden.

The loophole’s origins trace back to a 2013 North Carolina Court of Appeals ruling concerning Cane Creek Village, a low-income housing project. The court determined that the project, despite being owned by a for-profit company but managed by a nonprofit, was eligible for a property tax exemption under state law. The House is scheduled to hold a final vote on this critical legislation on Wednesday.

Significant Investment in UNC System Infrastructure

In parallel, the House also voted with overwhelming support on Tuesday to authorize $636 million in construction projects across five campuses within the University of North Carolina system. This substantial investment is poised to upgrade student housing, dining facilities, and parking infrastructure, enhancing the overall campus experience for students.

The funding for these projects, detailed in House Bill 1123, will be generated through existing parking and housing revenue collected by the university system, rather than through new appropriations from the General Assembly. The bill received support from all but one member, Rep. Pricey Harrison (D-Guildford).

The most extensive project is slated for N.C. State University, which will undertake the construction of new student housing and dining facilities designed to accommodate 3,000 students, replacing outdated structures. Other key projects approved include:

• The construction of a new residence hall at UNC Chapel Hill.
• The demolition and replacement of Parker and Teague residence halls on the UNC Chapel Hill campus.
• The renovation of an existing residence hall at UNC Charlotte.
• The construction of a new parking deck at UNC Wilmington.

Beyond campus infrastructure, House Bill 1123 also addresses academic policy by aligning the residency requirement for admission to the North Carolina School of Science and Mathematics with the state’s established process for determining in-state tuition eligibility. Furthermore, the bill includes provisions for various other adjustments concerning tuition grants and the utilization of capital improvement funds.

Following its passage in the House, this comprehensive bill will now move to the Senate for consideration and approval.

This story was contributed to by Greg Childress and written by Christine Zhu, who covers state politics and government for NC Newsline from Raleigh.