House Bill 13 could lower property taxes for some, but shift burden to others

The Alaska House of Representatives has passed House Bill 13, giving municipalities the option to provide targeted property tax exemptions aimed at expanding housing access across the state.

While the bill is being promoted by its sponsor and supporters as a tool to tackle Alaska’s housing challenges, it also raises serious concerns about shifting the tax burden onto other property owners. It’s a redistribution of wealth because every exemption must be made up elsewhere in the city. This is taking money from some people and giving it to others.

Sponsored by Anchorage Democrat Rep. Andrew Gray, HB 13 allows local governments to adopt ordinances granting property tax relief for specific types of real estate, including:

• Long-term rental units
• Certain mobile home parks
• Properties rented to low-income families
• Owner-occupied primary residences
• Homes purchased by first-time buyers

The stated intent is to promote stable rental markets, improve the quality of life in mobile home communities, and increase access to homeownership.

Tax exemptions would not be automatic. Municipalities must choose whether to implement them, and each community can define its own criteria and processes. For example, a city might require proof of income to qualify for low-income rental exemptions or set time limits for what qualifies as “long-term” rental housing.

In Anchorage, many property owners have applied for and received existing property tax exemptions, which have shifted the tax burden to other taxpayers. For example, if you are 65 or older and own/occupy your primary residence, you may qualify for an exemption on up to $150,000 of the assessed value. Same for a disabled veteran who has a service-connected disability, which gets a similar exemption.

Since property taxes are a key revenue source for local governments and fund schools, public safety, streets, emergency services, and more, reducing taxes for some property owners will likely require raising them for others in order for the city to not go bankrupt.

If exemptions are widely adopted, municipalities may need to:

• Raise property tax rates on non-exempt properties such as commercial buildings, homes, or market-rate rentals;
• Increase other local taxes, such as sales taxes, which could broadly impact residents and small businesses;
• Cut public services to make up for lost revenue.

For example, if a borough exempts $10 million in assessed property value, it may need to raise mill rates on the rest of the tax base to maintain funding levels.

Supporters argue HB 13 could make long-term rentals more attractive to landlords and potentially reduce rents for low-income tenants by lowering their landlords’ tax costs. It may also help mobile home parks and first-time buyers by reducing barriers to investment and ownership.

But the benefits are not guaranteed. If landlords of non-exempt rental properties face higher taxes due to budget adjustments, they may raise rents to cover the costs, pushing housing expenses higher for some renters.

Because implementation is optional and subject to local ordinances, the impact of HB 13 will vary by municipality. Cities like Anchorage or Fairbanks may embrace broader exemptions to address housing shortages, while smaller or rural communities may be hesitant to reduce revenue from already narrow tax bases.

Administering the new exemptions, including verifying income limits, determining first-time buyer status, and monitoring compliance, will place new burdens on municipal governments. And while the exemptions are meant to support housing goals, critics may argue that they unfairly favor specific groups, leaving other taxpayers to foot the bill.

HB 13, which passed 25 to 15, now goes to the Senate for consideration. There are nine days left in the session. If the bill doesn’t get through Senate committees and the Senate floor, it will be held over until next year.