By Jordan Meadows
Staff Writer
A growing set of tax incentives meant to encourage development and expand affordable housing in Wake County is now raising alarms among local officials, who say a surge in property tax exemptions could jeopardize funding for schools, public safety, and other essential services.
During a Monday morning meeting of the Wake County Board of Commissioners, Deputy Housing Director Mark Pearlman outlined the complex landscape of housing incentives available to developers, while Tax Administrator Marcus Kinrade warned that one increasingly common strategy is rapidly eroding the county’s tax base.
At the center of the concern is what officials and housing advocates call a “rent-a-nonprofit” structure. Under a 2013 ruling stemming from a North Carolina Court of Appeals case, for-profit developers can qualify for property tax exemptions by transferring a small ownership stake—sometimes as little as 0.1%—to a nonprofit partner, provided the property offers units at or below 80% of the area median income.
Kinrade told commissioners the impact has been significant.
“This is a huge leak in your tax base, and the City of Raleigh’s also,” he said. “Most of these things are occurring in the city, so it’s affecting them even worse than it’s affecting the county.”
The number of exempt properties has nearly doubled in recent years, rising from 66 in 2020 to 136 in 2025. Those exemptions now account for a projected $776 million reduction in taxable property value—equivalent to about $4 million in lost annual revenue. This year alone, the county received roughly 170 applications covering $1.2 billion in property value, which could result in an additional $6.2 million loss.
“If this issue continues to grow,” Kinrade warned, “it could encompass 94 percent of all the multi-family units in Wake County,” potentially removing an estimated $27 billion in value from the tax base and costing as much as $140 million in revenue.
Lower tax revenues mean less funding for public schools, libraries, emergency services, and infrastructure—costs that may ultimately shift to homeowners.
As Janet Cowell put it, “We’d either have to cut services or raise taxes on single-family or townhome-owning residents… or not hire those police, build those fire stations.” She continued, “It’s scary because you can see a train coming down the railroad track at you… That is the General Assembly.”
State lawmakers like Representative Erin Paré of Southern Wake pledged to work toward closing the loophole, while Phil Berger has convened a committee to examine broader property tax concerns. Local officials are also urging reforms that would tighten definitions of affordable housing and require annual reporting to ensure tenants meet income eligibility requirements.
The loophole exists alongside a broader suite of incentives designed to spur housing development. These include Builders Exclusion tax breaks, which allow developers to defer taxes on new residential construction for up to three years and commercial projects for up to five. Developers can also tap into federal Low-Income Housing Tax Credits (LIHTC), Opportunity Zone capital gains incentives, and Brownfields agreements that reduce taxes on redeveloped contaminated sites.
In Raleigh, additional tools such as expedited permitting for subsidized affordable housing and tax increment-style reimbursement programs aim to accelerate development in 2021. City leaders argue these programs are necessary to attract investment and address housing shortages, though critics say they can subsidize projects that would have been built anyway while accelerating gentrification.
Meanwhile, Wake County is also investing in affordable housing through financing mechanisms like the Wake County Opportunity Impact Fund, which partners with Raleigh-based CAHEC Capital. Since 2015, the organization has issued more than $104 million in short-term loans supporting over 60 affordable housing developments, and has helped finance more than 890 communities nationwide since 1992.
Still, even as officials emphasize the need for more affordable housing, the fiscal pressures are mounting. Wake County’s $2.1 billion budget for fiscal year 2026 already includes a property tax increase, following a period in which property values rose by 51% between 2020 and 2024. Commissioners have also had to make tradeoffs, including reducing seed funding for a housing acquisition fund and scaling back planned EMS staffing increases to redirect resources toward schools.
As North Carolina continues without a full state budget, Governor Josh Stein has called on lawmakers to pass a $1.4 billion “critical needs” spending package to support essential services. At the same time, a national housing bill under discussion in Congress—ROAD to Housing Act—could reshape how large developers build rental housing altogether.
“We’re not against affordable housing,” Kinrade said. “But we want it to be in the classic form… not this rent-a-nonprofit structure we think is just taking advantage of taxpayers.”
