Wake County leaders blame a 'nonprofit loophole' for hike in property taxes

Wake County leaders are sounding the alarm over what they call a growing tax loophole that allows some apartment complexes to receive significant property tax exemptions while raising questions about whether the developments are truly providing affordable housing.

The issue stems from a 2013 North Carolina court ruling known as the Blue Ridge Housing case. County officials say the decision broadened eligibility for a property tax exemption intended for nonprofit affordable housing providers and has since led to a surge in apartment complexes qualifying for tax breaks.

According to Wake County data, the value of properties receiving exemptions under the Blue Ridge Housing precedent has increased from roughly $290 million in 2021 to $2.2 billion in 2025.

Wake County Commissioner Don Mial said the growing number of exemptions is having a significant impact on local government finances.

"Because property taxes make up about 75% of our revenue, with a growing tax base, we have come to expect between $40 million and $50 million in new revenue each year," Mial stated at the State of the City and County on Thursday. "This fiscal year, we're only expecting about $8 million."

County leaders say the lost revenue could affect funding for services including public safety, parks and infrastructure.

The concern centers on how the exemption is applied. Under state law, nonprofit organizations that provide affordable housing for low- and moderate-income residents can qualify for property tax exemptions. However, Wake County officials argue the 2013 court ruling created a broad interpretation of what constitutes nonprofit ownership and affordable housing.

Wake County Tax Administrator Marcus Kinrade previously described the issue as one of the largest threats to the county's revenue stream.

"This is a substantial leak in your tax base," Kinrade told county commissioners earlier this year.

County officials say 137 properties qualified for the exemption in 2025, representing $2.2 billion in exempt property value. That's up from 66 properties in 2020.

If the trend continues, county officials estimate the exemption could eventually apply to most multifamily housing units in Wake County.

WRAL News reached out to the Foundation for Affordable Housing, an Oregon-based nonprofit that Kinrade referenced in a previous Wake County meeting. We have not heard back. 

Questions have also emerged about whether residents are seeing meaningful affordability benefits from the developments receiving exemptions.

Wake County officials note that current interpretations of the law allow properties to qualify even when rents may not align with what many residents consider affordable housing.

The issue has also drawn concern from Raleigh leaders.

Raleigh Mayor Janet Cowell told WRAL News the city expects to lose approximately $6 million in property tax revenue this year because of the exemptions.

"We'd either have to cut services or raise taxes on single-family or townhome-owning residents," Cowell said in a previous interview with WRAL News.

Cowell warned the issue could have statewide consequences if left unresolved.

"This is going to affect every single municipality in the state," she said.

North Carolina lawmakers are now considering possible changes.

State Rep. Erin Paré, R-Wake, is backing House Bill 1042, which would tighten eligibility requirements for the exemption. The proposal would require additional oversight of nonprofit entities seeking the tax break and would require qualifying units to meet affordability standards tied to 80% of an area's median income.

Supporters say the legislation would ensure tax exemptions are reserved for developments that are genuinely providing affordable housing while protecting local governments from significant revenue losses.

The bill remains under consideration in the General Assembly.