Summary:

 3/4/25 Bill died

Senate Bill 186 (SB 186) creates a special method of valuation for certain multifamily housing by  proposing a new section in the Property Tax Code, Section 7-36-34 NMSA 1978. The bill limits the per-unit valuation of multifamily housing for property tax purposes, prohibits attributing value to certain amenities, and provides an alternative valuation method based on actual construction and land costs. SB 186 applies to the 2026 and subsequent property tax years. 

Legislation Overview:

 Senate Bill 186 (SB 186) amends Section 7-36-15 NMSA 1978 of the Property Tax Code and proposes a new section establishing a special valuation method for certain multifamily housing properties. The bill defines “multifamily housing” as residential properties with five or more units that are regularly rented, leased, or made available to tenants under a written lease of at least 30 days.

Under SB 186, multifamily housing will be valued at its current and correct value, except as provided under specific limitations. The bill introduces three key provisions for valuation:
1. Annual Increase Limit: Any increase in property value over the prior year will be capped in accordance with Section 7-36-21.2 NMSA 1978.
2. Per-Unit Value Cap: The per-unit value of a multifamily housing complex cannot exceed 40% of the total property value divided by the number of units.
3. Exclusion of Amenities: No additional value will be attributed to amenities or ancillary improvements beyond the actual multifamily housing units.

For newly constructed multifamily housing, the valuation in the tax year immediately following construction will be the lower of: the current and correct value as determined by the county assessor, or the actual construction costs of the housing and the actual cost of the land.

Property owners must submit evidence of actual construction and land costs in the form required by the county assessor.

Implications
SB 186 is expected to reduce property tax burdens for multifamily housing owners by limiting taxable valuations, particularly for newly constructed properties. By capping per-unit valuation and preventing additional taxation on amenities, the bill could incentivize the development and retention of rental housing. However, it may reduce property tax revenues for local governments, potentially impacting funding for municipal services.
The bill could encourage the construction of multifamily housing by offering an alternative valuation method based on actual costs. This may particularly benefit developers in high-cost areas where land and construction expenses exceed market-based assessments. However, local tax authorities may face administrative challenges in verifying actual cost submissions and enforcing the new valuation method.

SB 186 introduces a structured valuation model designed to control tax increases for multifamily housing while offering developers an alternative cost-based valuation for newly constructed properties. The bill takes effect for property tax years beginning in 2026. 

Current Law:

 Under current property tax law, multifamily housing is assessed at market value using the income approach, cost approach, or comparable sales method, as outlined in Section 7-36-15 NMSA 1978. Existing properties are subject to annual valuation increases that are capped under Section 7-36-21.2 NMSA 1978, preventing rapid spikes in tax liability. However, new developments are assessed based on construction cost and land acquisition value in their initial tax year, before transitioning into standard assessment methods. 

Amendments:

 Amended March 4, 2025 on sfl:

sfla/STBTCa/SB 186: The Senate Floor Amendment 1 to STBTCa/SB 186 introduced modifications to the valuation methodology for multifamily housing in the bill. The key change revises how property value is determined for taxation purposes, particularly for multifamily housing that received a final certificate of occupancy before January 1, 2024. The amendment alters the calculation of property value limitations by inserting a new method for determining the maximum taxable value of these properties.

Sfla changes the valuation cap for multifamily housing by specifying that the total property value used for taxation must be the greater of two values. The first option retains the original calculation, which limits the per-unit taxable value to 40% of total property value. However, the amendment adds a second option, stating that for multifamily housing that received a final certificate of occupancy before January 1, 2024, the taxable value shall be frozen at the value listed on the county’s 2024 notice of value, with subsequent increases subject to the limitations in Section 7-36-21.2 NMSA 1978. This means that instead of being reassessed under the new valuation method, older multifamily properties would have their 2024 tax year value as the baseline, only increasing in accordance with existing property tax growth limits.

Additionally, the amendment restructures a section regarding the valuation of newly constructed multifamily housing, ensuring that property tax calculations align with the updated valuation method. Instead of calculating total property value solely using a capped per-unit formula, the bill now clarifies that for newly constructed housing, the assessed value is determined based on the lower of two values—either the newly assessed market value or the construction cost plus land acquisition costs.

Implications
The amendment creates a distinction between older and newly constructed multifamily housing by setting a different valuation approach for properties built before 2024. For these older properties, the 2024 tax year valuation now serves as a baseline rather than subjecting them to the newly proposed per-unit valuation cap. This change benefits owners of pre-2024 multifamily housing by preventing potential increases in tax liability that might have resulted from shifting to the new assessment methodology.

By allowing older properties to remain under existing valuation growth caps, the amendment protects longstanding property owners from sudden tax hikes, particularly those who may have purchased or developed housing under the expectation that their valuations would remain stable. On the other hand, new multifamily housing developments will still be subject to the alternative valuation method, meaning they could face different tax treatment than older properties. This could create disparities between newer and older multifamily developments, potentially incentivizing investments in existing buildings over new construction.

For counties and local governments relying on property tax revenue, the amendment reduces the potential tax base growth that may have occurred under the original version of SB 186. By freezing the taxable value of older properties at 2024 levels, the bill may limit future increases in property tax revenues from multifamily housing, impacting local government funding for infrastructure and services.

This amendment was likely introduced to address concerns raised by multifamily property owners, particularly those who feared increased tax liability due to valuation changes. However, the amendment also complicates property tax administration by creating two separate valuation tracks—one for older properties and one for newly constructed housing—which may require county assessors to apply different methodologies based on a property’s construction date.

Amended February 21, 2025 in STBTC:

STBTCa/SB 186: The primary amendments made by the Senate Tax, Business, and Transportation Committee to SB 186 focus on modifying the valuation methodology for multifamily housing, adding reporting requirements for property owners, and clarifying the handling of submitted financial information by county assessors.
   1.  On page 4, line 7, the amendment adds “or” to clarify a provision within the valuation formula.
   2.  On page 4, line 8, the phrase “per-unit” is removed, eliminating the previous requirement to assess value on a per-unit basis.
   3.  On page 4, lines 10 and 11, the language that required dividing total property value by the number of units in the multifamily housing is  struck, thereby changing how multifamily housing is valued.
   4.	A new subsection (C) is inserted, requiring property owners to file an affidavit with the county assessor within 90 days of the local government issuing a final certificate of occupancy for newly constructed multifamily housing. The affidavit must include the owner’s name, the legal property description, and the full development cost, including land acquisition costs.
   5.  The amendment adds subsection (D), which mandates that county assessors maintain the affidavit as a confidential record, use it only for analytical and statistical purposes, and ensure it is indexed properly without making it part of the valuation record.

Analysis of Amendments

The most significant change in STBTCa/SB 186 is the revision of the valuation method for multifamily housing. The removal of the per-unit calculation and the requirement to divide total property value by the number of units suggests a shift away from a formula that could have resulted in lower property valuations. This amendment likely prevents artificially reducing property tax obligations by setting valuation limits on a per-unit basis. The updated approach may result in a more accurate reflection of the overall property value rather than being constrained by a unit-based cap.

The requirement for property owners to file an affidavit detailing development costs introduces a transparency measure that may assist assessors in more accurately determining property values. By specifying that this affidavit is for analytical and statistical purposes only and keeping it confidential, the amendment aims to balance property owner privacy with the need for reliable valuation data. The requirement for filing within 90 days of receiving a final certificate of occupancy ensures timely reporting and avoids long delays in updating property tax records.

The amendments also reinforce the role of county assessors in maintaining accurate and confidential valuation records. The explicit direction to cross-reference the affidavit with other property records suggests an effort to improve administrative consistency and reduce errors in property tax assessments.

Implications of the Amendments

The amendments in STBTCa/SB 186 appear to address potential concerns regarding valuation fairness while maintaining incentives for multifamily housing development. By eliminating the per-unit valuation cap, the bill prevents potential undervaluation of large developments. The requirement to submit cost information ensures that assessors have the necessary data to make informed valuation decisions. However, keeping the affidavit confidential protects developers from potential competitive disadvantages while still enabling local governments to use the data for property tax administration.

The changes could lead to higher property tax obligations for multifamily housing developments compared to the original bill, as the valuation methodology now focuses on total property value rather than unit-based calculations. This may impact housing developers’ financial projections and potentially influence decisions on project viability. However, the transparency measures ensure that valuations remain based on documented costs, reducing the likelihood of arbitrary assessments.