Raleigh gets bad news on property tax revenue: An $800+ million hit to its base

Raleigh expects an over $800 million hit to its tax base for the budget year that begins July 1, a shortfall that could strain city services and raise homeowners’ tax bills.

The City Council heard grim news Tuesday from Wake County Tax Administrator Marcus Kinrade, who explained three factors are cutting away at the property tax revenue his office collects.

One of the largest and most controversial is a state law that allows a tax exemption for affordable housing, he said, but does not define affordable or ownership.

In local government circles, this is now known as the “Blue Ridge Loophole,” after a housing project in Mitchell County was granted an exemption even though it was 99.9% owned by for-profit investors. State courts ruled the 0.1% nonprofit ownership allowed it to qualify.

Developers statewide have since jumped in to enjoy the same benefits.

Kinrade pointed to the View at Lake Lynn apartments now mostly owned by for-profit developers in New York that had zero tax exemptions in 2024 and is now 70% exempt.

The exemption removed about $75 million from the tax rolls year over year, which equates to about $650,000 in taxes lost to the county and city. It was just one example of about 40 that occurred in 2025.

The apartments now claiming exemptions are not using government tax credits and do not have deed covenants for affordable rents, meaning they could be dissolved at any time.

All told, what Kinrade called the “affordable housing loophole” is taking $4 million in property tax revenue from Wake County and $2.38 million from Raleigh this year.

“And obviously the only way to cover that kind of loss is either reallocate money and reduce services or raise your tax rate,” he said, “and you have to spread that pain on the residential property owners that live here.”

For fiscal 2027, Kinrade said there are 115 applications for the tax loophole compared to 40 last year. That’s roughly an $830 million tax-base hit for the city and a $1.2 billion hit to the county. For the city that would represent another $2.95 million in city taxes lost, another $6.2 million for the county

“It is shocking,” Councilman Mitchell Silver said at the presentation’s close. “There are some serious financial implications. ... This is just a huge wake-up call.”

Raleigh held the line on the city’s property tax rate this fiscal year, making the city tax bill on a $470,000 home $1,668.50.

Combined with a $2,430.37 county tax bill, the owner of that home paid $4,098.87 in city and county taxes this fiscal year.

More exemptions, less revenue

Raleigh is only beginning its fiscal 2027 budget discussions and council members will not have a draft budget from the city manager to work with until May.

But the bulk of its revenue comes from property tax on real estate.

Kinrade pointed to two other trends fueling the decrease in available money.

Starting in 2024, both homeowners and businesses began rushing to appeal their property tax values. That year, formal appeals in Wake County more than doubled to 8,936, compared to 2016.

Many of those appeals are still tied up in the pipeline, placing more than $125 million of Raleigh’s tax base in limbo.

Also, developers are increasingly being granted exemptions for building on brownfields, which are older properties contaminated by past industry.

Those properties are being improved, the buildings going up there do not pay into the city’s property tax base, which now totals $514.5 million in lost value.

“This certainly is alarming,” Councilwoman Megan Patton said. “It means there will be an impact for our service.”

Josh Shaffer

The News & Observer

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Josh Shaffer is a general assignment reporter on the watch for “talkers,” which are stories you might discuss around a water cooler. He has worked for The News & Observer since 2004 and writes a column about unusual people and places.