This legislation addresses a long-standing challenge in how California implements its Property Tax Welfare Exemption, a critical tool for supporting affordable housing development.

The Welfare Exemption is a provision in California law that exempts certain properties from local property taxes when they are owned by nonprofits or allowed entities and used exclusively for charitable purposes. This includes properties dedicated to affordable housing. The rationale behind the exemption is straightforward: when entities spend money on property taxes, those dollars are diverted away from their mission-driven work, work that often fulfills public needs and reduces costs for government. By granting this exemption, the state helps ensure that limited resources are directed toward building and preserving housing for low-income families rather than paying taxes.

However, before this bill’s passage, the process for securing this exemption was cumbersome and costly. Even when a nonprofit housing developer has a property that clearly qualifies, often with recorded affordability restrictions and prior approvals, they must still pay property taxes upfront while waiting for their exemption application to be processed by both the county assessor and the State Board of Equalization. This review can take months or even years. During that time, developers may be forced to float hundreds of thousands of dollars in tax payments, only to receive refunds later without interest. To cover these upfront costs, developers often borrow money and pay interest or seek additional subsidies from local or state programs. These extra steps inflate development costs and consume scarce affordable housing funds.

AB 2353 changed this dynamic. The bill allows nonprofit affordable housing developers to withhold property tax payments without penalty while their welfare exemption application is under review. If the application is ultimately denied, the developer remains fully liable for the taxes and any applicable penalties. This reform eliminates the inefficient cycle of payments and refunds, reducing the need for bridge financing and lowering overall development costs. It also eases administrative burdens on county assessors, who currently spend time processing refund requests and issuing checks.

In short, the bill streamlines an outdated process, saves money for affordable housing projects, and ensures that public resources are used effectively to meet California’s housing needs. By removing unnecessary financial hurdles, AB 2353 strengthens the state’s commitment to expanding affordable housing and makes the welfare exemption work as intended: to support charitable efforts that serve the public good.