North Charleston apartment complex receives total property tax exemption

NORTH CHARLESTON — The state approved one of the largest apartment complexes in Charleston County for a total property tax exemption in July, taking nearly $1.2 million annually from local governments and schools. In return, the Montague at Park Circle complex is supposed to provide affordable rental housing under a controversial state law that allows such deals. The school budget is taking the bulk of the hit. “I think this may be the most substantial one in the county,” said Daniel Prentice, chief financial officer for the Charleston County School District. The revenue loss is about $675,000 a year, an amount equal to the starting pay for 10 teachers. Large rental properties across South Carolina have been going tax-exempt in large numbers under a 2020 law change meant to encourage affordable housing. Hundreds of tax exemptions have been approved in just Charleston County. State lawmakers have decried — but not closed — a loophole in the rules that has allowed for-profit real estate companies to shield apartment complexes from property tax with little oversight. If the law works as intended, it would make some rental housing more affordable but local governments in general — school districts in particular — would bear all the costs of the tax breaks the state would approve. But it’s not working as intended. After state lawmakers failed to approved legislation this year aimed at closing the loophole and improving oversight, they put a one-year halt on new applications for the tax break this summer. The Montague at Park Circle was the last to be approved for a tax exemption in Charleston County before the moratorium took hold. The law was meant to allow nonprofit housing groups, which were already allowed tax exemptions, to work with for-profit partners and still get those exemptions. “Not having to pay property tax allows us to make units more affordable,” said the Rev. Bill Stanfield, leader of the Metanoia nonprofit group in North Charleston. “From a taxpayer standpoint, it’s important that the good is actually being done in exchange for the tax benefit.” Metanoia was receiving tax exemptions before the 2020 law change, as nonprofit groups dedicated to affordable housing were already able to do. The provisions that are allowing large apartment complexes to go tax-exempt were not something Metanoia needed, Stanfield said. “I feel like some nonprofits are involved with lots of properties and are collecting fees,” he said. The 2020 change in the law has allowed for-profit apartment owners to marginally include a nonprofit in their ownership structure, typically owning one one-hundredth of one percent, and be freed from property taxes if they meet affordability standards. In such arrangements the nonprofit groups are often paid to participate. Meanwhile, rising incomes in many of the state’s growing areas have made the housing affordability standards easier to meet, and the number of tax exemptions has been rising fast. Once an apartment complex is approved by the state Department of Revenue for a tax exemption, there’s no annual review and no one checking to confirm the promised affordable rents are being offered to qualified tenants. In Greenville, Hunter Gibson with Standard Capital Partners has used the same tax break in a partnership with the Greenville Housing Fund to build a 120-apartment complex in Greer where affordable rentals are offered. He said that’s how the law was meant to work, and he’s among many who feel the law is being abused and that regulations and oversight should be strengthened. “I’m not a Boy Scout, I’m a capitalist,” he said. “If I can make a small profit and help the community at the same time, great.” Gibson said that while his company partnered with a local nonprofit group with a record of providing affordable housing and a large ownership stake in the apartments, others have attached the names of out-of-state nonprofits to their projects in exchange for fees. He said his nonprofit partner regularly checks to make sure tenants are income-qualified, and that the income-tied rents include the cost of utilities and any mandatory fees, as they should. Gibson wasn’t familiar with the Montague at Park Circle deal, but said experience has shown the law needs to change to require annual reporting, nonprofit partners active in South Carolina and meaningful improvements in affordability. Cities including Port Royal, Rock Hill and Cayce have sounded the alarm about plunging tax revenues. In Port Royal, in Beaufort County near Hilton Head, a state-approved tax exemption for one large apartment complex eliminated about six percent of all the town’s property tax revenue. “The groups that are really taking the brunt of this are the school districts,” Gibson said. In North Charleston, it’s not that the Montague at Park Circle apartments are doing anything other than what the state allows, but that there’s no way to know. The website for those apartments doesn’t mention affordable housing or income limits at all. It does boast of granite countertops, a “resort-style saltwater swimming pool” and a pet spa. “This one barely references (rent) rates on their website,” said Prentice. “Unless something’s changed, that development is pretty high-end.” The 358-apartment, 21-building complex paid $1,186,144 in local property taxes for 2025, and more than half of it went to public schools. For 2026, they will pay nothing. Calls and emails to the Texas-based owners of the complex, Comunidad Partners, received no response. The Beverly Hills, Calif., nonprofit group involved in the deal, Housing on Merit, did not respond to a request for comment. Housing affordability is based on local median incomes — the amount where half the people earn more, and half earn less. So when incomes rise that means “affordable” rents can rise as well. Housing expenses for rent and utilities that consume 30 percent of income count as affordable. To become tax-exempt, an apartment complex would need 75 percent of the apartments to qualify as affordable. In most cases, that means 55 percent for low-income and 20 percent for very-low-income tenants, with the remaining 25 percent rented at whatever price the market will bear. Low-income means people earning no more than 80 percent of the area median income, or AMI. In the Charleston metro area that would mean one person earning as much as $65,840, which would allow for a monthly housing cost of up to $1,646 for a single tenant. That’s pretty close to open-market rent rates, which makes it easier to qualify apartments as affordable for low-income residents without big changes in rents. In North Charleston, in rental properties with at least 50 units, the average rent for a one-bedroom apartment is $1,530, according to RentCafe — less than the rent that could be charged to “low-income” tenants in tax-exempt buildings. In rent rolls provided to the Department of Revenue with its 149-page tax exemption application, Montague at Park Circle listed some 80 percent AMI rents that were higher than market-rate rents for units with the same number of bedrooms. The complex assumed each one-bedroom unit would be occupied by two people, and each two-bedroom unit by three people. Median incomes rise with family size, so more people means more income and more income allows for higher rent. For low-income tenants Montague at Park Circle’s one-bedroom apartments list for up to $1,776 monthly, and two-bedroom apartments for up to $1,998. If the tax exemptions are meaningfully producing affordable rental housing it’s primarily for very-low-income residents, but even then the rents are higher than people might expect. Very low income is defined as 50 percent of AMI — just half the mid-point income in the area. In the tri-county Charleston area that would be $41,150 for one person, which would allow $1,028.75 monthly for housing, or more if the home is occupied by more than one person. Montague at Park Circle listed $1,110 monthly rents for its one-bedroom apartments for very-low-income tenants, based on the assumption of two people in each. In Charleston County alone, 283 apartment buildings and townhouse rentals have become tax-exempt since the start of 2024, according to the county auditor’s office. Some are very large complexes, most are owned by out-of-state companies and many are in North Charleston, where rents that count as affordable are closer to market-rate rents than elsewhere in the area. In North Charleston alone, the now tax-exempt apartment complexes include the 135-building Icon @ Park Circle, Alston Arms, Driftwood, Fairwind-Oakfield, Ellevate St. Ives, Ellevate North Charleston, and Avalon at North Charleston. “We’re going to be looking to our folks in the General Assembly to help resolve this issue,” said Ryan Johnson, deputy assistant to the mayor. “We are fortunate to have a larger budget than many municipalities, so percentage-wise it (the exemptions) doesn’t affect us as much.” He said North Charleston is willing to trade some tax revenue for affordable housing, as the city has with Charleston County’s initiatives, which Johnson said are “much more transparent” than the exemptions granted by the state. Like North Charleston, the Charleston School District has been able to manage the loss of property tax revenue from apartment exemptions because the tax base has been rising, according to Prentice. “It hasn’t become the five-alarm fire that it could be because the economy has been growing,” he said. Comunidad Partners bought Montague at Park Circle — formerly Link Apartments Mixson — for $70.75 million in December. “The Charleston market continues to demonstrate exceptional economic and demographic tailwinds,” Antonio Marquez, principal and managing partner at Comunidad, said in a written statement at the time. He added that the purchase “represents an opportunity to execute on our affordable and workforce thesis in Charleston, a high-growth market, while executing our proven strategy of enhancing operational performance and delivering durable, risk-adjusted returns for our investors.” Most of the Montague at Park Circle complex was built in 2014, and was called the Flats at Mixson. Construction defects became apparent and in 2016 North Charleston filed code violations and tenants were required to move out of 268 apartments. Charlotte-based Grubb Properties then acquired the property for $5.3 million, spent about $23 million on repairs, and reopened in 2017. The new owners added 90 more apartments and renamed the complex Link Apartments Mixson. A Post and Courier analysis of the tax-exemption application for the complex found that the average market-rate rent listed for a one-bedroom apartment was $1,622, while the rent for the income-restricted one-bedroom units averaged $1,463 for low-income renters and $1,109 for very-low-income renters. The analysis found that if all the Montague at Park Circle apartments were rented at the average market rates found in the application, the complex could collect an additional $1,094,112 in rent annually. If the rents and income limits are playing out as promised — which is impossible to check — then the effect is that the school district, North Charleston, and Charleston County are subsidizing the rents through the property taxes they will no longer receive. State lawmakers hope to make changes to the apartment tax exemption rules before the moratorium on new applications expires in mid-2027.