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AlabamaHB4042026 Regular SessionHouseWALLET

Class 1 municipalities; authorization to establish community land trusts, affordable housing

Sponsored By: Neil Rafferty (Democratic)

Enacted

Counties & Municipalities

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Bill Overview

Analyzed Economic Effects

7 provisions identified: 3 benefits, 0 costs, 4 mixed.

Income rules and fair housing selection

Trust leases must mainly serve affordable housing with legally enforceable income or rent limits. Low-income families qualify at up to 80% of the metropolitan area's median income; moderate-income families qualify at up to 120%. These limits are adjusted for family size. Individuals and families who qualify when their lease starts can renew without another income check. When an organization leases housing, its occupants must meet the applicable housing program's income rules. The affordable-housing definition includes 1–4-unit projects and a category with at least 40% restricted units. Certain other projects require at least 90% restricted units, with income capped at 120% of area median income or affordable rent limits. The law also recognizes housing covered by federal tax credits, Section 8, HOME, USDA, and HUD programs. For competitive selection, trusts must promptly publish eligibility rules, selection criteria, and scoring methods. When demand exceeds supply or merit-based selection does not fit, trusts must use a lottery or wait list without discrimination or favoritism. Awards to a single organization without competition need written justification and board approval.

Property tax breaks for trust housing

Qualifying trust-owned residential property without a ground lease is exempt from all property taxes for three years. The trust must intend affordable housing and be building, repairing, or attempting to transfer or lease the property. Affordable housing covered by a trust ground lease gets a 20% property tax exemption for 20 years. That exemption lasts only while the property remains affordable housing. The law does not require these tax savings to be passed on to residents.

Alabama cities can create housing trusts

Beginning October 1, 2026, Alabama Class 1 cities can create community land trusts by ordinance. Each trust must be an Alabama nonprofit and operate within the city. Trusts can buy, build, repair, lease, and transfer property to support affordable housing. Cities are not required to create or fund a trust. The law overrides conflicting laws.

Long housing leases with resale limits

Trusts keep ownership of the land and can offer renewable ground leases lasting up to 99 years. Each recorded lease must state renewal terms, occupancy rules, resale price limits, purchase options, cancellation grounds, fees, and fee-increase rules. Resale formulas limit owners' sale prices and divide proceeds to preserve future affordability. After notice of a triggering event, the trust has 90 days to buy buildings or other improvements on its land. If it declines or does not act, the city gets another 90 days after notice of that decision or inaction. Trusts and cities must negotiate promptly and can assign their options to affordable-housing operators within the same deadlines. Superior mortgage and other property rights still apply. If neither option is used, a qualifying owner can negotiate a sale price, subject to remaining restrictions and property interests. The trust retains its proceeds share on the first arm's-length sale after both options expire. Later buyers generally take title free of ground-lease rights, but remaining lease payments still apply when a ground lease remains, unless otherwise agreed. Trusts cannot evict lenders or buyers through foreclosure or a transfer in place of foreclosure, except for unpaid regularly scheduled rent.

Cities take over failed trust leases

Beginning October 1, 2026, an organization that loses or gives up nonprofit status can no longer operate as a community land trust. It must transfer its ground-lease interests within 120 days to the organizing city or a city-designated qualifying organization. A designated organization must share the trust's purposes and have federal 501(c)(3) status. The former trust receives no payment beyond incidental transfer costs. If it fails to begin the transfer within 120 days, its interests automatically pass to the city. The city must record notices of the transfer.

Housing trust boards face conduct limits

Trusts must allow public membership and public membership meetings. Seven directors serve four-year terms: three appointed by the city governing body, three by the mayor, and one by the Alabama Housing Finance Authority. Boards must meet expertise and independence rules and reflect community diversity as far as practical. Elected officials and specified family or household members cannot serve as directors or be hired as employees or contractors. Boards can set director pay and hire staff by resolution; employees are outside Alabama's Merit System Act. Trusts cannot engage in politics, lobbying, political consulting, or public advocacy about their operations, funding, or organization. They also cannot hire people or vendors to perform a material part of those activities; residents remain free to speak. Directors receive protection from civil liability for reasonable official actions, but not for willful misconduct, negligence, or fraud.

Public oversight of housing trust spending

Trust property records, vendor contracts, and correspondence are public records, subject to Alabama's public-records rules. The Alabama Department of Examiners of Public Accounts must audit every trust annually. The trust or sponsoring city pays the audit cost, which the law does not set. Audit reports must appear on the city's website and be provided promptly on request. Trusts must make good-faith efforts to offer property through competitive, transparent processes. By May 1 each year, trusts must publish an activity report on the city's website and send it to the Alabama Housing Finance Authority. Reports must cover property, funding, personnel, compensation, and contracts of $50,000 or more involving real-property interests. They must also cover other material matters requested by the Authority.

Sponsors & Cosponsors

Sponsor

  • Neil Rafferty

    Democratic • House

Cosponsors

There are no cosponsors for this bill.

Roll Call Votes

All Roll Calls

Yes: 334 • No: 0

Senate vote • 4/7/2026

Motion to Read a Third Time and Pass - Adopted Roll Call 1163

Yes: 35 • No: 0

Senate vote • 4/7/2026

Third Reading in Second House

Yes: 35 • No: 0

House vote • 3/31/2026

Motion to Adopt - Adopted Roll Call 1108

Yes: 66 • No: 0 • Other: 32

House vote • 3/31/2026

Third Reading in House of Origin

Yes: 66 • No: 0 • Other: 32

House vote • 3/31/2026

Motion to Adopt - Adopted Roll Call 1109

Yes: 66 • No: 0 • Other: 32

House vote • 3/31/2026

Motion to Read a Third Time and Pass as Amended - Adopted Roll Call 1110

Yes: 66 • No: 0 • Other: 32

Actions Timeline

  1. Enacted

    4/17/2026House

  2. Third Reading in Second House

    4/7/2026Senate

  3. Motion to Read a Third Time and Pass - Adopted Roll Call 1163

    4/7/2026Senate

  4. Ready to Enroll

    4/7/2026House

  5. Ready to Enroll

    4/7/2026House

  6. Enrolled

    4/7/2026House

  7. Signature Requested

    4/7/2026Senate

  8. Delivered to Governor

    4/7/2026House

  9. Reported Out of Committee Second House

    4/2/2026Senate

  10. Read for the Second Time and placed on the Calendar

    4/2/2026Senate

  11. Read for the first time and referred to the Senate Committee on Jefferson County Legislation

    4/1/2026Senate

  12. Pending Committee Action in Second House

    4/1/2026Senate

  13. Third Reading in House of Origin

    3/31/2026House

  14. County and Municipal Government Engrossed Substitute Offered

    3/31/2026House

  15. Motion to Adopt - Adopted Roll Call 1108

    3/31/2026House

  16. Rafferty 1st Amendment Offered

    3/31/2026House

  17. Motion to Adopt - Adopted Roll Call 1109

    3/31/2026House

  18. Motion to Read a Third Time and Pass as Amended - Adopted Roll Call 1110

    3/31/2026House

  19. Engrossed

    3/31/2026House

  20. Read for the Second Time and placed on the Calendar

    3/19/2026House

  21. Reported Out of Committee House of Origin

    3/18/2026House

  22. Read for the first time and referred to the House Committee on County and Municipal Government

    2/5/2026House

  23. Pending Committee Action in House of Origin

    2/5/2026House

Bill Text

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