Fiscal Year 2027 Budget Support Act Is Proposed in D.C.

The mayor of the District of Columbia proposed the Fiscal Year (FY) 2027 Budget Support Act (Proposed Act), which would significantly expand – and in some cases reshape – the District's economic development tools for real estate projects. Several provisions are particularly relevant to developers and owners pursuing workforce housing, large-scale redevelopment of certain former federally owned properties and projects that include a supermarket.

This Holland & Knight blog post summarizes select key economic development provisions of the Proposed Act and highlights practical considerations for stakeholders as the legislation advances through the Council of the District of Columbia review and approval process.

Subtitle C: Workforce Housing Opportunity Amendment Act of 2026

Subtitle C would create a new, competitive real property tax abatement aimed at workforce housing – projects that can be challenging to finance using only Low-Income Housing Tax Credit (LIHTC) and/or market-rate revenue.

Summary of Abatement Requirements

1. The developer provides a fiscal analysis prepared by a third party showing the amount of abatement required for the feasibility of the project.
2. The property is developed with at least 40 housing units.
3. For the duration of the abatement, at least 20 percent of the housing units developed or redeveloped on the property are maintained as affordable to households earning 80 percent or less of the median family income and at least 20 percent of the housing units are maintained as affordable to households earning 80 percent to 100 percent of the median family income.
4. The developer files a covenant in the land records of the District, binding on the developer and all successors in interest with respect to the property, requiring compliance with all obligations of the abatement.
5. The developer enters into a Certified Business Enterprise (CBE) agreement that requires the developer to contract with CBEs for at least 35 percent of the contract dollar volume of the construction and operations of the project.
6. The developer enters into a First Source Agreement for the construction, development and operations of the project.
7. The developer enters into an agreement with the mayor setting forth the requirements of the abatement legislation and any other terms and conditions that the mayor considers appropriate.

Abatement Amount and Program Cap

The total annual program cap for abatements would be:

• $4 million in FY 2029
• $5 million in FY 2030
• $6 million in FY 2031
• an amount equal to 105 percent of the prior year's maximum fiscal year abatement amount in FY 2032 and each subsequent FY

The amount of the tax abatement for an individual abatement is capped at no greater than the amount needed for the feasibility of the project, as demonstrated by an independent financial analysis, and may not exceed the total amount of residential taxes due for any year during the term of the abatement.

Abatement Term

Abatements run up to 10 years, with the possibility of extension to 20 years if required for feasibility.

Practical Impact

Subtitle C would incentivize the development of mid-income housing outside the traditional LIHTC framework and provide a potential additional revenue source to help projects move forward.

Subtitle D: Federal Property Development Tax Incentive Act of 2026

Subtitle D would create a new tax abatement for certain large-scale redevelopment projects on former federally owned property transferred (or otherwise disposed) after October 1, 2026.

Eligible Properties

The Proposed Act identifies four property disposition structures that could qualify for the abatement, which are generally tied to whether 1) the District or the federal government retains fee ownership in the site (ground lease) or conveys the site (sale), and 2) whether the disposition occurs directly to the developer or through the District.

1. Disposition Structure 1: A property to which the District takes title from the federal government, then retains ownership and ground leases the site to a developer. Such sites must meet the following criteria:

• is owned by the District
• was owned by the federal government immediately prior to its ownership by the District
• was disposed by the federal government to the District after October 1, 2026
• is ground leased to a private entity by the District pursuant to a ground lease and development agreement
• is developed pursuant to the ground lease and development agreement with a project that has 200,000 square feet or more in gross floor area
• was not subject to tax under D.C. Official Code § 47-811 or § 47-1005.01 immediately prior to being ground leased by the District government
• continues to be subject to the ground lease and development agreement

2. Disposition Structure 2: A property to which the District takes title from the federal government, then sells the property outright to the developer. Such sites must meet the following criteria:

• was owned by the District
• was owned by the federal government immediately prior to its ownership by the District
• was disposed by the federal government to the District after October 1, 2026
• was disposed of by the District pursuant to a sale and development agreement between the District and a private entity
• is developed pursuant to the sale and development agreement with a project that has 200,000 square feet or more in gross floor area
• was not subject to tax under D.C. Official Code § 47-811 or § 47-1005.01 while owned by the District government or federal government
• continues to be subject to the sale and development agreement

3. Disposition Structure 3: A property that the federal government sells directly to a private developer with no intermediate District ownership. Such sites must meet the following criteria:

• was owned by the federal government
• was disposed of by the federal government to a private entity after October 1, 2026, pursuant to a sale and development agreement between the federal government and the private entity
• is developed pursuant to the sale and development agreement with a project that has 200,000 square feet or more in gross floor area
• was not subject to tax under D.C. Official Code § 47-811 or § 47-1005.01 while owned by the federal government
• continues to be subject to the sale and development agreement

4. Disposition Structure 4: A property to which the federal government retains ownership and ground leases directly to a developer. Such sites must meet the following criteria:

• is owned by the federal government
• is ground leased by the federal government to a private entity after October 1, 2026, pursuant to a ground lease and development agreement between the federal government and the private entity
• is developed pursuant to the ground lease and development agreement with a project that has 200,000 square feet or more in gross floor area
• was not subject to tax under D.C. Official Code § 47-811 or § 47-1005.01 while owned by the federal government
• continues to be subject to the ground lease and development agreement

Summary of Abatement Requirements

1. The owner or ground lessee of the property must enter into an agreement with the District that requires the developer to, at a minimum:

• contract with CBEs for at least 35 percent of the contract dollar volume of the construction and development of the project
• enter into a First Source Agreement for the construction and development of the project
• for the duration of the abatement, maintain at least 10 percent of the housing units developed or redeveloped on the property as affordable to households earning on average 60 percent or less of the median family income
• for the duration of the abatement period, at least 10 percent of the housing units offered for sale must be affordable to households earning on average 80 percent or less of the median family income

2. Projects must be deemed of "special merit" by the mayor, defined as a project "providing significant benefits to the District or to the community in which the project is located by virtue of providing a significant number of housing units or a substantial square footage of neighborhood serving or regional retail; historical designation of the site on or building in which the project is located; complexity of the development; or social or other benefits having a high priority in the District or the community within the project is to be located."

3. The owner or ground lessee of the property must demonstrate:

• that a tax abatement is necessary for the project to be financially feasible
• the amount of the tax abatement necessary for the project to be financially feasible
• an ability to complete the project in a timely manner

Abatement Term and Amount

• The abatement can last for up to 20 consecutive tax years commencing after the tax year in which the certificate of occupancy is issued for the development on the property.
• The number of years and annual amount of the tax abatement is the number and amount, as determined in the sole discretion of the mayor, as being necessary for the project to be financially feasible and to be timely initiated and continued to completion by the owner or ground lessee of the property.

Termination/Loss of Eligibility

If, five years after the District and the owner or ground lessee enter into the development agreement, the owner or ground lessee has not made substantial progress in developing the project as determined by the mayor, the mayor may terminate the agreement and rescind the project's eligibility for a tax abatement.

Practical Impact

Subtitle D is designed to support institutional-scale projects where ownership structure, infrastructure needs and timing constraints can create feasibility challenges. Stakeholders should anticipate a negotiated agreement process, as well as a heightened record of feasibility and "special merit," to support the mayor's discretionary determinations.

Subtitle G: Supermarket Tax Incentive Amendment Act of 2026

Subtitle G would modify the District's existing supermarket tax incentive program – an incentive that can be material in financing and underwriting mixed-use and neighborhood retail projects.

Key Changes

The Proposed Act would, among other things:

• For developments that have been certified for an exemption prior to October 1, 2026, the real property tax exemption would apply for 10 consecutive real property tax years beginning with the tax year in which a certificate of occupancy is issued for the development.
• For developments that apply for an exemption on or after October 1, 2026, and are thereafter certified for the exemption, the real property tax exemption would apply for five consecutive real property tax years beginning with either the tax year in which a certificate of occupancy is issued for the development or the tax year in which the mayor certifies to the Office of Tax and Revenue that the development has made eligible improvements.
• The abatement may last "for any additional years as extended by the Mayor pursuant to D.C. Code § 47-3802."

Practical Impact

For projects using supermarket tenants as anchor uses – particularly in underserved areas – Subtitle G would clarify the potential duration and administration of the tax abatement incentive, which may affect underwriting, lease negotiations and capital stack planning.

Legislative Status and Next Steps

The mayor presented the proposed budget to the D.C. Council on April 10, 2026, and the Council began formal consideration of the proposed budget and associated bills on April 14, 2026. Upcoming dates currently include committee markups from May 18 to May 22, 2026, and a Committee of the Whole public hearing on May 13, 2026.

Holland & Knight will continue to monitor developments and provide updates as the Council process progresses and the FY 2027 budget is finalized. If you have additional questions or would like more information, please contact the author or another member of Holland & Knight's D.C. and Northern Virginia Land Use Team.

This blog post is provided for informational purposes only and does not constitute legal advice. Readers should consult counsel regarding the application of these developments to their specific circumstances.