Large-Scale Student Housing Bearing the Brunt: Tripling the Tax in Tuscaloosa

A group of Tuscaloosa apartment owners filed a lawsuit against the City of Tuscaloosa, alleging that a new tax unfairly targets student housing projects of a certain size.

On September 21, 2021, the Tuscaloosa City Council adopted Ordinance No. 9112, which increased the business rental license fee from one percent to three percent for student-oriented housing developments with more than 200 bedrooms. The ordinance uses the definition of student-oriented development from a 1972 zoning ordinance and grants the "zoning officer" sole discretion in determining what qualifies as "student-oriented housing development with more than 200 bedrooms." The stated reason for the ordinance was that population density and proximity to other highly-developed areas might necessitate a disproportionate provision of public services in the future. However, the license fee remained unchanged for other multi-family complexes regardless of size and for student housing with 200 bedrooms or less.  

In light of this ordinance, property owners of student-oriented developments with more than 200 bedrooms are required to pay a tax that is three times higher than the rate for student-oriented developments with less than 200 bedrooms or multifamily developments of any size.

Property owners, reasonably upset about the fee, filed suit. They argue that the definition of student-oriented housing is vague and lacks guidelines to determine what qualifies as a student-oriented development. They further take issue with the decision being in the sole discretion of the “zoning officer,” calling it a deprivation of their due process rights under the 5th and 14th Amendments. Finally, they contend that the arbitrary threshold of 200 bedrooms for the higher tax is subjective.

The property owners also argue that the Ordinance violates Alabama law. They argue that the Ordinance is a zoning ordinance subject to planning and zoning authority. Tuscaloosa, however, did not notify the public or holding a public hearing before adopting the ordinance as required.

With large fees at stake for both sides, we anticipate a hotly contested legal challenge that may take years to resolve.