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Housing Credits

Housing Credits. What is a Housing Credit? Volume cap ($1.75 per capita per year, currently $29,248,010) Program requirements Income and rent restrictions Length of set aside 9% and 4% credits Competition QAP. Housing Credit Syndication. Tax credit received annually for 10 years

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Housing Credits

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  1. Housing Credits • What is a Housing Credit? • Volume cap ($1.75 per capita per year, currently $29,248,010) • Program requirements • Income and rent restrictions • Length of set aside • 9% and 4% credits • Competition • QAP

  2. Housing Credit Syndication • Tax credit received annually for 10 years • Requires entity with tax liability to join partnership • For profit limited partnership formed • Developer (for profit or non-profit) is general partner with .01% ownership • Investor(s) with tax liability become limited partners with 99.99% ownership • 99.99% of tax credits flow to limited partners, who pay funds up front in exchange for 10 years of tax credits

  3. Tax Credit Calculation • Net Equity = Eligible basis (project cost less land and other ineligible items such as federal funds)x DDA/QCT factor (130%)X Credit rate (9% or 4%)X % Low Income UnitsX 10 (number of years credit granted)X 99.99% (% sold)X Current syndication rate

  4. 9% Tax Credit Example • $11,000,000 total project cost • $1,000,000 land and other ineligible costs • Not located in QCT • 90% low income • $10,000,000 eligible basisX 8.01% (current 9% credit rate)X 90% low income = $720,900 annuallyX 10 yearsX $0.80 syndication rateX 99.99% = $5,766,623 (52% of cost)

  5. Bonds for Rental Housing • Bond volume cap ($75 per capita per year, currently $1,253,486,175 - not all housing) • Loan program • Credit enhancement • Private placement • Difficulty of program • Expensive cost of issuance • Automatic 4% tax credits (50% test)

  6. 4% Tax Credit Example • $11,000,000 total project cost • $1,000,000 land and other ineligible costs • Not located in QCT • 90% low income • $10,000,000 eligible basisX 3.43% (current 4% credit rate)X 90% low income = $308,700 annuallyX 10 yearsX $0.82 (syndication rate)X 99.99% = $2,531,087 (23% of cost)

  7. HOME CDBG Federal Home Loan Bank Essential function bonds 501c3 bonds CRA SHIP SAIL Section 8 PHA Capital Funds Property tax exemption Other Programs

  8. Today’s Challenges • Astronomical insurance costs • High real estate taxes • No annual rent increases • Utility costs increasing • Lack of suitable, affordable land • Minimal opportunities for additional subsidy

  9. What Local Government Can Do: • Provide significant financial incentives • Recognize more subsidy per deal may be required; which may mean less overall production • Waive fees (especially school board) • Consider tax exemption

  10. What Local Government Can Do: • Combat NIMBYism • Shorten permitting time frames • Align funding cycles (i.e., County HOME program) • Work with the municipalities within Broward County to enact similar strategies

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