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Grove Hall Gateway: Affordable Housing Recommendations

Grove Hall Gateway: Affordable Housing Recommendations. Information Officer: Yili Tang Staff: Julie Huss Russell Tipper. Qualified Affordable Housing Zones. Roxbury Market Comparables. Affordable Housing Options. Section 8 Government (federal) subsidized housing vouchers Section 42

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Grove Hall Gateway: Affordable Housing Recommendations

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  1. Grove Hall Gateway:Affordable Housing Recommendations Information Officer: Yili Tang Staff: Julie Huss Russell Tipper

  2. Qualified Affordable Housing Zones

  3. Roxbury Market Comparables

  4. Affordable Housing Options • Section 8 • Government (federal) subsidized housing vouchers • Section 42 • Government (state) subsidized tax credits

  5. Section 8 • Authorized by Congress in 1974 and developed by HUD to provide rental subsidies for eligible tenant families residing in newly constructed, rehabilitated and existing rental and cooperative apartment projects. • Eligibility: • Must be a family (including single persons) • Must be income eligible (income limits set by the Department of Housing and Urban Development) • Must be U.S. citizen or have eligible immigration status. • Owner obligations: • (i) the leasing of assisted units to Section 8 income eligible families, • (ii) the maintenance of the project as decent, safe and sanitary housing for the residents, • (iii) compliance with applicable nondiscrimination and equal employment opportunity requirements, • (iv) compliance with Section 8 reporting, management and accounting requirements, and • (v) the procurement of the prior written approval of HUD and the Contract Administrator to any transfers of the project or any portion thereof and any assignment of the HAP Contract. • Rents: • The tenant then pays 30% of household income for rent, with the balance paid by the housing authority directly to the landlord.

  6. Section 8 Rent & Income Limitations The rent and income limits shown above are derived from the HUD 50% Area Median Gross Income units in accordance with Revenue Ruling 89-24. All final calculations are rounded down to the nearest whole dollar.

  7. Section 42 • In 1986, Congress enacted the Low Income Housing Tax Credit (refer to as the “Housing Credit” in the paper) Program which is authorized and governed by Section 42 of the Internal Revenue Code of 1986. • Income Restriction: • The entire development must meet the minimum set-aside test in order to be eligible for the Housing Credit. By doing so, it could ensure that certain number of apartment units will be available to low-income households. • Minimum set-aside (Section 42(g)) • 20%@50% - 20% or more of the aggregate residential rental unites are occupied by individuals with incomes of 50% or less of area median income, as adjusted for family size (the 20-50 set aside test), or • 40%@60% - 40% or more of the aggregate residential rental units are occupied by individuals with incomes of 60% or less of area median income, as adjusted for family size, (the 40-60 set aside test) • Rents: • The gross rent charged to a qualified tenant could not exceed 30% of the annual imputed income applicable to such rental unit.

  8. Section 42 (cont.) • Type of Credit: • The maximum Housing Credit allocated to owners of qualified low-income projects is equal to • 40% of the qualified development cost (30% on a present value basis) for projects which have qualified acquisition costs or the benefit of a federal subsidy, such as HUD loan or tax-exempt bond financing (the “4% credit”) • 90% of the qualified development cost (70% on a present value basis) for projects which are financed without a federal subsidy (the “9% credit”).

  9. Section 42 Rent Restriction Assume, for instance, a Housing Credit Project which elects to set aside a minimum of 20% or 40%of its units for qualifying households. Assume further that the 2002 median income for a family in the Roxbury area in which a property was built is $30,000 and that the tenant must pay their own utility bills which are estimated to be $50 per month.

  10. Comparing Section 42 & 8

  11. Recommendations • Agree with Grove Hall Gateway’s recommendation in using Section 42 instead of Section 8 • We would recommend the affordable housing units to exceed 20% • Maximize affordable housing credits to offset tax liabilities. • Rationale: • Investment return in fixed/known at onset of project. • Ability to capture a greater percentage of the low-income family demand due to a larger percentage of median income to qualify (60% vs. 50%). • Tax Credits can be used to offset future federal tax liabilities. • Section 8 properties tend to aggregate large numbers of unemployed families, defeating the goal of mixed-income housing. • Section 42 is a more stable environment for families moving to self sufficiency. • Difficulties: • Section 8 does not require a lock-in period unlike Section 42’s 30-year lock-in period. • Much longer than what we project it will take to gentrify the community • No rental guarantee, Section 42 can default on rent unlike Section 8 which has a portion backed by HUD.

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