BEST PRACTICES IN LIHTC POLICY

Brian Peters

Housing Policy Advocate, IndependenceFirst

ABOUT THE PRESENTER

Housing Policy Advocate at IndependenceFirst, a non-profit Center for Independent Living serving people with disabilities in 4-county Milwaukee metro area

Chair of National Council on Independent Living’s Housing sub-committee

An expert on LIHTC issues…NOT!

WHO AM I TO SAY WHAT “BEST PRACTICES” IS?

I want YOUR thoughts!

AUDIENCE QUESTIONS

How many are familiar with Low Income Housing Tax Credit Program (Section 42)?

How many know what Qualified Allocation Plans are?

THE BASICS:

LIHTC: Low Income Housing Tax Credit Program Federal tax credits allocated

to states through IRS LIHTC allocations vary

annually – In 2014, allocations were

calculated at $2.30 per capita (per person)

– Small states received a minimum of $2,635,000

– California received $88 million!

– Wisconsin received $12,884,395

QAP: Qualified Allocation Plans How states say they will

use the LIHTC funding Public hearings required

as part of process Typically written with

developers as audience Can be confusing to

newbies Important information

often are in appendices Outlines the criteria by

which proposals will be judged

LOW INCOME HOUSING TAX CREDIT “Section 42” of the

Internal Revenue Code

Two types: 9% (new

construction/ substantial rehab)

4% (acquisition/new construction/rehab)

Can be combined

LIHTC REQUIREMENTS

Section 42 mandates a preference for: Projects that serve the lowest income tenants Projects that are obligated to serve qualified

tenants for the longest period of time Projects that are located in a qualified census

tract (as defined in subsection 42(d)(5)(C)) and the development of which contributes to a concentrated community revitalization plan

LIHTC CONSIDERATIONSSTATE HOUSING FINANCE AGENCIES HAVE TO GIVE CONSIDERATION TO:

Housing Needs Characteristics

Sponsor Characteristics Project Characteristics,

including whether the project includes the use of existing housing as part of a community revitalization plan

Tenant populations of households with children

Targeting of individuals on Public Housing Waiting Lists

Targeting of Populations with Special Housing Needs

Project Location Projects intended for

eventual tenant ownership The energy efficiency of the

project The historic character of the

project

Some states add their own requirements and preferences

STATE HFA

Low Income Housing Tax Credits are administered by a State Housing Finance Agency

Wisconsin’s HFA is Wisconsin Housing and Economic Development Authority (New logo!)

STATES AND QAPS

Some states view LIHTC program as purely a financial transaction They do the bare

minimum Very short QAP &

application Not necessarily a

blue state/red state thing!

Other states view LIHTC as an opportunity to do some “social good” Typically have more

in-depth QAPs and applications

Many goals involve homelessness and other “special needs” populations as well as energy and sustainability

“SOCIAL ENGINEERING”

Trying to do some “social good” has been called “social engineering”

But the absence of those actions IS a form of social engineering-particularly if there are countervailing incentives or pressures in community

Example: Pleasantsville enacts zoning ordinances designed to drive up property values. This makes housing unaffordable to low-income families Is this not social

engineering?

STATE TOOLS

How do states use LIHTC as a tool for in communities? Mandates

“You must do this if you want money” “You must do this if you want to qualify” Sometimes developers have options- “You must

do something on this list” Example: Wisconsin has design requirements for

buildings on accessibility and sustainability

MORE TOOLS Incentives

A popular way to encourage a goal “If you do this, you’ll get x number of points” Sometimes additional financing is offered as incentive Examples: Income targeting, increased accessibility,

transportation linkages, family size Set-asides

Done when state wants to guarantee a type of development WILL happen even if it scores low

“We’ll set aside this pot of money just for developers doing a specific kind of project”

Examples: Rural set-aside, supportive housing set-aside

WISCONSIN QAP

Wisconsin’s QAPs and other information can be found at www.wheda.com.

Discussing 2013-2014 QAP, available on website

Note that nitty gritty details are in appendices

2015-2016 QAP finalized last week

QAP BEST PRACTICES

During this Workshop, we shall: Look at some of the issues with LIHTC units Look at specific sections of WHEDA’s QAP and

compare with other QAPs Discuss what we like/dislike Discuss what we think Best Practices should be

INCOME TARGETING

LIHTC Units generally are aimed at 50% or 60% of Area Median Income (AMI)

LIHTC has two income targeting options: At least 40% of units must be targeted at people

at or below 60% AMI (40/60 test) OR At least 20% of units must be targeted at people

at or below 50% AMI (20/50 test) But typically because of fixed costs, developers

will do 100% (or close to it) of units being LIHTC

LIHTC RENTS Rent usually is set at 30% of chosen AMI level Rent is “fixed” and does not change with household’s

income Unit income limitation calculated as:

Studio=1 person Each bedroom=1.5 individuals

WAUKESHA RENT LIMITS AT 50% AMI

Bdrm # RentEfficiency: 616 One 660 Two 791Three 914Four 1,020Five 1,125Six 1,231Source: Wisconsin Standard Multifamily Tax Subsidy Project - Estimated Maximum Income and Rent Limits, Effective December 18, 2013

Extremely Low Income Household Wisconsin SSI (2013)

Combined Federal & State SSI payments:

Individual: $793.78 Couple: $1,198.05

A couple receiving SSI renting an efficiency would be paying 51% of their income-far beyond the 30% rule of thumb.

Many properties require certain threshold of income (3x rent)

Source: http://www.dhs.wisconsin.gov/ssi/benefits.htm

THE ISSUE: UNAFFORDABLE TO ELI

LIHTC developments at standard AMI targets are not affordable to ELI households

How can state HFAs reach this population?

What is needed to make it work?

AFFORDABILITY OPTIONS

30% AMI is extremely difficult to reach without rental subsidies; would it be better to have more units at 40%?

Some states offer additional financing to assist with deeper income targeting. But WI cannot use state funds for this. No state tax credits or tax revenue available.

What programs could be used with LIHTC for additional subsidies?

2014 WHEDA QAP-ELI TARGETING

80 (out of 465) for serving Lowest Income Residents 70 Points on sliding

scale 10 bonus points if 6

or more units Units with project-

based subsidies not eligible unless supportive housing

HOME funds OK

SAMPLE ELI TARGETING: 58.50 POINTS

Total Units for

Development

44

CMI Set-Aside Percentage

Number of Units @ CMI

Percentage of Total, (Must equal or exceed 5%)

Multiply Percent by Factor

Total Points

50% 9 20.45 X 1.00= 20.45

40% 3 6.07% X 1.25= 7.59

30% or Lower

6 13.64 X 1.50= 20.46

B. 10 Bonus Points

CheckBox

Points Description

10

The application includes 6 or more 30% CMI Units.

ELI TARGETING IN ALASKA

Alaska requires at least 5% of any projects with 20 or more units to serve populations with “special needs” (of which ELI is a category) Cannot be targeted by other funding (i.e. 811)

Offers discretionary basis boost (additional funding) for developers meeting certain conditions for ELI targeting

ELI TARGETING IN MASSACHUSETTS

ELI is one of 4 housing priorities developers must choose to qualify. 20% of units must be for ELI.

One of 13 mandatory thresholds 9% tax credit must have 10% of units for 30%

AMI 4% tax credit and “primarily” affordable must

have 10% of units for 30% AMI. IF mixed-income with 50% or more market-rate units, 15% of units must be for 30% AMI.

ELI IN ILLINOIS

Developers score points (up to 10 out of 100 possible points) for units at 30% AMI as percentage of total projects. Example is for projects with 41 or more units. 1 pts for 1%-4.99% 2 pts for 5.0%-9.99% 4 pts for 10%-14.99% 7 pts for 15%-19.99 10 pts for 20% or more

Projects 40 units or less starts at 4% minimum up to 25% or more, similar to above

ELI IN CONNECTICUT

107 possible points in application; Targeting units at 25% AMI earns up to 7 pts for

25% or more units (sliding scale) 6 pts for targeting units above 25% AMI to 50%

AMI (40% or more units needed for full number of points on a sliding scale)

ELI IN DELAWARE

Delaware takes a balanced approach, encouraging developers to mix income target levels (30%, 40%, 50%, 60%) with higher points for targeting lower income levels

Interesting that the chart for 2014 is much less complicated than the one for 2013 (next 2 pages)

2013 BALANCED INCOME TARGETINGArea Median Income Rents

Percent of Units

30% 40% 50% 60% Market

50.0 or more 1 1 2 2 0

42.5 to 49.99

1 2 2 2 0

35.0 to 42.4 2 2 3 2 0

30.0 to 34.99

3 4 4 3 0

25.0 to 29.99

5 5 5 5 0

20.0 to 24.99

5 5 5 5 0

15.0 to 19.99

4 4 4 4 5

10.0 to 14.99

3 3 2 2 4

5.0 to 9.99 2 2 2 1 3

2014 BALANCED INCOME TARGETING

ELI IN IOWA

Category 1. Serves Lowest Income Residents 0 to 20 points Projects that provide Units that are set aside and occupied

by tenants with incomes at or below forty percent (40%) AMGI and are rent restricted. 1 point for each full one percent (1%) of the total Project Units (20

points maximum)

 Category 2. Mixed Income Incentive 0 to 25 points Projects that provide market rate Units (not eligible for Tax

Credits). On-site staff Units cannot be counted for points. 1 point for each full one percent (1%) of the Units (20 points

maximum) And Serve 30% AMGI qualified tenants.

1 point for each full one percent (1%) of the Units at 30% AMGI (5 points maximum)

*Units assisted with vouchers cannot qualify for any of scoring points in this category.

ELI IN NORTH CAROLINA

State law classifies counties as high, moderate, or low income. If high income county:

5 pts if at least 25% targeted at 30% AMI OR; 2 pts if at least 50% targeted at 40%

If moderate income county: 5 pts for at least 25% targeted at 40% AMI OR; 2 pts if at least 50% targeted at 50% AMI

ELI IN NORTH CAROLINA

If in a low income county; 5 pts for at least 40% of units at 50% AMI

This scoring encourages ELI units in high-income counties, and does not incentivize them in low-income counties

ELI BEST PRACTICES

How do we serve the ELI population?….without using other federal subsidies?

Should ELI units be discouraged in high-poverty areas? Is that not where the “need” or demand is?

Some (14) states have a state tax LIHTC. Wisconsin doesn’t. Does this hurt WI efforts?

You could use market-rate units to subsidize ELI units. What are pros/cons of this?

What did you like/dislike?

ACCESSIBILITY

Section 42 is not considered federal funding, so…Section 504 of the Rehabilitation Act of 1973 does not apply. In other words, no requirement for increased

accessibility Only Fair Housing Act would apply nation-

wide. Wisconsin also has Open Housing Law. Similar to Fair Housing Act, but lowers unit

threshold to 3 or above (FHA is 4 or above), and includes accessibility triggers for rehabs.

FAIR HOUSING IS…NOT SO FAIR

Fair Housing Act’s construction standards have accessibility requirements

But they are the minimum requirements ….

Minimum Is not very accessible for many

Scooters Bariatric wheelchairs Non-mobility/non-sensory disabilities

ACCESSIBILITY STANDARDS/GUIDELINES Common standards or guidelines used

Section 504 Building code requirements (ICC/ANSI) Universal Design Visitability Aging in Place

Don’t forget features for non-mobility disabilities like environmental sensitivities

WISCONSIN QAP ACCESSIBILITY

WHEDA has two categories; New Construction/Adaptive Reuse of non-housing structure (NC) and Rehab of existing housing (R)

Design Requirements are listed for both NC & R WHEDA requires increased accessibility using

ICC/ANSI A117.1 and part of ADA Accessibility Guidelines

But only 20% of single-family/duplex/ townhomes required to be Visitable

Offers points for increased accessibility features

MANDATE EXAMPLES

New Mexico-Mandatory Visitability for at least 50% of new multi-family housing units

Colorado has “Healthy Living Environment” with safe biodegradable materials, mold reduction, adequate ventilation, and isolation of garages

Missouri requires all 12+ units to have 5% wheelchair accessibility and 2% sensory accessibility

DELAWARE ACCESSIBILITY INCENTIVES

Awards additional points for developments that exceed 5% of total unit count being fully accessible units 10% = 3 extra points 15% = 4 pts 20% = 5 pts

Also requires marketing & renting to households that need features. If household has no disability, lease addendum allows management to transfer them if someone else needs accessibility features

ILLINOIS ACCESSIBILITY

Offers points for increased accessibility under ICC/ANSI 117.1-2003 1 pt for 10% or more of units for mobility

disability, AND 2% for sensory disabilities 2 pts for 10% mobility, 2% sensory, AND

Universal Design score of at least 50 3 pts for 10% mobility, 2% sensory, and

Universal Design score of at least 75

INDIANA ACCESSIBILITY

Aging in Place is a housing priority, and points are given for Aging-in-Place related services

Indiana minimum of Section 504 units or similar fully accessible units is 5% for rehab and 6% for new units.

Additional percentages are assigned additional points on sliding scale up to 9% to 11% (depending on type of project)

Also offers incentives for Universal Designs on a sliding scale.

ACCESSIBILITY APPROACHES

Do you think having accessibility mandates is a good idea? How much should be mandated?

What about incentives? Should we incentivize additional units using existing standards like ADAAG, ICC/ANSI, or use newer approaches like Universal Design?

What should best practices be?

INTEGRATION

Integration means many things to different people

To fair housing & social justice advocates, it’s inclusion of minorities/economically disadvantaged groups, and access to opportunities

To advocates on disability issues, integration is inclusion of people with disabilities into community in a non-segregated way

INTEGRATION EXAMPLES

Examples we discussed already includes: North Carolina’s scoring requiring higher % of ELI

units in high-income counties, but none in low-income counties

Balanced Income approaches encouraging mixes of units (i.e. Delaware offering points for 20%-50% of units being market-rate)

Affirmatively Furthering Fair Housing, de-segregation, etc. to avoid concentration of developments

ALASKA INTEGRATION

Alaska has an unusual scoring system that encourages high # of LI units in high-income tracts, but does the reverse in census tracts with low income, giving scoring incentives for high number of market-rate units.

ALASKA PROJECT MIX

COLORADO SCORING INCENTIVE

Colorado provides scoring incentives for mixed-income projects that have no more than 80% market-rate units (the max allowed under 20/50 Rule).

INDIANA

INDIANA MATRIX (REALLY!)

Encourages a mix of units from 30%, 40%, 50%, 60%+ Market Rate (Similar to Delaware’s 2013 Balanced Scoring that we previously discussed)

Scoring incentive based on % of units in each category, ranging from 55% of units down to 3% of units.

Highest scoring opportunities is at range of 22% to 29.99% of units for each.

NEW HAMPSHIRE

Points for projects in towns with no other previously approved affordable family housing. At least 20% of units must be affordable to low income households with no age designations.

INTEGRATION BEST PRACTICES

Thoughts on best way to achieve integration of LIHTC and tenants into communities?

Should we encourage mixed-income buildings in low-income areas, and higher % of LI units in high-income areas?

Should there be a limit on how many LIHTC developments there can be in an area? If so, what? How? Urban density is different than rural or suburban

density if using geographic distances Wouldn’t this be a barrier for neighborhood

revitalization efforts?

COMMUNITY SUPPORT EXAMPLE

Many states require community support letters Pro: Community support can smooth the way for

development (zoning changes, variances, etc.). This way, the SHFA is assured development will happen.

Con: Isn’t this rewarding NIMBYism? WHEDA provides 2 points for Local

Notification, and 2 points for each support letter, up to 6 points. Letter must be from local big-wigs (my words, not theirs)

Other states have similar requirements How much should support in the community

impact the development?

SUPPORTIVE HOUSING

Many states use LIHTC as principal funding for developments with supportive housing, with some other additional funding for services and rental subsidies

Maryland offers incentives for developers that accept Section 811 Project Rental Assistance Demonstration Program for non-elderly persons with disabilities

MORE SUPPORTIVE HOUSING

Wisconsin offers two types of Supportive Housing scoring for new cycle Integrated model with no more than 25% of units

targeted at persons with disabilities “Segregated” model with 50% or more units

targeted at homelessness Iowa has section in QAP that supports goals

of Olmstead (community living) Scoring incentives for visitable or fully accessible

units Scoring incentives for management training on

disability issues

SUPPORTIVE HOUSING BEST PRACTICES

Case managers like convenience of everyone in same location But advocates believe scattered is best practices

Disability advocates don’t like housing and services being linked in anyway

Does the type of supportive services (i.e. for people with disabilities, elderly as opposed to homeless) make a difference?

Should services be on-site or off-site? Your thoughts?

FINAL THOUGHTS