Best Practices in LIHTC Policy

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Best Practices in LIHTC Policy. Brian Peters Housing Policy Advocate, Independence First. About the Presenter. Housing Policy Advocate at Independence First , a non-profit Center for Independent Living serving people with disabilities in 4-county Milwaukee metro area - PowerPoint PPT Presentation

Transcript of Best Practices in LIHTC Policy

PowerPoint Presentation

Best Practices in LIHTC Policy

Brian PetersHousing Policy Advocate, IndependenceFirst

1About the PresenterHousing Policy Advocate at IndependenceFirst, a non-profit Center for Independent Living serving people with disabilities in 4-county Milwaukee metro areaChair of National Council on Independent Livings Housing sub-committeeAn expert on LIHTC issuesNOT!

2Who am I to say what Best Practices is?I want YOUR thoughts!

Nobody, thats who. Thats why YOU are going to be part of this discussion-I want to hear your thoughts as well. 3Audience QuestionsHow many are familiar with Low Income Housing Tax Credit Program (Section 42)? How many know what Qualified Allocation Plans are?

Note: I am NOT an Expert on LIHTC-dont ask me about financing, basis boosts, etc. This is about using LIHTC as a tool.4The Basics:LIHTC: Low Income Housing Tax Credit ProgramFederal tax credits allocated to states through IRSLIHTC 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 $12,884,395QAP: Qualified Allocation Plans How states say they will use the LIHTC fundingPublic hearings required as part of processTypically written with developers as audienceCan be confusing to newbiesImportant information often are in appendices Outlines the criteria by which proposals will be judged

5Low Income Housing Tax CreditSection 42 of the Internal Revenue CodeTwo types: 9% (new construction/ substantial rehab) 4% (acquisition/new construction/rehab)Can be combined

6LIHTC RequirementsSection 42 mandates a preference for:Projects that serve the lowest income tenantsProjects that are obligated to serve qualified tenants for the longest period of timeProjects 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

7LIHTC ConsiderationsState Housing Finance Agencies have to give consideration to:Housing Needs CharacteristicsSponsor CharacteristicsProject Characteristics, including whether the project includes the use of existing housing as part of a community revitalization planTenant populations of households with children

Targeting of individuals on Public Housing Waiting ListsTargeting of Populations with Special Housing NeedsProject LocationProjects intended for eventual tenant ownershipThe energy efficiency of the projectThe historic character of the projectSome states add their own requirements and preferencesConsideration is pretty vague.8State HFALow Income Housing Tax Credits are administered by a State Housing Finance AgencyWisconsins HFA is Wisconsin Housing and Economic Development Authority (New logo!)

I liked orange. 9States and QAPsSome states view LIHTC program as purely a financial transactionThey do the bare minimumVery short QAP & applicationNot necessarily a blue state/red state thing!

Other states view LIHTC as an opportunity to do some social goodTypically have more in-depth QAPs and applicationsMany goals involve homelessness and other special needs populations as well as energy and sustainability

If its in QAP, but not in scoring or requirements, its not happening.

10Social EngineeringTrying to do some social good has been called social engineeringBut the absence of those actions IS a form of social engineering-particularly if there are countervailing incentives or pressures in communityExample: Pleasantsville enacts zoning ordinances designed to drive up property values. This makes housing unaffordable to low-income familiesIs this not social engineering?

Something that is called social engineering usually is because of another unacknowledged social engineering11State ToolsHow do states use LIHTC as a tool for in communities?MandatesYou must do this if you want moneyYou must do this if you want to qualifySometimes developers have options- You must do something on this listExample: Wisconsin has design requirements for buildings on accessibility and sustainability

12More ToolsIncentivesA popular way to encourage a goalIf you do this, youll get x number of pointsSometimes additional financing is offered as incentiveExamples: Income targeting, increased accessibility, transportation linkages, family sizeSet-asidesDone when state wants to guarantee a type of development WILL happen even if it scores lowWell set aside this pot of money just for developers doing a specific kind of projectExamples: Rural set-aside, supportive housing set-aside

If you do points for incentives, how do you get it right? Too few points, and developers may think its too much effort/money. Too many points, and you weaken the incentives for other aspects of application.13Wisconsin QAPWisconsins QAPs and other information can be found at 2013-2014 QAP, available on websiteNote that nitty gritty details are in appendices2015-2016 QAP finalized last week

14QAP Best PracticesDuring this Workshop, we shall:Look at some of the issues with LIHTC unitsLook at specific sections of WHEDAs QAP and compare with other QAPsDiscuss what we like/dislikeDiscuss what we think Best Practices should be

15Income TargetingLIHTC 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) ORAt 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

NYC alone has 25/60 test. Any one in audience want to summarize some of costs?16LIHTC RentsRent usually is set at 30% of chosen AMI levelRent is fixed and does not change with households income Unit income limitation calculated as:Studio=1 person Each bedroom=1.5 individuals

17Waukesha Rent Limits at 50% AMIBdrm # RentEfficiency: 616 One 660 Two 791Three 914Four 1,020Five 1,125Six1,231Source: Wisconsin Standard Multifamily Tax Subsidy Project - Estimated Maximum Income and Rent Limits, Effective December 18, 2013

Extremely Low Income HouseholdWisconsin SSI (2013)Combined Federal & State SSI payments:Individual: $793.78Couple: $1,198.05A 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:

18The Issue: Unaffordable to ELI

LIHTC developments at standard AMI targets are not affordable to ELI householdsHow can state HFAs reach this population?What is needed to make it work?

19Affordability 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?Ask audience for examples of programs (HOME, CDBG, project-based vouchers, etc.)202014 WHEDA QAP-ELI Targeting80 (out of 465) for serving Lowest Income Residents 70 Points on sliding scale10 bonus points if 6 or more unitsUnits with project-based subsidies not eligible unless supportive housingHOME funds OK


22Sample ELI Targeting: 58.50 pointsTotal Units for Development 44CMI Set-Aside Percentage Number of Units @ CMI Percentage of Total, (Must equal or exceed 5%) Multiply Percent by Factor Total Points 50% 920.45X 1.00= 20.4540% 36.07% X 1.25= 7.5930% or Lower 6 13.64X 1.50= 20.46

B. 10 Bonus Points CheckBoxPointsDescription10The application includes 6 or more 30% CMI Units.

I round this off earlier than WHEDA does. I believe they go to four decimal places.23ELI Targeting in AlaskaAlaska 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 targeting24ELI Targeting in MassachusettsELI is one of 4 housing priorities developers must choose to qualify. 20% of units must be for ELI. One of 13 mandatory thresholds9% tax credit must have 10% of units for 30% AMI4% 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.

4 priorities: ELI, at-risk neighborhoods, preservation & family housing in neighborhoods of opportunity. Focus on homelessness/risk encouraged for ELI priority.25ELI in IllinoisDevelopers 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%-19.9910 pts for 20% or moreProjects 40 units or less starts at 4% minimum up to 25% or more, similar to aboveEncourages ELI units, but question is, is 20% the right number? Too many within a building? Also, this is what I mean when I say sliding scale in later examples.26ELI in Connecticut107 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)

27ELI in DelawareDelaware takes a balanced approach, encouraging developers to mix income target levels (30%, 40%, 50%, 60%) with higher points for targeting lower income levelsInteresting that the chart for 2014 is much less complicated than the one for 2013 (next 2 pages)282013 Balanced Income Targeting

Offers more flexibility, emphasis is an even mix of units. But matrix could be confusing for developers & for staff.292014 Balanced Income Targeting

Note market rate scoring is gone. More of an emphasis on lower-income units.30ELI in IowaCategory 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.

Note that in Category 2, you get up to 20 points for market-rate units, and then up to another 5 points for targeting ELI. I think this is interesting because this encourages market-rate units in developments which would mean more tax credits for other applicants.31ELI in North CarolinaState 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

32ELI in North CarolinaIf 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 countiesWhat are the pro/cons of the scoring in North Carolina?33ELI Best practicesHow 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 doesnt. 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?34AccessibilitySection 42 is not considered federal funding, soSection 504 of the Rehabilitation Act of 1973 does not apply.In other words, no requirement for increased accessibilityOnly 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.Many states and municipalities also have additional accessibility laws. Wont cover that here.35Fair Housing isnot so fairFair Housing Acts construction standards have accessibility requirementsBut they are the minimum requirements.MinimumIs not very accessible for manyScooters Bariatric wheelchairsNon-mobility/non-sensory disabilities36Accessibility Standards/GuidelinesCommon standards or guidelines usedSection 504Building code requirements (ICC/ANSI)Universal DesignVisitabilityAging in PlaceDont forget features for non-mobility disabilities like environmental sensitivities

Advantage of 504 and ICC/ANSI is that they have written standards and documentation. The latter 3 can vary depending on who you ask. ICC also has Type C Visitable unit that developers can use37Wisconsin QAP AccessibilityWHEDA 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 & RWHEDA requires increased accessibility using ICC/ANSI A117.1 and part of ADA Accessibility GuidelinesBut only 20% of single-family/duplex/ townhomes required to be VisitableOffers points for increased accessibility features ExamplesNew Mexico-Mandatory Visitability for at least 50% of new multi-family housing unitsColorado has Healthy Living Environment with safe biodegradable materials, mold reduction, adequate ventilation, and isolation of garagesMissouri requires all 12+ units to have 5% wheelchair accessibility and 2% sensory accessibility 39Delaware Accessibility IncentivesAwards additional points for developments that exceed 5% of total unit count being fully accessible units10% = 3 extra points15% = 4 pts20% = 5 ptsAlso 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 featuresAlso required to participate on state housing search website40Illinois AccessibilityOffers points for increased accessibility under ICC/ANSI 117.1-20031 pt for 10% or more of units for mobility disability, AND 2% for sensory disabilities2 pts for 10% mobility, 2% sensory, AND Universal Design score of at least 503 pts for 10% mobility, 2% sensory, and Universal Design score of at least 75

Illinois total pts is 100, so not very large incentive unless very competitive. UD is from separate manual.41Indiana AccessibilityAging in Place is a housing priority, and points are given for Aging-in-Place related servicesIndiana 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.42Accessibility ApproachesDo 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?43IntegrationIntegration means many things to different peopleTo fair housing & social justice advocates, its inclusion of minorities/economically disadvantaged groups, and access to opportunitiesTo advocates on disability issues, integration is inclusion of people with disabilities into community in a non-segregated way44Integration ExamplesExamples we discussed already includes:North Carolinas scoring requiring higher % of ELI units in high-income counties, but none in low-income countiesBalanced 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

45Alaska IntegrationAlaska 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.46Alaska Project Mix

Personally, I dont know if Id go for 100% LI units. Id also want to know how well the market-rate incentive works.47Colorado Scoring IncentiveColorado provides scoring incentives for mixed-income projects that have no more than 80% market-rate units (the max allowed under 20/50 Rule). 48

INDIANA49Indiana Matrix (really!)Encourages a mix of units from 30%, 40%, 50%, 60%+ Market Rate (Similar to Delawares 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.Delaware changed theirs to simplify it. Indiana didnt. Indiana doesnt have a separate incentive for market-rate in this.50New HampshirePoints 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.Remember that NH is mostly small towns!51Integration Best PracticesThoughts 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 distancesWouldnt this be a barrier for neighborhood revitalization efforts?

52Community Support ExampleMany states require community support lettersPro: Community support can smooth the way for development (zoning changes, variances, etc.). This way, the SHFA is assured development will happen.Con: Isnt 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 requirementsHow much should support in the community impact the development?

53Supportive HousingMany states use LIHTC as principal funding for developments with supportive housing, with some other additional funding for services and rental subsidiesMaryland offers incentives for developers that accept Section 811 Project Rental Assistance Demonstration Program for non-elderly persons with disabilities

54More Supportive HousingWisconsin offers two types of Supportive Housing scoring for new cycleIntegrated model with no more than 25% of units targeted at persons with disabilitiesSegregated model with 50% or more units targeted at homelessnessIowa has section in QAP that supports goals of Olmstead (community living)Scoring incentives for visitable or fully accessible unitsScoring incentives for management training on disability issuesExplain55Supportive Housing Best PracticesCase managers like convenience of everyone in same locationBut advocates believe scattered is best practicesDisability advocates dont like housing and services being linked in anywayDoes 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?56Final Thoughts