Utah Housing Corporation Low-Income HousingTax Credit Program
PresentationBy
W. Robin KemkerLIHTC Technical SpecialistUtah Housing Corporation
The Spectrum The Spectrum of of
Housing AffordabilityHousing Affordability
Spectrum of Housing Spectrum of Housing AffordabilityAffordability
What is Median Income?What is Median Income?
No Income Very HighIncome
MedianIncome
An equal number of families are above and below “Median Income.”“Median Income” does not mean “Average Income.”
This number is estimated by HUD for all counties annually.
HomelessHomeless EstateEstate
Housing ProgramsHousing Programs
Spectrum of Housing Spectrum of Housing AffordabilityAffordability
Income Definitions Income Definitions
No Income( 0% )
MedianIncome(100%)
50%AMI
30%AMI
80%AMI
Poor
Very low-income
Low-incomeModerate-income
Spectrum of Housing AffordabilitySpectrum of Housing Affordability UHC Programs UHC Programs
Poor
Very low-income
Low-income
Moderate-income
No Income( 0% )
MedianIncome(100%)
50%AMI
30%AMI
9% LIHTC and Other
80%AMI
4% LIHTC & Bonds
Bonds and Mixed Income LIHTC First-Time Homebuyer
60%AMI
PreservationLIHTC & Bonds
and Other
PublicPublic — — Private Private PartnershipPartnershipUnited States TreasuryUnited States Treasury
Local CommunityLocal Community
Olene Walker Housing Trust FundOlene Walker Housing Trust Fund
Local HOME and CDBG FinancingLocal HOME and CDBG Financing
Private L
end
erP
rivate Len
der
Co
nstru
ction
Len
der
Co
nstru
ction
Len
der
Investo
rIn
vestor
DeveloperDeveloper
General ContractorGeneral ContractorArchitectArchitect
Management CompanyManagement Company
Types of Housing CreditsTypes of Housing Credits
Federal Credit Allocated at $1.75 per capitaAvailable through the 9% & 4% CompetitiveProcess. Approximately $40 million in total credits.
Federal Credit Allocated to Private ActivityBond projects. This 4% credit comes directlyFrom the Federal Treasury. Non-competitive credit.
State of Utah Credit Allocated at $0.125 per capitaAvailable to reduce rents, special needs amenities,feasibility, etc. $2.8 million in total credits.
Initial Credit PeriodInitial Credit Period19861986::
15 Year Initial Compliance Period15 Year Initial Compliance Period10 Year Credit Period10 Year Credit Period
19901990::Federal Extended Use Period of 15 YearsFederal Extended Use Period of 15 Years
19961996::Utah Extended Use Period of 84 YearsUtah Extended Use Period of 84 Years
0 15 9910
15 / 84 Yr. Extended Use15 Yr. Compliance
10 Yr. Credits
30
Utah Affordability PeriodUtah Affordability Period
The 9%/4% competitive credit has an The 9%/4% competitive credit has an affordability requirement of 99 years.affordability requirement of 99 years.
The 4% non-competitive credit used The 4% non-competitive credit used with tax-exempt bonds has an with tax-exempt bonds has an affordability requirement of 51 years.affordability requirement of 51 years.
How Do LIHTC Create Affordable Housing?
Market Rate Project
25% - 30% Equity
Debt
9% Tax Credit Project
45% - 55% Equity
Debt
Lower debt service Lower debt service Lower rents Lower rents
Building Total Cost $1,000,000 Less Land/Soft Costs (200,000) Eligible Basis $ 800,000 Multiplied by LIHTC rate 9% Annual Tax Credits $ 72,000 Total over 10 years 720,000 Purchased by Investor $ 648,000 (90% purchase rate)
How are LIHTC Calculated? New Construction
Rehabilitation Acquisition
Building Total Cost $1,800,000 $1,200,000 Less Land/Soft Costs (360,000) (160,000) Eligible Basis $1,440,000 $1,040,000 Multiplied by LIHTC rate 8% 3.5% Annual Tax Credits $ 115,000 $ 36,400 Total over 10 years $1,150,000 $ 364,000 Purchased by Investor $ 1,035,000 $ 327,600
(90% purchase rate) Total Credits: $1,362,600
Total Credits in 130% area: $1,771,400
Acquisition & Rehabilitation Project LIHTC Calculation
Underwriting a ProjectUnderwriting a Project
Use Standard Secondary Market CriteriaUse Standard Secondary Market Criteria Tighter on DCR 1.15:1 minimumTighter on DCR 1.15:1 minimum Minimum cash flow per unit: $300/yr.Minimum cash flow per unit: $300/yr. Greater of 7% or market study vacancy.Greater of 7% or market study vacancy. Safe Harbor guidelines for operating Safe Harbor guidelines for operating
expenses, capital replacement reserves, etc.expenses, capital replacement reserves, etc. Competition is pushing rents lower.Competition is pushing rents lower. Result: Investor interest is high for Utah Result: Investor interest is high for Utah
projects.projects.
Subsidized vs. LIHTCSubsidized vs. LIHTC
SubsidizedSubsidized LIHTCLIHTC
Rent SubsidyRent Subsidy YesYes NoNo
RentRentIncomeIncome YesYes InitiallyInitially
Mixes IncomeMixes Income NoNo YesYes
Warehouse PoorWarehouse Poor YesYes NoNo
MonitoredMonitored YesYes YesYes
Do LIHTC Projects Make a Do LIHTC Projects Make a Difference?Difference?
Average Income Served*Average Income Served*
ContractedContracted Actual Actual
UrbanUrban $30,550$30,550 $24,660$24,660
RuralRural$22,704$22,704 $16,866$16,866
* Family of four in competitive 9%/4% projects* Family of four in competitive 9%/4% projects
LIHTC Unit ProductionLIHTC Unit Production
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Total Units
LIHTC Units
LIHTC Units by CountyLIHTC Units by County
0%
5%
10%
15%
20%
25%
Percent of Rentals
IRON
WASATCH
SUMMIT
TOOELE
WASHINGTON
KANE
DUCHESNE
BOX ELDER
WEBER
DAVIS
Statewide: 7.7% of Rental Units
ComplianceCompliance
All tenants must be income eligible.All tenants must be income eligible. Must be pre-qualified before Must be pre-qualified before
occupancy.occupancy. Cannot be a dormitory.Cannot be a dormitory. Projects must report annually to the Projects must report annually to the
Utah Housing Corporation.Utah Housing Corporation. Project must be properly maintained.Project must be properly maintained.
