utah housing corporation low-income housing tax credit program presentation by w. robin kemker lihtc...

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  • Utah Housing Corporation Low-Income HousingTax Credit ProgramPresentationBy

    W. Robin KemkerLIHTC Technical SpecialistUtah Housing Corporation

  • The Spectrum of Housing Affordability

  • Spectrum of Housing AffordabilityWhat is Median Income?No IncomeVery HighIncomeMedianIncomeAn 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.HomelessEstateHousing Programs

  • Spectrum of Housing Affordability Income Definitions

  • Spectrum of Housing Affordability UHC Programs

  • Public Private PartnershipUnited States TreasuryPrivate LenderConstruction LenderInvestorDeveloperGeneral ContractorArchitectManagement Company

  • Types of Housing CreditsFederal 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 Period1986:15 Year Initial Compliance Period10 Year Credit Period1990:Federal Extended Use Period of 15 Years1996:Utah Extended Use Period of 84 Years30

  • Utah Affordability PeriodThe 9%/4% competitive credit has an affordability requirement of 99 years.

    The 4% non-competitive credit used with tax-exempt bonds has an affordability requirement of 51 years.

  • How Do LIHTC Create Affordable Housing?Lower debt service 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 720,000Purchased by Investor $ 648,000 (90% purchase rate) How are LIHTC Calculated? New Construction

  • Rehabilitation AcquisitionBuilding 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 $ 364,000Purchased by Investor $ 1,035,000 $ 327,600 (90% purchase rate) Total Credits: $1,362,600Total Credits in 130% area: $1,771,400

    Acquisition & Rehabilitation Project LIHTC Calculation

  • Underwriting a ProjectUse Standard Secondary Market CriteriaTighter on DCR 1.15:1 minimumMinimum cash flow per unit: $300/yr.Greater of 7% or market study vacancy.Safe Harbor guidelines for operating expenses, capital replacement reserves, etc.Competition is pushing rents lower.Result: Investor interest is high for Utah projects.

  • Subsidized vs. LIHTCSubsidizedLIHTC

    Rent SubsidyYesNoRentIncomeYesInitiallyMixes IncomeNoYesWarehouse PoorYesNoMonitoredYesYes

  • Do LIHTC Projects Make a Difference?

    Average Income Served*

    Contracted ActualUrban$30,550$24,660

    Rural$22,704$16,866

    * Family of four in competitive 9%/4% projects

  • LIHTC Unit Production

  • LIHTC Units by CountyStatewide: 7.7% of Rental Units

  • ComplianceAll tenants must be income eligible.Must be pre-qualified before occupancy.Cannot be a dormitory.Projects must report annually to the Utah Housing Corporation.Project must be properly maintained.

    **In the 90s, the sky was falling! But, what part of the sky was falling?

    Lets look at the Spectrum of Housing Affordability and see what is happening where.

    The SPECTRUM IS CONTAINED WITHIN A RANGE OF NO HOUSING TO OWNING AN ESTATE.

    NOT EVERYONE IS HAVING A HOUSING SHORTAGE, BUT CLEARLY, SOME SEGMENTS OF SOCIETY ARE HAVING A CRISIS IN HOUSING.*Lets look at the scale from Homeless to the Estate owner.

    Median Income

    HOUSING PROGRAMS*Affordable Housing Nomenclature

    *At this time, the Utah Housing Corporation is supporting all ranges in the lower Median Income range.********Along the Wasatch front, LIHTC units represent fewer new units at this time. As a percentage of Units, LIHTV will increase. But, less than 505 of the LI*HTC units will be new construction. The reset will be rehabilitation of existing housing.*

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