How States Allocate 9% Competitive Tax Credits to Preserve Affordable Housing

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1 How States Allocate 9% Competitive Tax Credits to Preserve Affordable Housing Faced with a growing affordable housing crisis, states are increasingly preserving existing multifamily, affordable homes. Forty-five states target a portion of their competitive 9% to the preservation or rehabilitation of existing multifamily properties. Twenty-four states have adopted a set-aside, choosing to reserve a specific proportion of their tax credits for preservation/rehabilitation projects. Almost all of the remaining states award points to tax credit applicants for preservation. For more specific information on state and local preservation efforts view the National Housing Trust's State and Local Housing Preservation Working Paper at District of Columbia Preservation Set Aside Equal or Greater than 20% Preservation Set Aside Less than 20% Points for Preservation Non-numerical Preservation Priority Established No Preservation Priority Established National Housing Trust th Street, NW, Suite Washington, DC

2 SUMMARY Preservation of Existing Affordable Multifamily Housing (see full working paper for additional details) State Agency (2004) Alabama HFA ; Acquisition and rehabilitation of federally subsidized properties qualify for private activity bonds with 4% credits Alaska HFC Points for acquisition/rehabilitation or rehabilitation Arizona DoH/HFA ; ; Set-aside for two acquisition/rehabilitation properties State Housing Fund finances development of qualified affordable rental properties ,283 Arkansas DFA ; California TCAC & CDLAC 5% set-aside for preservation; Multifamily Housing Program ($150 million/year) provides points for at-risk properties; Preservation acquisition fund ($45 million levered 3 to 1 with CalHFA funds); Additional resources described in complete working paper ,649 Colorado HFA Internal Housing Opportunity Fund (HOF) funds 2nd lower interest rates; HOF funds used for very low interest loans on smaller transactions; Multifamily Refinance Program; Interest rate reductions to properties struggling to meet debt service; Extending affordability periods on owners reaching 10-year lockout expirations Connecticut HFA Non-numerical priority for preservation Delaware SHA $600,000 set-aside for preservation (approx. 30%) Housing Development Fund loans may be used to finance pre-development expenses, construction costs and permanent financing; private activity bonds with 4% credits are available without competition to Preservation Expiration Housing that satisfies the requirements of the QAP District of Columbia DHCD & HFA ; (for private activity bonds with 4% tax credits); Non-numerical priority for preservation (for 9% credits) Joint initiative w/ National Housing Trust Community Development Fund (NHTCDF); Collaboration with Enterprise Foundation on preservation; RFP in 2003 for Housing Production Trust Fund -- $7 million for preservation; RFP in 2003 targeting $1.5 million of CDBG/HOME funds for preservation Florida HFC State & Local Housing Trust Funds can be used for rehab or acquisition; SAIL program loans can be used as gap financing for substantial rehab Georgia DCA/HFA na

3 (2004) HCDC of Hawaii Rental Housing Trust Fund provides equity gap low interest loans or grants--allowable uses include preservation, acquisition and substantial rehab Idaho HFA Affordable Housing Investment Trust includes a designated "account" for multifamily gap loans that can be used for acquisition/preservation Illinois HDA $2 million set-aside for preservation (approx. 10%) Governor Blagojevich signed an executive order in 2003 making preservation a statewide housing priority; Affordable Housing Trust Fund can be used for acquisition and rehab; State Affordable Housing Tax Credit gives preference to preservation ,469 Indiana HFA 20% set-aside for preservation; 15% set-aside applicable to tax credits, tax exempt bonds, HOME and the state Housing Trust Fund; Housing Trust Fund may be used for rehab, including preservation of at-risk housing Iowa FA 20% set-aside for preservation; Multifamily Preservation Loan Program provides loans for preservation; Main Street Revitalization Loan program could provide loans for preservation; 40% of State Housing Trust Fund is allocated to Project-Based Housing Program that funds development & preservation of single-family and multifamily housing. The remaining funds go to local housing trust funds, which can provide funds for rehab Kansas HRC ; State Housing Trust Fund provides loans & grants for acquisition and/or rehab of multifamily properties, among other things Kentucky HC Affordable Housing Trust Fund can provide loans for most housing-related activities, including preservation NA NA 0 0 Louisiana HFA Housing Trust Fund can be used to produce, rehab and preserve affordable housing Maine SHA Non-numerical priority for acq/rehab; Housing Opportunities for Maine Fund provides loans & grants to support affordable housing, presumably including preservation; Maine's Preservation Financing Program can be used for properties currently financed by MSHA for acquisition or refinancing, and physical plant improvements Maryland DHCD Has preserved significant amounts of older assisted properties w/ private activity bonds; Affordable Housing Trust provides deferred payment loans & grants for capital costs for rehab & preservation, among other things; Multifamily Bond Program finances large percentage of preservation properties

4 (2004) Massachusetts DHCD 35% set-aside for preservation (after Hope VI set-asides) State has a creative HUD Rent Adjustment Waiver that replaces HUD's "10% rule;" Affordable Housing Trust Fund may be used for preservation; State Housing Tax Credits may be used for preservation; Capital Improvement and Preservation Fund is a state bond funded program that preserves & improves existing privately owned, assisted affordable rental properties Michigan SHDA 30% holdback for preservation; Section 236 and Section 202 Preservation Program used for acquisition and preservation; "Plethora of Preservation Programs" including MSHDA's TEAM Preservation Program and Section 8 Preservation Program Minnesota HFA Housing Trust Fund provides capital financing for acquisition, construction and rehab; Preservation Affordable Rental Investment Fund Program provides low-interest-deferred loans for preservation; Devoted $37 million in agency resources to preservation; 40% of recent HOME expenditures for Rural Development preservation; Redefined Equity II program and bond refunding program for FAF developments Mississippi HC Missouri HDC Non-numerical priority for preservation Rental Housing Production & Preservation Program provides below market interest rate construction & permanent financing for acquisition, rehab & new construction; In 2003, state stretched its funds by allocating MHDC & HOME funds for properties that would work with bond allocation and 4% credits; One of evaluation factors for MO Housing Trust Fund is preservation Montana BoH/HD 20% set-aside for preservation; Revolving Loan Account for Housing makes loans for preservation or conversion to low- or moderate-income housing Nebraska IFA ; Affordable Housing Trust Fund provides financial assistance for rehabilitation Nevada HD Trust Fund provides grants and loans for multifamily acquisition or rehabilitation New Hampshire HFA Trust Fund provides flexible financing for construction, rehabilitation and acquisition New Jersey HMFA Set-aside for preservation Balanced Housing Program provides funds low-interest, soft financing to tax credit properties in addition to providing subsidized zero-interest loans for rehab; Small Rental Project Preservation Loan Program preserves small rental properties; NJHMFA provides $15,000/apartment in HOME funds for preservation properties as well as allocating $40 million of reserves to provide lower than market rate financing; Formed Division of Multifamily Lending whose main focus is financing preservation New Mexico MFA ; In 2004, state agency funded 8 multifamily development with bond financing (over 20% of their total allocation) ,110

5 (2004) New York State DHCR 10% set-aside for preservation ,142 NY HFA HOPES program is a set-aside of private activity bonds w/ 4% credits for preservation NYC HPD 65 1, North Carolina HFA 20% set-aside (or 10 properties) for rehab Allocation of tax credits permitted outside of the normal process for preservation; Rehab properties listed at 2nd out of 4 priorities in allocation of multifamily portion of taxexempt bonds with 4% credits; Trust Fund provides loans, grants and interest reduction payments for rehabilitation North Dakota HFA 10% set-aside for preservation/rehab; Ohio HFA 25% set-aside for preservation pool Trust Fund funds activities including predevelopment costs and rehabilitation. In 2004, funds available to all competitive projects seeking 9% credits and for preservation bond projects ,072 Oklahoma HFA Housing Trust Fund offers loans for acquisition and rehabilitation Oregon HCS 25% set-aside for preservation (actually exceeded 25%) OR Housing Development Grant Program earmarked $1 million for preservation; City of Portland prioritizes HOME, CDBG and tax increment dollars for preservation; Portland requires owners to provide 210 day notice of intention of opt out -- City may issue condemnation proceedings to pay owner fair market value Pennsylvania HFA 20% set-aside for preservation Philadelphia -- 1/05 approved Trust Fund which will be able to support preservation 26 2, Rhode Island HMFC Non-numerical priority for preservation and rehabilitation Exception to state's 10-year placed in service restriction for expiring use properties; Housing Trust Fund has made loans to ensure preservation; RIH's Preservation Program uses mortgage loans, additional financing, distributions of residual receipts and tax credits to provide owners/buyers with incentives to maintain properties for 40 years beyond current use restrictions South Carolina SHFDA 25% set-aside (after RHS set-aside is deducted) for rehabilitation South Dakota HDA 60% set-aside for rehab/preservation Tennessee HDA 10% set-aside for rehabilitation; THDA will allocate up to $15 million in multifamily tax-exempt bond authority per development for developments involving conversion and/or acquisition ,002 Texas DHCA 15% set-aside for preservation The state Trust Fund provides grants and loans to finance, acquire and develop affordable housing; TDHCA maintains a list of affordable housing portfolios on its website and classifies each property by its priority for being preserved; Multifamily Housing Preservation Incentives Demonstration Program provides financing for acquisition, rehab or new construction which replaces an existing property. 25 2, ,156

6 (2004) Utah HC Set-asides for preservation and rehabilitation; Olene Walker Housing Trust Fund prioritizes gap financing for preservation Vermont HFA Non-numerical priority for preservation Trust Fund provides loans and grants for acquisition, rehab & construction; Preservation agreements provide increased return on equity and access to cash; Facilitates the sale and transfer of properties to nonprofits or tax credit partnerships; Creation of local partnerships have been critical to success of nonprofit acquisitions Virginia HDA Non-competitive pool for preservation in Northern VA $2 million set-aside of the Virginia Housing Fund for preservation; CDFI with the express purpose to aid in preservation; Fairfax Co. -- $3 million preservation fund and preservation tax abatement incentive 22 1, Washington State HFC WA's Housing Trust Fund can be used for acquisition & rehab for preservation; Impact Capital provides pre-development, bridge and other financing for properties developed or rehabilitated by nonprofit organizations; Nonprofit bonds are issued for preservation properties; Seattle -- bridge loan program and $86 million housing levy fund preservation West Virginia HDF 15% set-aside for rural preservation; Set-aside for HUD Preservation; Affordable Housing Trust Fund provides grants and loans for rehabilitation and foreclosure prevention among other things; Mini Moderate Rehabilitation Program "no-nonsense" lending program provides low interest loans with streamlined access to funds Wisconsin HEDA 40% set-aside for preservation Preservation financing offered to restructure existing loans to preserve; $10 million Saving Our Stock program preserves project-based Section 8 housing; Governor appointed Task Force for Housing Preservation; 3-year strategic plan with large component being preservation Wyoming CDA Small Project Opportunities Program uses set-aside of HOME funds for rehabilitation of existing small properties NA NA NA NA Totals , ,995 Housing Finance Agencies & Preservation Priorities Total in 2004 (9% and 4% credits) 45 states prioritize preservation through points or a specific preservation set-aside in their competitive tax credit program Total states set-aside at least 10% of their 9% tax credits for preservation Total 46,816 Almost every state has a surplus of 4% tax credits and private activity bonds and many of them use such bonds for preservation Estimated Tax Credit Equity* $40,000/apartment *Tax credit equity calculated with information provided by State housing finance agencies Some of the information contained in this table was generously provided by the National Council of State Housing Agencies, National Affordable Housing Trust and Affordable Housing Finance magazine. Information was supplemented with data from the National Housing Trust.