Tax Credit Advisor Article Archives

The Internal Revenue Service and U.S. Treasury Department have begun work on developing guidance expected to outline the conditions under which a limited partner investor in an historic rehabilitation tax credit transaction will be respected as a partner for federal tax law purposes.

Competition is the lifeblood of existence, for only through competition does natural selection harness the self-interest of autonomous beings into evolutionary advance. Though the same principle is the fuel that powers the success of entrepreneurial capitalism, it was a long time coming to affordable housing, arriving serendipitously in the Low-Income Housing Tax Credit (LIHTC) program, which mandates a trifecta of ring-fenced individual-state autonomous allocations, annual award cycles, and Qualification Allocation Plans (QAPs) as modifiable DNA.

To paraphrase Mick Nelson, a policy analyst at the Tennessee Housing Development Agency and recent panelists at NH&RA’s 2013 Multifamily Housing Exchange, the housing market doesn’t work like an NFL draft – the households with the least resources and greatest challenges don’t get to choose their unit first. Whether it’s the senior living on a fixed-income, the wounded veteran transitioning back to civilian life, or the working class family living in a blighted neighborhood, the marketplace provides few options for the families and individuals served by our federal affordable housing programs.

The Obama Administration’s budget request for the U.S. Department of Housing and Urban Development (HUD) for Fiscal Year 2014, which begins October 1, reflects a mix of winners and losers and contains a number of proposed program changes. The Administration’s budget also includes positive and negatives for rural housing programs along with some tax credit proposals (see p. 12).

Stakeholders have reacted favorably to recommendations made by the National Park Service for promoting greater awareness, efficiency, and use of the federal historic rehabilitation tax credit program.

LIHTC Multi-Investor Fund Activity

The low-income housing tax credit (LIHTC) equity market continues to hum along with rising yields on new multi-investor funds and softening credit prices in some areas. Current national multi-investor LIHTC funds generally have projected after-tax yields to investors ranging from 7.0% to 7.5% – with many clustered around 7.25%.

Pennsylvania has made and Maryland is proposing major changes to their federal low-income housing tax credit programs this year, officials told a Washington, D.C. conference held by the National Council of Housing Market Analysts and National Housing & Rehabilitation Association.

Huntington Bank has developed quite an appetite for low-income housing tax credits. The Columbus, Ohio-based regional bank has committed to invest another $150 million in LIHTC properties in Ohio through the Ohio Capital Corporation for Housing (OCCH). The new pledge, expected to finance the construction or preservation of about 2,000 affordable rental housing units, follows a previous $100 million investment commitment by Huntington Bank that was completed in 2012.

The historic tax credit industry has been roiled by a sharp curtailment in closings of historic tax credit transactions and the availability of new equity commitments from major investors for new projects, as investors, tax attorneys, accountants, and others mull the tax structures of deals for possible modifications before resuming business as usual.

The mortgages were the first closed under the U.S. Department of Housing and Urban Development’s pilot program, which is designed to drastically reduce the time it takes HUD to process applications for FHA insurance for new Section 223(f) mortgages for projects utilizing federal low-income housing tax credits.

The Obama Administration’s Fiscal Year 2014 budget proposes tax law changes relating to federal low-income housing, new markets, and energy tax credits. One is to make the new markets tax credit permanent.