A proposed change to the federal low-income housing tax-credit program would help affordable housing projects reach more income levels and make the credits more attractive to investors, according to New York officials.
Currently, tax credits can be used for housing units by families or individuals whose income is at or below 60% or 50% of area median income, depending on the program used. President Barack Obama's proposed budget would extend the tax credit to units in a project that reserved 40% of units for people earning an average of 60% of area median income and would allow for incomes of up to 80% of AMI.
"It's hard to get to middle income or moderate income New Yorkers using traditional federal, state and city affordable housing tools," said Marc Jahr, president of the New York City Housing Development Corp. "Those folks are the people who the federal, city, state programs aren't reaching."
The higher rents in units for incomes above 60% AMI would cross-subsidize those set aside for the lower incomes needed to reach the required average, he said.
"We can't get to people at or below 30% of median using the tax-credit program even though we put in roughly $150,000 per unit in subsidy and give these projects full tax abatements and exemptions," Jahr said. "We're trying to reach both very low-income households but also provide good housing for moderate income households and [this legislation] would help us create mixed-income housing and mixed-income neighborhoods."
The U.S. Department of Housing and Urban Development in 2010 estimated family median income in the New York City metropolitan area at $62,339.
The wider income levels would make the tax credits more marketable to investors, according to Brian Lawlor, chief executive officer of New York State Homes and Community Renewal, an umbrella organization that includes the New York State Housing Finance Agency.
"Where it's really going to help in New York State are some of the smaller markets like upstate where investors who purchase the tax credits sometimes are a little reluctant to get involved because pricing is all determined by marketability of the units," Lawlor said. "This rigid 60% rule sometimes can just make investors a little nervous because of the limited pool of people that might be qualified to move into the units."
Tax-credit investors take on risk that the project could fall out of compliance with regulations and they would lose their tax benefit.
"What happens if there's a mistake made? What happens if they can't find someone at 60%?" Lawlor said. "This bill would just eliminate that little bit of doubt that depresses pricing for tax credits for smaller markets."
Affordable housing projects financed with HDC or HFA bonds often use a mix of tax credits and state or city subsidies.
The HDC and HFA were the biggest issuers of multifamily housing bonds in 2010, issuing a combined $1.41 billion, roughly half of the $2.82 billion issued nationwide, according to Thomson Reuters.
MassHousing, which issued $116.3 million of multifamily bonds last year, is still looking at the proposed change, said spokesman Eric Gedstad in an e-mail.
"We're supportive of the broad concept of expanding the use of the tax credit to help more people — particularly lower-income renters — obtain affordable housing," Gedstad said. "The proposal a good starting point for further discussion."