The Board of Directors of the Texas Department of Housing and Community Affairs approved today a plan to use the Tax Credit Exchange Program (TCEP) to provide financial incentives to low income housing tax credit (LIHTC) developers to provide 10 percent to 20 percent more apartments in their new developments for Texans with incomes at or below 30 percent of the area median family income — the lowest income category served by housing programs.
I blogged earlier about the TCEP and its potential to be used to put a dent in the state’s huge deficit of apartments affordable to these families near the bottom of the income ladder.
TDHCA’s new program is the most significant effort the State of Texas has ever undertaken to provide housing for the neediest category of families in the state.
The TCEP was created by Congress and the Obama Administration in response to the collapse of the market for housing tax credits brought on by the current national economic crisis. Prior to the crisis, recipients of low income housing tax credits, developers who construct and manage apartments affordable to lower income families, sold the tax credits to large institutions such as corporations and banks that could apply the tax credits to offset their tax liabilities. With the current diminished tax liabilities and a number of other economic conditions, the market for these tax credits has dried up. TCEP allows the state (which administers the housing tax credit program) to return the unused credits to the federal Treasury and receive cash.
Housing tax credit developers speaking at today’s board meeting were unanimous in their opposition to the incentives the board adopted. They urged the board to award developers the extra funds and not to require any additional apartments to be set aside at lower rents for lower income tenants.
Sarah Mills and Belinda Carlton, advocates for Texans with disabilities and I testified in favor of the set-aside incentives.
The TDHCA board’s unanimous action today will offer an incentive to tax credit developers in the form of enhanced value for the tax credits they return, provided the developers agree to increase the number of apartments set aside for families earning 30 percent of the area median income in urban areas and 40 percent of the area median income in rural areas. Developers will receive 77 cents for each dollar of tax credits if they provide no additional units, 81 cents if they increase the affordable apartments by 10 percent and 85 cents if they increase affordable apartments by 20 percent.
This is truly an historic decision that will have unprecedented positive impact on the lives to most needy Texans.
According to Census Bureau calculations published in the TDHCA State Low Income Housing Plan and Annual Report, in 2000 there were 418,681 Texas households with HUD defined housing problems earning less than 30 percent of the area median family income. This is by far the largest economic group in the state with housing problems. Traditionally, the LIHTC program targets all but a small fraction of the apartments created under the program to families earning 50 percent to 60 percent of the area median.
My compliments to the staff and board of the Texas Department of Housing and Community Affairs for this major commitment to expanding affordable housing opportunities to the most needy Texans.