Opening Doors – Issue
Using
the Low Income Housing Tax Credit Program to
Create
Affordable Housing for People with Disabilities
Editorial
50 Percent Cut Proposed For The
Section 811 Program!
Disability advocates were in shock when HUD’s FY 2006 budget proposal
submitted to Congress included a drastic 50 percent cut in the Section 811
Supportive Housing for Persons with Disabilities program. The Bush Administration proposes to slash the
Section 811 budget by reducing funding to $120 million from $238 million
enacted in FY 2005. Most critically, the budget proposes to completely
eliminate all funding for new unit production in FY 2006 by zeroing out
the capital advance component of the program.
This unprecedented cut ends a 30+ year federal commitment to support
the production of new affordable and accessible housing targeted to non-elderly
people with severe disabilities. It also
calls into question the Administration’s actual commitment to people with
disabilities and to the goals of its New
Freedom Initiative – created by the Administration in response to the
community integration mandates affirmed in the U.S. Supreme Court’s Olmstead decision.
Many
readers of Opening Doors know Section
811 as the program that provides affordable housing for the most
vulnerable people in our society – that is people with physical or
developmental disabilities, or people with severe mental illness who are 18
years of age or older and have very low incomes (at or below 50 percent of the
area median income). Section 811 housing is developed and owned by
mission driven non-profit organizations that make a commitment to the project
for 40 years – 25 years longer than developers of the federal Low Income
Housing Tax Credit program, the topic of this issue of Opening Doors.
These
proposed cuts are not the entire story.
Of the $120 million that the Administration did request for Section 811,
$80 million is needed to renew Section 811-funded vouchers that HUD began
distributing to PHAs (and a few non-profits) beginning in 1997. It has been clear for years that using
Section 811 to fund vouchers would slowly but surely eliminate funding for new
housing development. It is very doubtful
that Congress intended for the Section 811 program to gradually disappear when
they authorized the voucher component of the program back in 1992.
We
seriously doubt that Congress intended valuable Section 811 voucher funding to
simply go to people who do not necessarily have severe disabilities but who
happen to be on PHA waiting lists – or, for that matter, to non-disabled people
on PHA waiting lists. Unfortunately,
HUD’s complete neglect of the 811-funded voucher program means that precious
Section 811 funding may have been diverted (whether intentionally or not) to
people who are not disabled at all.
Perhaps
the final straw in the Section 811 budget picture is the fact that the
Administration’s budget requested funding of over $700 million for the Section
202 Supportive Housing for the Elderly program.
Section 202 and Section 811 have been “companion” supportive housing
programs for many years, dating back to the pre-1990 days of the “old” 202
Supportive Housing for Persons with Disabilities program. Until now, when the 202 budget was increased,
the Section 811 budget was increased proportionately. Both programs also took equally severe budget
cuts in the mid-1990s.
When
asked recently at a Congressional hearing to justify the Section 811 cut, HUD
Secretary Jackson said that HUD’s priority was to save the Section 8 voucher
program. But HUD’s budget request for
vouchers in 2006 will not fund all of the vouchers (including disability
vouchers) authorized by Congress, let alone new vouchers for people with
disabilities on waiting lists.
There
are no winners here – only more low-income people with disabilities without affordable
and accessible housing. Disability advocates must fight these cuts to the
Section 811 program and fight the clear message behind these cuts. Section 811 is a symbol of the federal
government’s commitment to affordable, accessible and integrated housing for
people with severe disabilities – people who would otherwise end up in
institutions, nursing homes, substandard board and care homes, and on the
streets of our cities.
Call
your members of Congress today and let them know how important the Section 811
program is to hundreds of thousands of people with severe disabilities who need
supportive housing. If Congress doesn’t
hear from you, they will think that housing for people with disabilities does
not matter and that no one cares about the Section 811 program. Request that Congress appropriate at least
$249 million in new Section 811 funding for 2006 – which would restore the
program to 2004 funding levels. And do
it today!
Introduction
Since it was created in 1986, the Low Income
Housing Tax Credit program (LIHTC) has become the largest single source of funding for the
production of rental housing for low-income families and individuals. Over the years, the LIHTC program has
produced over 1.5 million affordable housing units, and provided housing for approximately
3.5 million people – including low-income people with disabilities.[i]
The LIHTC program can be a valuable tool to
finance the creation of permanent housing for people with disabilities with
extremely low incomes if – if being
the critical word – it is used in combination with other government housing
programs. Other resources, and in particular rent subsidies, are essential to
ensure that LIHTC financed rental units are affordable to people with
disabilities whose incomes are at the Supplemental Security Income (SSI) level.
In
Disability advocates in these states have learned
that the LIHTC program is also one of the most complex affordable housing programs
ever created by the federal government. The program’s basic approach – to use
federal income “tax credits” to generate funding for affordable housing
development – is also very different from other government housing programs
that provide funding more directly.
Nevertheless, an increasing number of non-profit housing organizations
within the disability community are mastering the details of LIHTC housing
development.
Certain features of the LIHTC program are very compatible
with housing strategies that benefit people with disabilities. For example, owners of LIHTC properties cannot
discriminate against households that will use a Section 8 Housing Choice
Voucher to subsidize their rent – a requirement that may not be familiar to
disability housing advocates. Another
positive feature of the program is that a minimum of 10 percent of the LIHTC
allocated to a state must be awarded to non-profit housing providers.
Fortunately, housing advocates for people with
disabilities do not need to become LIHTC experts in order to understand how the
program works. Once the disability
community understands the “basics” of this program, they can begin to advocate
for strategies that use the LIHTC program in combination with U.S. Department
of Housing and Urban Development (HUD) rent subsidy programs such as Section 8
or Shelter Plus Care. These strategies can
create housing that is very affordable for people with disabilities receiving
federal SSI benefits of less than $600 per month.
Part One of this issue of Opening Doors
provides basic information on the LIHTC program. At first glance, the program description may
discourage disability advocates seeking to serve the lowest-income people. But read on!
This basic information is very important for advocates who want to
successfully engage state housing officials administering the LIHTC program on
behalf of the federal government.
More information on the state’s role in the LIHTC
program is described in Part Two of this issue.
Part Three includes specific approaches that can help people with
disabilities benefit from the LIHTC program, including strategies that combine
the LIHTC program with other federal housing programs to produce rental housing
units affordable to people with disabilities with the lowest incomes.
Part
One – The Basics of the LIHTC Program
The federal government created the LIHTC program
to encourage the development of new mixed-income rental housing that would
benefit low-income households. At the
federal level, the program is not administered by the HUD, but rather by the
Internal Revenue Service (IRS) within the Department of Treasury – an agency
not typically associated with affordable housing! Each year, the LIHTC program produces approximately
$6 billion of private investment in affordable housing. According to the National Council of State
Housing Agencies, the LIHTC program helped create over 70,000 housing units for
low-income families and individuals in 2003.[ii]
Housing developed under the LIHTC program must be maintained
as affordable rental housing for at least 15 years. Many types of rental housing are eligible
including:[iii]
·
Multifamily
rental housing;
·
Mixed-use
projects that include both rental housing and commercial space;
·
Single
Room Occupancy (SRO) housing; and
·
Scattered-sites
that can be “bundled together” as one project.
As mentioned above, the LIHTC program encourages the development
of rental housing by non-profit organizations through a 10 percent set-aside
policy. The program also contributes to
the supply of accessible housing needed by people with mobility or sensory
impairments. Specifically, newly
constructed or substantially rehabilitated properties financed with LIHTC are
required have 5 percent of the units accessible to people with mobility
impairments and an additional 2 percent of the units accessible to people with
sensory impairments.
How Does
the LIHTC Program Work?
The LIHTC program works through five basic and
sequential steps:
Step One: Each
year, the IRS allocates a specific dollar amount of LIHTC – often simply
referred to as “tax credits” or “housing credits” – to each state.
Step Two: Through a
competitive process, the state awards these tax credits to specific affordable
housing projects proposed by developers who must agree to meet LIHTC “affordability”
requirements for a 15-year compliance period.
Step Three:
Affordable housing developers awarded these tax credits then proceed to
sell them to private investors – such as banks, corporations, etc. The investors use the credits to reduce the
amount of federal income tax they owe.
Step Four: The
developer then uses the money received from the sale of the tax credits – referred
to as “tax credit equity” – to help finance the project. LIHTC projects can be either new construction
of rental housing or rehabilitation of existing housing.
Step Five: Once a
LIHTC property is completed, and for the duration of the 15-year “tax credit
compliance period,” the owner/manager must select low-income tenants who are
eligible for the affordable units, which must be included in all LIHTC
properties.
Show Me
the Money!
Under the LIHTC program, the federal government
does not provide money directly to affordable housing developers. The only “real money” that ever changes hands
in the LIHTC program is the money that investors pay to housing developers to
buy the tax credits as described in Step Three above. The investors receive a
reduction in their federal tax liability over a 10-year period in exchange for
providing the equity (meaning the money) to finance the development of the
housing. This reduction in federal tax
liability is the incentive for investors to participate in the LIHTC
program. It is also the reason why
developers have no difficulty selling the tax credits they are awarded by the
state.
Developers can never be completely certain ahead
of time exactly how much money investors will pay to buy the tax credits. The
amount can vary based on several factors including: (1) the “going rate” or market for tax
credits that exists at the time the developer actually sells them to the
investor; (2) the type of project proposed by the developer; and (3) other
factors related to the project’s likelihood of success.
Why
Developers Love the LIHTC Program
The LIHTC program is very generous to developers.
Depending on the amount of tax credits the state awards to a specific project,
and how much money can be obtained from the sale of the tax credits, a
developer may obtain up to 50 percent of the funding needed to finance an
affordable housing project. These funds
greatly reduce the need for developers to “put up” their own money to develop
the housing.
The tax credits are valuable to developers for
another reason. Once a state has awarded
tax credits for a specific project, it is much easier for the developer to
secure any remaining sources of funding needed to finance the project. Because developers of affordable housing often
“piece together” various forms of rental housing financing, the LIHTC program
is often the “anchor” for the project’s overall financing strategy.
For all these reasons, the demand for tax credits among
affordable housing developers is very high.
Many states receive two to three times the number of requests for tax
credits that can be awarded during a specific funding round.
Because the program involves a federal tax credit
from the IRS, compliance with all the program’s requirements is essential. If
there are problems during the 15-year compliance period, investors can lose
their tax benefits, placing a substantial obligation on the developer/owner.
Because of the potential tax consequences to investors, state agencies awarding
tax credits require that housing developers meet certain organizational
capacity and experience requirements to be eligible to receive LIHTC funds. To overcome these capacity issues, developers
seeking tax credits for the first time (including non-profit organizations)
often partner with others who have successfully developed/managed a LIHTC
project.
What
Does LIHTC “Mixed-Income” Housing Mean?
One of the primary goals of the LIHTC program is
to create “mixed-income” housing – meaning creating affordable housing units
within market rate rental housing properties.
To achieve this goal, a minimum number of affordable units are
required in each LIHTC project. These affordable units are targeted to
low-income households who are the primary beneficiaries of the program.
Under the LIHTC program, low-income households are
defined as households with incomes at or below 50 percent or 60 percent of area
median income. According to the LIHTC
program guidelines, the minimum number of affordable units required in
each LIHTC property is determined by the following federal formula:
In a mixed-income LIHTC project, once these
minimum set-aside requirements are met, all of the other units can be rented at
market rents.
Eastside Lofts – A Mixed-Income LIHTC Property
The Arc Arkansas (www.arcark.org) is a statewide
membership organization providing supports, advocacy, education and leadership
to people with developmental disabilities and their families. In 2001, The Arc Arkansas partnered with a
local for-profit housing developer to purchase and renovate a former junior
high school, transforming it into Eastside Lofts. Using over $3.8 million in Low Income Housing
Tax Credits, as well as other funding, the former classrooms were converted
into 41 loft style apartments – 32 units for low-income households (three of
these are for households with incomes below 30 percent of AMI) and 9 units with
market-rate rents. The apartments were
targeted to a mix of populations, including people with and without
disabilities. All apartments are
designed using Universal Design techniques – making every apartment accessible,
livable, and visitable for any person regardless of their type of disability.
The Arc case mangers provide support services to
tenants and/or assist tenants with arranging for other community-based services. For more information, please contact Cynthia
Stone at The Arc Arkansas at cstone@arcark.org
or (501) 375-7770 or go to www.arcark.org.
The 100
Percent Affordable Model
Under the LIHTC program, there is no
requirement that projects be mixed income. In other words, the LIHTC
program can be used to create projects that contain only affordable
housing units and no market rate units.
Non-profit housing developers frequently use the LIHTC program to
develop projects that are 100 percent affordable to households within the
income guidelines described above. Of
course, in these types of projects, the non-profit developer must figure out
how to obtain sufficient funding to make all of the units affordable.
Affordable To Whom?
In its most basic form, the LIHTC program is not
necessarily structured to create units that are affordable to extremely
low-income households such as people with disabilities receiving SSI. Under the laws governing the program, the affordable units in LIHTC properties only need to be affordable
for the program’s target population – meaning affordable to households at
either 50 percent of median or at 60 percent of median.
People with disabilities receiving SSI on average nationally have
incomes that are approximately 18 percent of median – well below the 50
percent/60 percent of area median income targeted by the LIHTC program. So does that mean that the affordable units
in a LIHTC project will be affordable to people receiving SSI?
The answer to this question is complicated but the simple answer
is no! Under the LIHTC program, the
so-called “tax credit rents” for the affordable units are almost always too
high to be affordable to households with extremely low incomes. Even if the LIHTC program is being used to
develop housing for households at 40 percent of area median income, or even 30
percent of median income (as it is in a few states), a rent subsidy is almost
always needed to make the “tax credit rent” affordable to people with SSI level
incomes of $550-$600 per month.[iv]
What Are Tax Credit
Rents?
Thus, under the LIHTC program, the rents for the affordable units
– often called “tax credit rents” – are calculated as follows:
OR
Thus, the tax credit rent that the owner must agree to charge for
the “affordable” units will depend on: (1) the income targeting of the project
(i.e., households at 50 percent of area median vs. 6o percent, etc); and (2) the area median incomes in the
project’s location. Unlike some HUD
programs, the incomes of the tenants themselves are not a factor in calculating
tax credit rents.
Specific Examples
This concept of “affordability” in the LIHTC program is – in the
abstract – one of the program’s most complex requirements. However, examples of hypothetical projects
help to illustrate how the income targeting for the project and the area median
income are used to calculate basic LIHTC affordable rents.
Example 1: A
LIHTC property in Community A has 50 one-bedroom units. This property has 20
percent of the units (or 10 affordable units out of the 50 units in the
property) targeted to households at 50 percent of area median income. The income of a one-person household at 50
percent of area median income in Community A is $20,000 per year or $1,666 per
month. The “tax credit rent” for a one-bedroom affordable unit in this property
in Community A would be 30 percent of 50 percent of area median income or $500
per month ($20,000 divided by 12 months X 30 percent = $500).
Example 2: A LIHTC
property in Community B has 100 two-bedroom units. This property has 40 percent
of the units (or 40 affordable units out of the 100 in the property) targeted
to households at 60 percent of area median income. The income of a three-person household at 60
percent of area median income in Community B is $30,000 per year or $2,500 per
month. The “tax credit rent” for a two-bedroom affordable unit in this property
in Community B would be 30 percent of 60 percent of area median income or $750
per month ($30,000 divided by 12 months X 30 percent = $750).
Example 3: A
LIHTC property in Community C has 40 one-bedroom units. This property has 20
percent of the units (or eight affordable units out of the 40 in the property)
targeted to households at 50 percent of area median income. The income of a one-person household at 50
percent of area median income in Community C is $15,000 per year or $1,250 per
month. The “tax credit rent” for a one-bedroom affordable unit in this property
in Community C would be 30 percent of 50 percent of area median income or $375
per month ($15,000 divided by 12 months X 30 percent = $375).
Affordability and People
with Disabilities
Virtually all people with disabilities receiving
Supplemental Security Income (SSI) are theoretically eligible for the affordable
housing units in LIHTC properties because they have incomes far below 50
percent or 60 percent of area median income.
As regular readers of Opening
Doors know, on average the national income of a person receiving SSI is
equal to 18 percent of area median income.
The problem for many people with disabilities is
that the tax credit rents for the affordable units in LIHTC properties are too high, as illustrated in the examples
above. In certain localities with
relatively low tax credit rents, if two people with disabilities are
willing to share a unit, or if both members of a two-person household receive
SSI, the tax credit rent may be affordable.
But in many localities, the tax credit rent charged in a LIHTC property
may be higher than a person’s entire SSI monthly income.
Why the
LIHTC Program is Important
So why should the disability community care about
this complicated program if it doesn’t provide units that are affordable to
people with disabilities receiving SSI?
There are at least three reasons:
Before describing these positive aspects of the
LIHTC program in more detail, it is helpful to understand the role of the
states in administering the LIHTC program.
Part Two – The Lihtc Program And The States
Each state has a tax credit allocation agency
responsible for administering the federal LIHTC program and awarding the tax
credits to housing developers based on locally determined priorities. In most states, the state housing finance agency
(HFA) is responsible for administering the federal LIHTC program. HFAs are state-chartered authorities
established to help meet the affordable housing needs of their states. There is a state housing finance agency in
each of the 50 states, the
Although they vary from state to state in their
relationship to state government, most HFAs are independent entities that
operate under the direction of a Board of Directors appointed by the Governor. In
a few states, the LIHTC program may be administered by the state Department of
Housing and Community Development. To learn more about HFAs and state housing
agencies, read issue 22 of Opening Doors available online at
www.tacinc.org.
Each state receives an annual allocation of LIHTC
based on a federally determined per capita amount (currently $1.85 per capita). Thus, the amount of LIHTC available for new
projects varies from state to state depending on population. Through some type of competitive process
(usually a Request for Proposal), the state housing agency awards these tax
credits to affordable housing projects proposed by developers. Most states have many more requests for tax
credits than they have credits to award, so the program is very competititve.
The
LIHTC Qualified Allocation Plan (QAP)
The LIHTC program includes a requirement that states develop a
strategic planning document – similar to the federally mandated Consolidated
Plan – describing how the LIHTC program will be utilized to meet the housing
needs and housing priorities of the state.
This plan – known as the Qualified Allocation Plan (QAP) – must be
submitted to the Department of Treasury/IRS each year in order for the state to
receive its LIHTC allocation from the federal government. Because of the intense competition for tax
credits in most states, developers pay very close attention to the housing
priorities adopted in a state’s QAP.
The QAP is prepared by the state each year through a process that includes
a public hearing to solicit the public’s comments on high priority housing
needs and on the strategies proposed by the state to address these needs. The
QAP must also provide information on the competitive process that the state
will administer to award tax credits as well as any priorities for funding,
set-asides, or threshold requirements adopted by the state. In some states, housing advocates for people
with disabilities have used the development of the QAP to create preferences or
set-asides that benefit people with disabilities. [v]
QAP Preferences, Set-Asides, and Threshold
Requirements
Within general guidelines promulgated by the federal government,
states are allowed to set specific allocation criteria for awarding tax
credits. Federal law requires that the
QAP give priority to projects that serve the lowest-income households and
remain affordable for the longest period of time. As mentioned above, at least 10 percent of a
state’s annual LIHTC allocation must be reserved for non-profit
organizations. These requirements can
help the disability community to argue that the state’s QAP must include a high
priority and feasible strategies for the use of LIHTC funding to create housing
that will be affordable to people with disabilities with the lowest incomes.
As part of the QAP, states can establish selection criteria that
target specific groups – such as people with disabilities, people who are
homeless, elderly people, etc. – or specific localities, such as rural
areas. According to the HUD 2001 study Analysis
of State Qualified Allocation Plans for the Low-Income Housing Tax Credit
Program, almost all the QAPs reviewed (51 total) included some type of
incentive to create housing for people with special needs.
In general, these incentives were of three types: preferences;
set-asides; and threshold requirements.
·
Preferences are used when scoring applications. Under a preference system, LIHTC project
applications that propose to meet the state’s established preferences (e.g.,
housing for people with disabilities, housing for elders, special needs
housing, etc.) are awarded extra points.
·
Set-asides operate a little differently than
preferences. Under set-aside policies, a
portion of LIHTC funds are actually reserved each year for certain types of
projects. Some states have created
set-aside policies to encourage the development of permanent supportive housing
or other permanent housing for people with disabilities.
·
Threshold
requirements are
another policy approach used to facilitate the development of certain types of
LIHTC projects. Threshold requirements
establish specific standards that are applicable to all developers applying for
LIHTC funds. In states that use threshold
requirements, an application would have to meet these minimum standards in
order to be deemed “eligible” to receive an award of LIHTC. For example, some states – such as
Massachusetts (see the box on page 9) – have established threshold standards
that require all developers applying for LIHTC to agree to target 10 percent of
the LIHTC units funded for households with incomes at or below 30 percent of
the area median income. Those LIHTC
project applications that do not meet this requirement are considered not to
have “met threshold” and are, therefore, ineligible to compete for funds.
Recent Qualified Allocation Plans
(QAP) for Massachusetts include threshold requirements that promote the
development of new housing for people with extremely low incomes, including
people with disabilities. The 2004 QAP
developed by the Massachusetts Department of Housing and Community Development
(DHCD) required that all LIHTC applications meet 11 threshold criteria,
including a requirement that the project reserve 10 percent of the total number
of units for households earning less than 30 percent of the area median income.
This Massachusetts QAP also included a
preference for special needs housing, including housing for people with
disabilities. Specifically, DHCD competitive
process awarded six points to LIHTC projects that proposed to primarily serve
individuals or households with special needs.
This category included: the frail elderly to be served in assisted
living projects; tenants with developmental disabilities; formerly homeless
households making the transition to permanent housing; individuals with
children; etc. However, the QAP clearly
stated that the points were only available if the project design, amenity
package, and services package were appropriate for the intended residents. For more information about the 2004
Massachusetts QAP go to www.mass.gov/dhcd/components/housdev/TxCrProg.pdf.
Which
approach works best?
Some states use only preferences to allocate LIHTC funds. Some use only set-asides or threshold
requirements. Some use a combination of
these incentives while other states use none at all. Since they establish requirements for certain types of housing, set-asides and
threshold requirements are more active policy directives than preferences,
which merely encourage but do
not mandate certain types of housing. However, all three are useful approaches
used by some states to encourage the development of LIHTC-financed housing for groups
with high priority housing needs as defined by the state.
Part
Three – Making The Low Income Housing Tax Credit Program Work For Extremely
Low-Income People With Disabilities
There
are several approaches and strategies that the disability community can
recommend to state officials to ensure that extremely low-income people with
disabilities benefit from affordable housing activities financed through LIHTC
program. Some of the most successful
strategies are discussed below.
Linking Tax Credit Properties With Rent Subsidies
As it is currently structured, the LIHTC program only helps pay
for the one-time cost of developing the housing (e.g., the cost of
acquisition/rehabilitation or new construction of housing). With the exception of certain very innovative
projects, LIHTC does not pay for the ongoing cost of operating the housing
(e.g., insurance, maintenance/repairs, reserves, property management costs,
utilities, etc.).[vi] In order to make LIHTC affordable housing
truly affordable to people with disabilities, an ongoing rent subsidy or
operating subsidy is needed to cover the affordability gap between 30 percent
of SSI income and the tax credit rent.
Two federal rent subsidy programs – the Section 8 Housing Choice Voucher
program and HUD McKinney/Vento Homeless Assistance Shelter Plus Care program –
can be linked with the LIHTC program using the approaches described below.
Linking LIHTC Properties and Section 8
Vouchers
HUD’s Section 8 Housing Choice Voucher program is the longest and most
successful federal rent subsidy programs.
More than 2 million Section 8 vouchers are now administered at the local
level by Public Housing Agencies (PHAs), including more than 60,000 vouchers
that are set aside exclusively for people with disabilities. For more information on the Section 8 program
and these set-asides, read issues 17 and 25 of Opening Doors available
online at www.tacinc.org.
The Section 8 program is designed to take advantage of rental
housing in the private market. The fact
that landlords are generally not required to accept prospective tenants who
have vouchers makes it very difficult to use a voucher in many locations. Even
after searching for housing for 60-120 days, people issued vouchers – including
people with disabilities – frequently cannot find a landlord willing to accept
payments under the voucher program.
Housing advocates for people with disabilities are often surprised
to learn that under federal rules, owners of LIHTC properties are required
to accept Section 8 vouchers. In
practical terms, this requirement means that an owner of a LHITC property may
not reject a household seeking a LIHTC unit solely because the household
will use a Section 8 voucher to help pay their rent. People with disabilities can use this rule to
gain access to high quality LIHTC-financed rental housing – including newly
constructed accessible units.
This requirement to accept households with vouchers is not
absolute, however. The owner is not
required to accept a household with a Section 8 voucher if the household
fails to meet the owner’s screening criteria (credit history, criminal
background, previous landlord references, etc.) used for all prospective
tenants. For example, if the owner
screens out all prospective tenants with criminal histories, a household with a
voucher could be denied a LIHTC unit if a member of the family has a criminal history.
However, owners should not be permitted to use income screening criteria
for voucher holders (some have tried), since the rent will be subsidized
through the Section 8 voucher program.
Housing advocates agree that there has not been enough education,
policy development and enforcement regarding this LIHTC/Section 8
requirement. Disability advocates are
particularly concerned that there is no systematic strategy in most states to
link people with mobility/sensory impairments who have Section 8 vouchers to
vacant accessible units in LIHTC properties.
State policies that could be adopted to effectively link
Section 8 voucher holders with LIHTC units include the following:
It is important to point out that Section 8 rents can be a
complicated issue in LIHTC projects. For
example, the tax credit rent for an affordable LIHTC unit may be higher than
the Section 8 rent permitted by the Public Housing Agency (PHA). However, the PHA should able to grant an
exception rent for a person with a disability as a reasonable accommodation
under Section 504 policies, which apply to the PHA’s Section 8 program. If the tax credit rent is above the exception
amount that can be approved by the PHA (which could happen in a very high-cost
housing market area) the PHA can request HUD’s approval of the exception rent.
Combining LIHTC
financing with Section 8 Project-Based Assistance
While tenant-based rental assistance is the most common and
well-known type of Section 8 assistance, new Section 8 rules now allow a PHA to
commit a portion of its Section 8 voucher funding to project-based
assistance. Under the project-based
assistance program, the Section 8 voucher is actually committed or “tied” to
one or more units in a specific building for a specific period of time. The
project-based subsidy helps create new affordable housing units in a community
because it provides the guarantee of a rental subsidy. Because LIHTC properties
always involve new construction or rehabilitation, policies linking Section 8
project-based vouchers directly to LIHTC properties can also help provide high
quality housing to Section 8 program participants.
Through the Section 8 project-based assistance option, a PHA can
now designate up to 20 percent of its Section 8 funding to be used in specific
rental properties. Both new as well as
existing rental projects are eligible to receive project-based rental
assistance. The project-based assistance
program encourages mixed-income housing[vii] and permits PHAs to
commit the Section 8 voucher to the property for up to 10 years (subject to
annual appropriations). These policies
make the Section 8 project-based program an excellent resource to combine with
the LIHTC program to ensure the affordability of the tax credit units for people
with the lowest incomes.
State housing agencies that administer both the LIHTC program as
well as the Section 8 program are in an ideal position to create system level
linkages between the LIHTC program and the Section 8 project-based program. For
example, a state HFA preparing its QAP could propose that its new tax credit
financed barrier-free and accessible housing units be targeted for the Section
8 project-based voucher program administered by the state PHA.
The Section 8 project-based program can also be combined with the
LIHTC program to create permanent supportive housing. A few states, including the State of
Linking LIHTC with HUD’s Shelter Plus
Care Program
HUD’s McKinney/Vento Homeless Assistance Shelter Plus Care program
is a permanent supportive housing program that provides rental assistance to
homeless people with disabilities. It is one of several HUD programs authorized
by Congress through the McKinney/Vento Homeless Assistance Act. The Shelter Plus Care program has four
separate components, including a project-based component that works much like
the Section 8 project-based program described above.
Under Shelter Plus Care project-based assistance, rent subsidies
can be “tied” or committed to supportive housing projects for a period of
either 5 or 10 years. Congress has consistently provided renewal funding for
Shelter Plus Care rent subsidies that expire after the initial 5-10 year contract
period, a program feature that helps link Shelter Plus Care projects to LIHTC
financed supportive housing strategies. [NOTE:
For more complete information on how the Shelter Plus Care program can
be used to expand permanent supportive housing for homeless persons with
disabilities, read issue 13 of Opening Doors available online at www.tacinc.org.]
New Shelter Plus Care subsidies for LIHTC-financed properties are
obtained through HUD’s annual Continuum of Care competition. There are over 400
local Continuum of Care groups that have been formed to coordinate the delivery
of homeless assistance programs including McKinney/Vento Homeless Assistance
resources provided by HUD. More
information on local Continuums of Care and HUD’s McKinney/Vento Homeless Assistance
programs can also be found at www.tacinc.org.
Since 1999, HUD has provided permanent housing “bonus” funding to
local Continuums of Care that rank a new permanent supportive housing project,
such as a Shelter Plus Care project-based application, as their #1 priority for
funding. HUD’s Super Notice of Funding
Availability (Super NOFA) published each spring provides localities with the
opportunity to apply for new Shelter Plus Care subsidies that could be linked
with LIHTC-financed properties. In some
states, LIHTC have been linked with Shelter Plus Care project-based subsidies
during the actual development of the project.
However, these subsidies can also be used to provide permanent
supportive housing opportunities in existing LIHTC projects through set-asides
of affordable units in mixed-income developments.
Linkages to Other Federal Housing Resources
In most states, it is impossible to
develop new affordable rental housing using only LIHTC. Although tax credits typically generate 40
percent or more of the cost of development,[viii] in almost
every instance, additional capital financing is needed in order to make the project
financially viable. Some 100 percent affordable
LIHTC properties may have five or more separate sources of financing.
A few states have utilized state
housing trust funds and tax exempt bond financing in combination with
LIHTC. Most states combine the federal
HOME program administered by states and localities to help fill the financing
gaps in LIHTC projects. State policies
linking federal LIHTC funding with state HOME funding and a rent subsidy can
help develop new rental housing opportunities affordable for people with
disabilities. This coordination could
begin when the state prepares its QAP and Consolidated Plan for approval by the
federal government. While all of this
bureaucracy can sound overwhelming, it is through these planning processes, as
well as other sustained advocacy efforts, that LIHTC policy-related changes
actually occur. For more information
about the HOME program, as well as the Consolidated Plan, read issues 8 and 16
of Opening Doors available online at www.tacinc.org.
Conclusion
It is clear that the LIHTC program is a critical resource
to create affordable rental housing. With
the appropriate policies and strategies in place, the LIHTC program can create
hundreds of new affordable rental units for people with disabilities with SSI
level incomes. These policies are never created overnight, however. Experience shows that it takes a sustained
advocacy effort by the disability community to positively affect LIHTC policies
at the state government level.
Disability
advocates are often at a disadvantage in LIHTC discussions because they lacked
information on how the program works and how it can benefit people with
disabilities. This issue of Opening Doors has helped close that
information gap, and is intended to promote new advocacy efforts by the
disability community.
Key strategies that could be the focus of
discussions between disability advocates and state LIHTC officials include the
following:
Hud Low
Income Housing Tax Credit Property Database
HUD
has created a Low Income Housing Tax Credit
(LIHTC) property database that holds information on nearly 22,000
projects containing more than 1.14 million rental housing units. The database includes properties developed
between 1987-2002 and does not include more recent properties developed in 2003
and 2004.
The
database allows the user to extract information on projects such as the
address, number of total units, number of low-income affordable units and
bedroom distribution.