A dozen affordable housing projects face tight race for state tax credits

On Thursday, City Council will consider plans for 11 housing developments across the city that could receive state money to fund the creation of affordable housing. Nearly 1,100 units are in the works for the projects, which if approved will compete for 9 percent tax credits from the state’s Low Income Housing Tax Credit (LIHTC) Program.

The program provides the credits to offset the cost of including affordable housing in new construction, with developers able to sell the credits to investors, banks or other large institutions looking to offset their federal tax liability over a 10-year period.

A memo from Mandy DeMayo, director of the Housing Department, notes that the 9 percent credits are competitively awarded based on the ability to offer long-term affordable housing and spur job growth that lasts beyond the construction period of the project. A separate state program offers 4 percent credits based on a lottery system.

The memo notes that local competition for the credits is likely to be fierce because the greater Austin region has $5.3 million available – enough to help fund two projects – as well as a statewide pool of $13 million for projects deemed to be “at risk.”

The deadline for this year’s applications is March 1, with a 12th project located in the local extraterritorial jurisdiction scheduled for a Council vote on Feb. 15.

The city has already weighed in on the scoring for the first 11 projects, which are evaluated based on several criteria: local government support, the commitment of development funding by a local political subdivision, the local revitalization plan for the project, twice the per capita state average of affordable units, a location that’s 1 mile or less from a similar development that received tax credits in the past three years, a location in a census tract with a poverty rate above 40 percent and having no objections from a local governing body when a project is in a census tract with more than 20 percent tax credit eligible per total households.

Housing staff also identified seven additional city priorities to evaluate the projects, which include “the activation of City-owned land, affordable housing in high opportunity areas, anti-displacement, transit-oriented development, supportive housing, preservation of affordable housing, and family-friendly unit composition.” The memo stated, “Applicants who met two of these criteria were eligible to receive a recommendation for a Resolution of Support. Of the 15 initial applications, 13 applicants met at least two of these criteria.”

The need for subsidies to cover the costs of affordable housing construction and the small pool of available state aid make it likely the city will have to work with developers to find additional assistance.

“Many applicants have indicated that they intend to apply for extremely large amounts of RHDA gap financing,” the memo stated. “Staff do not anticipate funding being available at these levels in upcoming funding cycles. As a result, staff will be communicating with the applicants to inform them that alternative financing sources will need to be identified in order to sizably close their financing gaps. Staff wish to make it abundantly clear that approval of a Resolution of Support by Council does not indicate support for any future requests for City funding.”

Photo by Larry D. Moore, CC BY 4.0, via Wikimedia Commons.

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