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Low-Income Housing Tax Credit
Share Low-Income Housing Tax Credit on Facebook Share Low-Income Housing Tax Credit on Twitter Share Low-Income Housing Tax Credit on Linkedin Email Low-Income Housing Tax Credit linkThe Housing Tax Credit (HTC) program is funded by the U.S. Treasury Department and is overseen by the Internal Revenue Service. Federal Regulations guiding the program can be found in IRC Code Section 42. In Texas these funds are administered by the Texas Department of Housing and Community Affairs (TDHCA).
TDHCA offers the Housing Tax Credit program as one of the primary means of directing private capital toward the development and preservation of affordable rental housing for low-income households. The program is governed by the Qualified Allocation Plan (QAP) approved annually. Each year, TDHCA issues a new QAP that sets forth baseline criteria that all low-income housing tax credit (LIHTC) applications must meet.
There are two types of Housing Tax Credit programs available: a 4% (non-competitive) and a 9% (competitive) program. Both programs have unique features and rules; however, in general, the current QAP from the TDHCA for 9% includes a scoring item that developers receive resolutions of support or no objection from the municipality in which the project is located. For the 4% program, there are threshold documents requiring that developers receive resolutions of no objection from the municipality in which the project is located.
9% HTC (Competitive)
- The 9% HTC program is highly competitive.
- The amount of tax credits available in each region is determined through the Regional Allocation Formula (“RAF”); there are separate set-asides for “at risk” and US Department of Agriculture (“USDA”) assisted developments.
- At least 10% of the allocation must be used for qualified non-profits.
- Applications are scored and ranked within their region or set-aside.
- Scoring criteria range from financial feasibility, various indicators of local support, size and quality of units, amenities and services to be provided to the tenants, economic health of the community, and more.
- Scoring reflects requirements found in state law and program rules; the program rules are known as the Qualified Action Plan (“QAP”).
4% HTC (Non-Competitive)
- 4% HTCs are awarded to developments that use tax-exempt bonds as a component of their financing.
- Applications are accepted throughout the year.
- 4% HTCs are available statewide; they are not subject to regional allocation.
The tax credits are awarded to eligible participants and provide a source of equity financing for the development of affordable housing. Investors in qualified affordable multifamily residential developments can use the HTCs as a dollar-for-dollar reduction of federal income tax liability.
The 9% tax credit tends to generate about 70% of a development’s equity while a 4% tax credit will generate about 30% of a development’s equity. Additionally, 4% tax credits are primarily for those projects seeking financing through tax-exempt private activity bonds. The Non-Competitive (4%) Housing Tax Credit program is coupled with the Multifamily Bond Program when the bonds finance at least 50% of the cost of the land and buildings in the Development. There is a limit to the amount of 9% tax credits allocated each year from the federal government therefore the demand for 9% tax credits exceeds the supply in the competitive 9% program.
The value associated with the HTCs allows housing to be leased to qualified families at below market rate rents. Typical projects include apartment complexes, rental townhomes, mixed-income and mixed-use properties, supportive housing for those with special needs, and independent living facilities for seniors.
CITY OF DENTON HTC POLICY AND APPLICATION
The Denton City Council approved a HTC policy through Resolution 18‐756 on May 8, 2018 to establish expectations and streamline the HTC request review process.
To meet the City of Denton housing and development objectives, it is the City’s policy to review projects requesting support for proposed Housing Tax Credits (HTC). Such analysis will determine if the project(s) comply with the principles and policies found in the City’s Denton 2040 Plan, the 5-Year Consolidated Plan for Housing and Community Development, as well as various other master, strategic, and redevelopment or neighborhood plans, adopted by the City of Denton.
The goal of this analysis is to (a) establish if HTC projects merit local support, and (b) prioritize HTC submissions if more than a single proposal is received during an evaluation period. Community Services serves as the City’s primary staff and point of contact for all HTC programs. Developers seeking consideration by the City of Denton for either a Resolution of Support or a Resolution of No Objection, for an HTC from TDHCA must submit a request for support using the HTC Application.
The City’s current role is to provide Resolutions of Support (ROS) or No Objection (RONO) that help developments score the necessary points to be awarded the 9% tax credits or provide the threshold documentation necessary to apply for the 4% program.
Through implementation of the Affordable Housing Toolkit, the City of Denton hopes to expand its role in providing further assistance and incentives to developments interesting in scoring in the 9% competitive credit and the 4% non-competitive credit.
