RICHMOND—Developers will have
to do more to win low-income housing tax credits (LIHTCs)
in Virginia in 2008.
Officials will only consider applications for LIHTCs
that reach a minimum point score, according to the proposed
qualified allocation plan (QAP) for the program. The draft
QAP sets the minimum score at 500, though the final minimum
score could be as low as 300, officials say. Applications
can theoretically score as high as 1,000.
"We put that number  there to generate comments,"
said James M. Chandler, director of LIHTC programs for the
Virginia Housing Development Authority (VHDA).
Fortunately for developers, the proposed QAP, which
officials planned to finalize Nov. 7, includes new
opportunities for developers to rack up points, Chandler
For example, proposed developments that meet the high
standards for efficient use of resources and creation of
healthy living spaces set by EarthCraft will be able to
earn 30 points in 2008, up from 15 points. EarthCraft is a
program developed by the Greater Atlanta Home Builders
Association in partnership with Southface Energy
Those extra 30 points are in addition to the 25 points
that already reward measures like energy-efficient windows
and appliances and water submetering.
Considering that applications for LIHTCs in Virginia
typically score only 500 to 600 points, the 55 extra points
can make a big difference for an application.
Chandler hopes that VHDA’s incentives will
eventually motivate as many as 70 percent of the winning
deals to measure up to the EarthCraft standard, compared to
40 percent in 2007.
Another 25 points will reward projects that plan to use
property managers certified by VHDA.
VHDA also plans to allow more projects to apply under
its 15 percent set-aside for projects that preserve
existing affordable housing. The setaside used to only
target projects in Northern Virginia.
In 2008, VHDA will set aside 5 percent of its LIHTCs for
preservation projects in any part of the state. Another 10
percent will be set aside for Northern Virginia.
In Virginia, most preservation projects involve the
acquisition and rehabilitation of buildings that
don’t have formal income restrictions but which
house low-income residents who could potentially be
displaced by rising rents, Chandler said.
VHDA will ask for more next year from projects that plan
to acquire and rehabilitate existing properties. To qualify
for LIHTCs, these projects must plan to spend at least
$15,000 on average to fix up each apartment, up from
$7,500. Chandler hopes the change will weed out of the
competition what Virginia developers call "sweep and paint"
The demand for LIHTCs in Virginia is high enough to
support the extra demands VHDA plans to put on developers,
Chandler said. Affordable developers applied for $27
million in LIHTC in 2007, nearly twice the $15 million the
agency had to hand out.
That subsidy will only produce 2,654 affordable
apartments at a cost of $57,000 per unit over 10 years.
That per-unit cost is 21 percent higher than the $47,000
per-unit cost of apartments produced with 2005 LIHTCs.
Rising construction costs are making it much more
difficult to develop affordable apartments, Chandler said.
He estimates that the hard cost of construction has risen 5
percent to 10 percent in 2007 alone, as prices jumped for
copper and steel.
Rising costs have made it especially difficult to
develop affordable housing using low-interest tax-exempt
bond financing combined with equity from 4 percent LIHTCs,
"The biggest barrier to winning bond cap is getting a
deal that pencils out," he said.
Virginia developers will probably only close four deals
in 2007, even though the state has enough tax-exempt bond
cap set aside for affordable rental housing to finance many
Of Virginia’s $650 million in total tax-exempt
bond cap, 41 percent is set aside every year to finance
affordable rental housing. In 2007, that works out to $265
million split between VHDA and local housing
In addition, any cap not used for industrial development
also flows to VHDA at the end of the year to use for
But the four deals in VHDA’s pipeline will only
use $36.8 million in cap to create 442 affordable
apartments. Hundreds of millions in unused cap will flow
into VHDA’s home loan programs.
In comparison, in 2006, VHDA used $100 million in bond
cap to finance seven projects totaling 1,150 units of
housing. That’s more than twice the amount of
housing in the pipeline for 2007.
2008 LIHTC PROGRAM:
- 2008 LIHTC authority (est.): $15
- Application deadlines: Feb. 15,
- Web: www.vhda.com