TAX CREDITS & TAX-EXEMPT BONDS: STATE-BY-STATE PREVIEW

DELAWARE

BY BENDIX ANDERSON

AFFORDABLE HOUSING FINANCE • DECEMBER 2007

DOVER—The entire low-income housing tax credit (LIHTC) program here will focus on rehabilitating existing affordable housing in 2008. "We have our heart set on preservation," said Lisa McCloskey, a housing mortgage finance officer for the Delaware State Housing Authority (DSHA).

Nearly 1,800 subsidized apartments in Delaware will have the option of leaving their affordable housing programs by 2012, more than seven times the current demand for new affordable apartments in Delaware, according to a report commissioned by DSHA.

The agency will set aside more than $1.6 million of its $2 million in 2008 LIHTCs for preservation developments from all over the state, eliminating Delaware’s two geographic set-asides. The remaining tax credits will be split between projects developed by nonprofits and projects to house the homeless, according to DSHA’s proposed qualified allocation plan, which officials expect to finalize in February.

Those numbers don’t leave much room to build affordable housing from scratch, which typically requires LIHTC reservations larger than $200,000 because of the high cost of land and new construction, said McCloskey.

Delaware’s preservation goals fit well with another state plan to promote green affordable housing designed to conserve resources, including building materials, because rehabilitation re-uses entire buildings. Since 2006, applications for LIHTCs have had to meet Delaware’s green building standards to compete.

The four projects that won 2007 LIHTCs include three rehabilitation deals. Only two of those will preserve existing affordable housing. The third will turn an existing building into housing for the homeless.

A fourth project to build 44 new apartments won a reservation of $524,000 in LIHTCs—a high price for a new construction project, McCloskey said.

DSHA received applications for $2.2 million in LIHTCs this year, and made a total of $2 million in reservations.

No help from bonds
Neither new construction projects or preservation deals will get any help from tax-exempt bond financing in 2008. DSHA has no plans to use any taxexempt bond cap for rental housing because the deals are not financially feasible, according to the agency.

“The bond issuance costs will kill you,” McCloskey said. “You can’t do a deal.”

2008 LIHTC PROGRAM: