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

HAWAII

BY DONNA KIMURA

AFFORDABLE HOUSING FINANCE • DECEMBER 2007

HONOLULU—With the price of land and cost of development so high in Hawaii, lowincome housing tax credits (LIHTCs) are essential to developing affordable housing in the state.

Developers will vie for about $2.5 million in housing tax credits in 2008.

The Jan. 18, 2008, deadline for applications is fast approaching, followed by reservations being made around April or May.

Affordable housing developers should be very familiar with the 2008 tax credit program because the Hawaii Housing Finance and Development Corp. (HHFDC), the state’s tax credit allocating agency, is not expecting to make any significant changes to its qualified allocation plan from the prior year.

The main point categories will continue to be overall project feasibility, having a greater percentage of low-income units than required under the federal rules, providing affordable units for a longer period than required, and the tax credit/lowincome rental unit ratio. Developer experience and project location are also important point categories.

In addition to the federal LIHTCs, Hawaii will have about $1.25 million in state credits to reserve in 2008 as well as money from a state housing trust fund.

In 2007, the HHFDC reserved about $3.8 million in LIHTCs to four developments that will provide 238 affordable units, reported Dean Sakata, finance specialist at HHFDC. Nonprofit developers are building all of the 2007 projects.

More than $3.3 million is going toward three family developments and $434,710 is reserved for a seniors housing project. The median tax credit award was $939,979, and the median project size was 60 units.

Nearly 77 percent of the units are aimed at households earning no more than 60 percent of the area median income (AMI). Nineteen percent target residents earning no more than 50 percent of the AMI, and 4 percent will be for those earning no more than 30 percent of the AMI.

"We continue to see the bulk of our 9 percent LIHTCs going to new construction and the 4 percent LIHTCs toward preservation," Sakata said.

Hawaii officials estimate that the state will have about $256 million in tax-exempt private-activity bond cap in 2008. There is not a set-aside for housing.

HHFDC officials anticipate increased demand for bonds as the competition for resources grows.

2008 LIHTC PROGRAM: