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

MARYLAND

BY BENDIX ANDERSON

AFFORDABLE HOUSING FINANCE • DECEMBER 2007

CROWNSVILLE—Officials are proposing a host of changes to the competition for low-income housing tax credits (LIHTCs) in Maryland, ranging from new ways to earn points that reward green, energy-efficient projects to a series of tweaks that recognize the high cost of construction.

The qualified allocation plan (QAP) for the competition for 2008 LIHTCs, now in draft form, will likely make at least some of these changes final in May 2008, depending on how Maryland’s developers react to the proposals.

Maryland’s tax credit allocating agency, the Department of Housing and Community Development (DHCD), proposes adding new ways for applications to earn the five "sustainable development" points included in the 2007 QAP, including new standards for green projects.

The QAP is also likely to continue to offer green projects extra points for features including energy efficiency, the use of long-lasting materials, and sites near existing infrastructure. In 2007, the QAP’s green points totaled 27 out of the maximum 310 points an application could earn.

DHCD also proposes offering up to 20 points to projects that raise a significant amount of their financing from sources other than DHCD. That’s twice the 10 points that DHCD offered such projects in 2007.

As construction costs continue to rise, DHCD also proposes to remove construction cost limits from the list of threshold criteria and would instead subtract points from high-cost projects that also request a high level of both LIHTC subsidy and gap financing from DHCD.

The draft QAP would offer new points to projects that target at least 10 percent of their units to households earning up to 30 percent of the area median income. "We’re trying to give people a little extra incentive to go lower," said Andrew Cohen, LIHTC administrator for DHCD. The agency also proposes to offer points to properties located in one of the nine counties affected by the planned expansions of the U.S. Army bases at Fort Meade and the Aberdeen Proving Grounds.

Unlike many states, DHCD does not set aside LIHTCs for specific purposes. The only set-aside reserves 10 percent of DHCD’s tax credits for projects sponsored by nonprofits, as required by federal law.

Developers applied for $25.6 million in LIHTCs in 2007, about 60 percent more than the $16.2 million that DHCD had to reserve.

DHCD would only have had $10.9 million to reserve in 2007 LIHTCs, but the agency added $5.3 million by using carry-forward from 2006 and forward allocations from 2008.

The 21 projects that received reservations of LIHTCs in 2007 will create a total of 1,449 affordable apartments. The LIHTCs were roughly split between family projects and developments that will house seniors. About a third of the LIHTCs in 2007 went to projects in rural areas.

Almost all—97 percent—of LIHTCs reserved in 2007 financed new construction projects. The agency is considering a number of potential ways to make projects that preserve existing affordable housing more feasible, though this goal may not directly affect the 2008 QAP, said Cohen.

Nonprofit developers received 38 percent of the LIHTC reservations in 2007, well above the 10 percent set aside for them.

Many of the projects that received tax credits in 2007 also won funding from the state’s Rental Housing Program, which provides loans of up to $1.5 million to affordable housing projects in priority funding areas.

Tax-exempt bonds
DHCD typically reserves roughly $270 million of the state’s $450 million in tax-exempt bond volume cap for housing. The department splits the money between its rental housing program and its program to provide affordable home mortgages on a first-come, first-served basis. Projects to preserve affordable housing often receive much of the available volume cap.

DHCD has added a new tax-exempt bond financing product, Multifamily Development 4 Less, which offers low interest rates with no fees.

2008 LIHTC PROGRAM: