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

NEW YORK

BY BENDIX ANDERSON

AFFORDABLE HOUSING FINANCE • DECEMBER 2007

NEW YORK CITY—Affordable housing projects that conserve resources and create healthier living spaces will have a big advantage in the competition for low-income housing tax credits (LIHTCs) here in 2008.

The two biggest agencies that reserve LIHTCs in New York will give new points to applications from green projects. In addition, both agencies will require all projects that apply for LIHTCs to meet some basic green building standards.

New York state’s housing agencies will have a total of about $38.6 million in LIHTCs to reserve in 2008. Of these, the Division of Housing and Community Renewal (DHCR) will keep roughly two-thirds to reserve in its statewide competition; the exact amount has not yet been decided. DHCR will sub-allocate the remaining LIHTCs to agencies including the New York Housing Finance Agency, the New York City Department of Housing Preservation and Development (HPD) and the Development Authority of the North Country.

DHCR plans to finalize its 2008 qualified allocation plan (QAP) for the program in late January.

The agency proposes to give green projects up to 10 points in a new category of its 100-point competition. The 10 points reward applications that include a green development plan, an integrated green design approach, a site location close to existing infrastructure and mass transit, a site plan that does not disturb waterlands, compact densities, sidewalks that link the project to public space, and other green features.

Green building features that won applications extra points in 2007 are likely to become threshold requirements in 2008. For example, in 2007, projects won two extra points by including Energy Star-rated heating, ventilation, and air-conditioning systems and appliances. More than 80 percent of applications won those points, said officials. Those features would become a threshold requirement in 2008 under the draft QAP.

DHCR is also considering setting aside $3 million in LIHTCs to preserve existing affordable housing. That amount would include $1 million for distressed projects with high acquisition costs. DHCR may set aside an additional $2 million for supportive housing projects.

DHCR is considering making a 30- year commitment to affordability another threshold requirement in 2008.

The agency is also proposing a major change in the 15 points that traditionally reward projects with strong support from their communities. In 2008, five points would reward projects with strong support; another five would reward projects set in areas with vacancy rates of less than 5 percent for comparable units; and another five would go to projects set in areas with "unmet demand for affordable housing," said officials. These points should help affordable housing penetrate into new markets, said officials.

Demand for LIHTCs is so high in New York that even a few points can make a big difference. Developers applied for $55.4 million in LIHTCs in 2007, more than twice the $22.8 million DHCR had to reserve. The 40 projects that won will produce 1,662 affordable apartments.

DHCR will also distribute $4 million in state housing tax credits in 2007 and another $29 million though the New York State Low-Income Housing Trust Fund.

New York City turns green
New York City’s tax credit allocating agency, the Department of Housing Preservation and Development (HPD), is also planning to require all applications for LIHTCs to include green design features. The proposals will be finalized early next year in the QAP for the 2008 program.

Officials are considering an increase in the amount of LIHTCs a project can receive per unit.

HPD will reserve $12.5 million of New York state’s $38.6 million in LIHTCs in 2008. Developers applied to HPD for $28.8 million in LIHTCs in 2007, about two-and-a-half times the $11.4 million the agency had to reserve. The winning 59 projects will create 828 new affordable apartments.

NYSHFA focuses on preservation
The New York State Housing Finance Agency (NYSHFA) plans to make it easier to finance projects that preserve existing affordable housing with tax-exempt bonds in 2008.

"Preservation of housing is high on our list," said Gary Carriero, assistant vice president for development for NYSHFA, a major allocator of taxexempt bonds. "NYSHFA is encouraging all owners to discuss financing options."

Aging properties originally built under the state’s Mitchell-Lama program can now apply for bond financing through NYSHFA’s new Mitchell-Lama rehabilitation and preservation program. Owners will be required to keep rents affordable for an additional 40 years in exchange for low-interest financing and 4 percent LIHTCs.

The program has already closed two deals: a $6.7 million loan for the 119-unit Admiral William F. Halsey Senior Village Apartments in Poughkeepsie, and a $7 million loan for the 130-unit Creek Bend Apartments in Hamburg.

Mitchell-Lama properties most in need of immediate repairs can also get up to $15 million in zero-interest repair loans funded from NYSHFA’s available resources.

Tax-exempt bonds
It’s too soon to know how much of the state’s $1.6 billion in tax-exempt bond cap NYSHFA will have to reserve for multifamily projects in 2008. As of October, 11 projects had received $612 million in tax-exempt bond financing, including $322 million in 2007 bonds as well as $291 million in bonds carried forward from 2006. These properties will create or preserve 2,545 units of housing.

NYSHFA expects to decrease the amount of mixed-income projects it finances. In the recent past, more than half of NYSHFA’s tax-exempt bond cap has financed properties in which 80 percent of the apartments rent at market rates and 20 percent are reserved for low-income families. For example, NYSHFA has committed to reserve $468 million in bond cap over three years to developer Larry Silverstein’s $916.7 million plan to build 1,157 mixed income apartments in two towers on Manhattan’s West Side.

As of October, the New York City Housing Development Corp. had also reserved $415.6 million in bonds to finance multifamily affordable housing projects, including $386 million in 2007 tax-exempt bond volume cap in addition to other types of bonds.

Preservation is also a major focus for HDC. It has active programs to refinance properties originally built under the federal Sec. 202 and Sec. 236 programs. "We also expect new Mitchell- Lama projects to enter our portfolio in the coming calendar year," said Aaron Eckerle, program information manager for HDC.

2008 LIHTC PROGRAM: