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

PENNSYLVANIA

BY DONNA KIMURA

AFFORDABLE HOUSING FINANCE • DECEMBER 2007

HARRISBURG—Pennsylvania’s competition for low-income housing tax credits (LIHTCs) will encourage projects in underserved housing markets and discourage new development in outer-ring suburbs.

"We don’t think we will see new construction in a greenfield or rural area," said Eileen Staudt, manager of tax credits for the Pennsylvania Housing Finance Agency (PHFA). A greenfield is undeveloped land, often converted from farm use.

Applications to build affordable housing can earn up to 30 points in Pennsylvania’s 155-point competition for 2008 LIHTCs if the projects are located in strong housing markets with high rates of homeownership and low poverty rates, limited affordable housing options, and ample employment opportunities. Developers can also earn points by participating in a "broader comprehensive plan of neighborhood improvement," according to the qualified allocation plan (QAP).

The points are included in the new community and economic impact section of the final 2008 QAP aimed at encouraging projects with a positive community impact.

The first funding cycle will reserve $19.2 million of the state’s total $24 million in 2008 LIHTCs. The winners of the first cycle will be announced May 8.

After that, projects that "contribute to a neighborhood’s revitalization" will get a second chance to win LIHTCs. These projects will compete in a new "Community Impact" cycle for the last $4.8 million in 2008 LIHTCs. The agency will announce the winners of this second cycle July 10.

Applications for both funding cycles are due Dec. 14. That’s a change from the competition for 2007 LIHTCs, when PHFA held two rounds with application deadlines that were six months apart.

The first funding cycle also has some major changes, including a new set-aside that will reserve $1.2 million in LIHTCs for supportive housing projects. To qualify, 25 percent of the units at a planned project must be set aside for homeless or nonhomeless special needs populations that require supportive services.

Also in the first cycle, PHFA will use a new method to reserve LIHTCs for the six regions of the state. More than $7 million will be reserved for general occupancy projects in the regions. Another $6 million will be reserved for seniors projects. In the past, seniors and family projects competed against each other in each region.

PHFA has also changed its scoring criteria. The agency no longer rewards applications with extra points for energy conservation measures, community rooms, or wiring for Internet access; instead, these features are now threshold criteria, as are several other kinds of amenities.

Market studies also are required on all applications.

In another change, the agency will no longer award points to developments in which 20 percent of the units are set aside for residents earning up to 40 percent of the area median income. Instead, PHFA will allow developers to increase their fee to establish a rent subsidy for these residents.

Developers applied for $77 million in 2007 LIHTCs, nearly three times the $26 million the state had to reserve. The winning projects will finance 55 developments totaling 2,944 affordable apartments.

Most of the LIHTC reservations, $22.4 million, went to new construction projects. But more developers every year apply for LIHTCs to preserve existing affordable housing, according to Staudt, including both projects originally financed by the Department of Housing and Urban Development and aging properties originally developed with LIHTCs. Officials are expecting to see more aging LIHTC projects apply for new funding in the near future.

PHFA also plans to finance another six projects totaling 418 affordable apartments by issuing $26.7 million in 2007 tax-exempt bonds. These projects also plan to use roughly $500 million in 4 percent LIHTCs.

Tax-exempt bonds
Pennsylvania will have roughly $990 million in total tax-exempt bond volume cap to distribute in 2008. From that, PHFA uses a few million each year to finance rental housing projects, mostly projects to preserve existing affordable housing.

The first priority of the program is that applicants have the "ability to quickly and efficiently close their financing, commence and complete construction," according to PHFA.

2008 LIHTC PROGRAM: