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

SOUTH CAROLINA

BY LIX ENOCHS

AFFORDABLE HOUSING FINANCE • DECEMBER 2007

COLUMBIA—South Carolina is revising its 2008 qualified allocation plan (QAP) for low-income housing tax credits (LIHTCs) to beef up its criteria for rehabilitation projects and offer extra points to developers with experience working with LIHTC-financed projects.

The state’s draft QAP for 2008 includes a new 10-point list of mandatory criteria developers must follow on all rehabilitation deals using LIHTCs. The guidelines were added "to make rehabs more marketable once the rehabilitation work is complete," said Laura Nicholson, program manager for the South Carolina State Housing Finance and Development Authority. The minimum hard construction cost per unit will be $15,000, she said.

For the first time next year, developers can earn points for prior LIHTC development experience. The draft QAP would award general partners up to five points, depending on how many LIHTC projects they’ve worked on.

The state is also de-emphasizing lower income targeting. Previously, developments that restricted more than a quarter of their units to tenants with incomes at or below 50 percent of the area median income could earn extra points by increasing the share of units devoted to serving that population. For 2008, the draft QAP would cap the points it awards for this practice to five, from a maximum of 10 in 2007. The change was made in response to developer comments that the income restrictions were hurting projects because rents were not rising.

South Carolina expects to impose a minimum and maximum cash-flow-perunit underwriting standard on developments, Nicholson said. "The intent is to provide a measurement similar to a debtcoverage ratio for developments that may not carry debt," she said.

South Carolina has a housing trust fund that awarded $21.5 million this year, and is projected to award another $20.4 million in 2008.

In 2007, South Carolina reserved $8.5 million in LIHTCs, while developers requested two-and-a-half times that amount. Nineteen projects representing 1,112 tax credit units and 1,127 total units received reservations. New construction developments won the biggest share of the reservations, garnering $6.4 million.

South Carolina expects to have $331 million in private-activity bond volume cap in 2008, and applications will be accepted on an ongoing basis. No specific amount is set aside for rental housing. Twenty projects received or were slated to receive $27 million in tax-exempt bond financing in 2007. Six of them received reservations of 4 percent LIHTCs totaling $1.7 million.

2008 LIHTC PROGRAM: