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

WISCONSIN

BY DANA EFINGER

AFFORDABLE HOUSING FINANCE • DECEMBER 2007

MADISON—Preservation will again be an important part of the Wisconsin Housing and Economic Development Authority’s (WHEDA’s) tax credit allocation process in 2008, as the state’s population growth historically has been minimal.

WHEDA will set aside 40 percent of its low-income housing tax credit (LIHTC) allocation, or $4.2 million, for preservation, about the same as in 2007.

No changes have been made to the major scoring categories from last year’s qualified allocation plan (QAP), but Wisconsin has made some changes to other parts of its 2008 QAP.

Developers working on smaller projects of 24 units or less will have a more difficult time winning LIHTC allocations. The total for that category has been reduced to 12 points from 24 points in this year’s QAP.

Threshold requirements have also changed. WHEDA is implementing a development cost-per-unit cap. Developments exceeding the cost-per-unit thresholds of HUD’s Sec. 221(d)4 program plus a 15 percent “non-housing” allowance (for parking areas and community spaces), will be deemed ineligible to receive credits. WHEDA has provided a cost calculator to help determine whether a development exceeds those limits, which vary based on area median income figures and building type. The calculator can be found at www.wheda.com/CAT_TCA/2008/ 2008.asp.

WHEDA is also changing the way it determines the credit amount a developer will get for a mixed-income development. In the past, WHEDA used an “equity gap model” that reduced the amount of eligible credits if a development had market-rate units. WHEDA would typically waive the reduction in credits if a development with market-rate units also contained units serving those earning up to 50 percent of the county median income (CMI). To win such a waiver in 2008, developments must contain one unit serving those at 30 percent CMI or lower for each market-rate unit in the project.

The maximum LIHTC award will be $750,000 per development.

WHEDA estimates that $11.1 million in 9 percent LIHTC s was reserved in 2007, compared to more than $23 million requested. An estimated 38 projects received LIHTC reservations. Those projects represented 1,414 tax credit units.

The median tax credit award was $273,155, and the median project size was 24 units.

Tax-exempt bonds
In 2008, Wisconsin is expected to have $473 million in tax-exempt private-activity bond authority, of which $15 million will be set aside for local rental housing allocations. To receive direct WHEDA funding, a project must meet underwriting requirements, and no significant changes to its underwriting criteria are planned for 2008.

WHEDA hopes to spur more rehabilitation efforts. As an incentive to encourage developers to use bonds for such projects, the authority offers a program called “Preservation Plus,” which gives a 25 basis point discount for acquisition-rehab projects involving a minimum $15,000 per unit cost.

Applications for volume cap are granted on a first-come, first-served basis, until Sept. 30, 2008. There are no deadlines for WHEDA direct lending programs.

In 2007, 13 multifamily developments representing about 870 units received or were slated to receive bond financing totaling about $45 million.

2008 LIHTC PROGRAM: