RALIEGH—North Carolina housing
officials may have mercy on cost-strapped affordable
housing developers next year. The North Carolina Housing
Finance Agency (NCHFA) is proposing to allow owners of
projects that will be placed in service in 2008 to apply
for additional 9 percent low-income housing tax credits
(LIHTCs) if their development costs have increased since
the project’s inception.
Rising land and construction costs in North Carolina
over the last few years have pushed the budgets for many
apartment developments to the breaking point. The most
interesting affordable housing trend in the Tar Heel state
over the past year was “the number of previously
awarded projects that are having difficulty making the
numbers work,” said Mark Shelburne, NCHFA counsel
and policy coordinator.
The move to allow developers to apply for additional
credits, outlined in the state’s proposed
qualified allocation plan (QAP) for 2008, could provide
some relief for those facing rising development costs. The
catch is that both the initial credits and any subsequent
credits reserved would count toward the maximum per-project
The 2008 QAP would also eliminate the per-unit limit on
tax credit awards, which was set at $8,000, in favor of
setting a maximum amount per project. That amount would
increase to $1 million next year from $800,000 previously.
The QAP was expected to be final in November.
The agency also proposed increasing the maximum number
of units per project to 120 from 100 for developments
funded with 9 percent LIHTCs and to 200 from 180 for those
funded with 4 percent credits. The 2008 QAP would also
return to a practice the state followed before 2006:
assessing negative points for construction costs that rise
above certain limits. Those limits would be set at either
$78,000 or $92,000, depending on the project
In addition, the draft QAP puts loans made through the
state housing trust fund or through HOME funds under the
same limitations as other loans, which must have a fixed
interest rate and no balloon payments for at least 18 years
after the project’s completion. Also, projects
meeting all Energy Star standards would no longer be
awarded additional LIHTCs; instead, they would earn an
extra five points in the QAP scoring. "Green/sustainable
design features have been an increasingly important aspect
of our program each year and have been part of our design
requirements for over a decade," said Shelburne.
The maximum possible score for LIHTC applicants would be
205 for new construction and adaptive reuse developments.
Rehabilitation projects would not be scored. The point
thresholds for applications to be considered for funding
would be 110 points for projects seeking 9 percent credits,
down from 200 in 2007, and 100 instead of last
year’s 160 for developments applying for 4 percent
Unlike some other states, North Carolina awards the
lion’s share of its LIHTCs to new construction
projects rather than using them as a tool to preserve the
existing affordable housing stock. "We are able to devote
70 percent to 80 percent of our state ceiling to new
construction projects with a high market demand, and still
have more than a 2-to-1 application-award ratio," said
North Carolina has both a state tax credit and a housing
trust fund, which NCHFA expects will award $4.5 million to
housing developments in 2007. At press time, the amount of
state tax credits expected for next year was
NCHFA projects it will have $18 million in LIHTC
authority next year, or about the same as in 2007.
Applicants requested a total of $41 million in credits
in 2007, putting the state’s demand-to-supply
ratio at more than 2 to 1. The state’s application
deadline for LIHTCs next year is Jan. 11, 2008, and the
reservations will be made in August.
In 2007, 44 projects representing 2,403 tax credit units
and 2,405 totalunits received reservations of 9 percent
LIHTCs. New construction developments received $14.4
million of the total, while acquisition-rehab projects
garnered $3.7 million in reservations. Seniors projects
received $5.4 million of reservations, rural projects took
$7.2 million, and projects serving the homeless were
awarded $330,000. At least 10 percent of all units were
required to serve the physically or mentally disabled.
Nearly a quarter (23 percent) of North
Carolina’s LIHTCs went to units with deep income
targeting, serving tenants with incomes at 30 percent of
the area median income (AMI) or below; 10 percent were
targeted to those at 40 percent of the AMI; 12 percent at
50 percent of the AMI, and 55 percent at 60 percent of the
The median tax credit award was $360,000 and the median
project size was 48 units. The median equity amount per tax
credit dollar was 88 cents.
North Carolina’s total taxexempt bond volume
cap this year was more than $600 million. Still, only one
affordable housing development in the state received a
reservation of 4 percent LIHTCs and an allocation of
"There are only a few markets in our state than can
support projects that are large enough to support bonds,"
said Scott Farmer, director of rental investment for the
NCHFA. Tax-exempt bond issuance costs are too steep to
allow bond issuance to pencil out for projects needing less
than about $5 million in bonds, experts say.
The one development that received bond financing this
year was a 176-unit project located in Charlotte that
received $19.6 million in bond financing and a reservation
of $185,816 in 4 percent tax credits.
2008 LIHTC PROGRAM:
- 2008 LIHTC authority (est.): $18
- Application deadlines: Jan. 11,
- Web: www.nchfa.com