MONTGOMERY—Demand for low-income housing tax credits (LIHTCs) exploded in Alabama over the last two years, more than doubling compared to 2005 demand, and is likely to remain high in 2008 as developers respond to the state’s increased LIHTC authority with a surge in project proposals.
The federal government gave states affected by 2005’s hurricanes a special allocation of LIHTC authority to help rebuild in the areas most devastated by the storms. The move to add Gulf Opportunity (GO) Zone credits nearly tripled Alabama’s LIHTC authority to $24.7 million in 2007, and will keep it close to the same level in 2008.
The Alabama Housing Finance Authority (AHFA) added GO Zone funding restrictions to the 2007 qualified allocation plan (QAP) in order to prevent market saturation in the disaster-affected areas. For 2008, the authority added design quality standards for single-family homes to the QAP in response to strong developer interest in building single-family rental homes in the GO Zone. The state is restricting LIHTC allocations for single-family developments to the 11 GO Zone counties.
AHFA expects to see the number of acquisition-rehabilitation developments, which received a third of LIHTC reservations this year, to increase in 2008. It also expects to reserve the remainder of its GO Zone credits next year.
Also, HOPE VI projects will be required to compete in the regular cycle with other LIHTC projects in 2008 before they can apply outside the cycle. The state will make an exception to this rule for projects whose HOPE VI funds are at risk of being lost if they don’t receive housing credits in 2008.
AHFA raised the minimum score for LIHTC applications to receive funding to 110 from 100 points. The state will also emphasize green building in its scoring criteria in 2008, said Barbara Wallace, AHFA’s HOME/housing credit coordinator. "It will be important for projects to have green building design in order to score high enough to be considered for funding," she said. "Also, the design quality standards require certain green building features."
Developers requested $47.6 million in LIHTCs in 2007, and Alabama reserved $28.2 million, including about $930,000 in carryforward or returned credits, and another $2.8 million in forward allocations of 2008 authority. The reservations will fund 51 projects representing 3,046 tax credit units and 3,104 total units.
The state allocated $22.5 million in tax-exempt bonds to four multifamily projects representing 434 units in 2007. Those developments received about $1 million in reservations of 4 percent LIHTCs. At press time, the state’s 2008 tax-exempt private activity bond cap was unknown. Deadlines for tax-exempt bond applications in 2008 are Feb. 1, May 1, Aug. 1, and Nov. 1.
2008 LIHTC PROGRAM:
- 2008 LIHTC authority (est.): $24.8 million
- Application deadlines: March 2008 and June 2008