TRENTON—Almost all the projects that won 2007 low-income housing tax credits (LIHTCs) met New Jersey’s tough new green building standards for the conservation of resources and the creation of healthy living spaces, with the exception of a few projects to preserve existing affordable housing.
Officials plan to keep those standards in the qualified allocation plan (QAP) for the 2008 competition for $17.5 million in LIHTCs, though they are likely to tinker with the QAP after they receive feedback from developers in meetings planned for late October and November.
The New Jersey Housing and Mortgage Finance Agency (HMFA) will finalize its QAP in the first quarter of 2008. Applications will be due in April and August.
HMFA required all applications for LIHTCs in 2007 to meet the federal Energy Star standards for energy conservation.
The 2007 QAP also gave one point to projects that included solar panels or that were in New Jersey’s Affordable Green program.
Demand is so tight for LIHTCs in New Jersey, that one point can make a difference, particularly in a competition where the maximum score is more than 100. Developers applied for $47.9 million in LIHTCs in 2007. That’s more than two-and-a-half times the $19.9 million that HMFA had to reserve.
The 18 projects that won LIHTCs this year will create 1,396 units of affordable housing. The projects average 78 housing units apiece.
The mixed-income set aside had the lowest demand in the 2007 competition for LIHTCs, according to HMFA. The 2007 reservations will create only 15 housing units that rent at market rates, among a total of 1,411 units of housing.
"The decrease in equity generated by a mixed-income development makes it more difficult for such projects to achieve financial feasibility," said Debra Urban, director of tax credit services for HMFA.
Nearly three quarters of New Jersey’s 2007 LIHTCs went to new construction projects. About a quarter went to projects that preserve existing affordable housing.
The set-aside with the highest demand was for projects that would reserve all their units for residents earning up to 50 percent of the area median income (AMI). In 2007, nearly twothirds of the 1,411 planned housing units that received 2007 LIHTCs will be targeted to this income level.
That’s because in many of New Jersey’s rental markets, market-rate rents are close to rents affordable to households earning up to 60 percent of the AMI. Targeting apartments at 50 percent of the AMI could both make a project’s apartments easier to market in addition to giving a project an advantage in the battle for LIHTCs, said Urban.
For-profit developers dominated the competition, bringing home almost three quarters of the LIHTCs. Nonprofit developers won only 20 percent, and joint ventures between nonprofits and for-profits only won 7 percent of the LIHTCs in 2007.
HMFA pushes preservation
HMFA will focus its tax-exempt bond financing on projects that preserve existing affordable housing in 2008.
New Jersey will have $742 million in tax-exempt bond volume cap to suballocate to various agencies in 2008. HMFA will accept applications throughout the year for tax-exempt bond financing.
In 2007, HMFA had $125 million in tax-exempt bond volume cap to reserve for affordable housing. As of October, HMFA planned to provide $91 million in tax-exempt bonds to finance 13 affordable housing projects totaling 1,364 units of housing.
Most of the developments will preserve existing affordable housing, according to HMFA, in contrast to the new construction projects that dominated the contest for 9 percent LIHTCs.
"HMFA has created a special division devoted to the preservation of existing housing projects that were previously financed or subsidized through a federal housing program," said Todd Evans, director of finance for HMFA.
The agency also favors projects that leverage tax-exempt bond subsidy with other forms of soft financing such as the HMFA multifamily program or the Department of Community Affairs balanced housing program.
The HMFA has also created a subsidy gap program to provide soft loans with a zero percent interest rate during construction and 1 percent permanent interest rate.
2008 LIHTC PROGRAM:
- 2008 LIHTC authority (est.): $17.5 million
- Application deadlines: April 2008 and August 2008