Atlanta Thanks to a revised qualified allocation plan (QAP), more than a third of the low-income housing tax credit applications being evaluated are for small, rural projects.
The Georgia Department of Community Affairs (DCA) received 72 applications for the 2006 9 percent tax credit round, of which 25 are for rural developments composed of 65 units or less. The current QAP gives an automatic six-point advantage for these rural projects and also for projects with special-needs units.
Last year, DCA received only 49 applications for the tax credits. Laurel Hart, director of DCA’s Office of Affordable Housing, attributed this year’s surge in applications to the increase in smaller rural housing applications and a simplified application process. She also noted a drop in 4 percent tax-exempt bond projects because of the large number of these deals that had been done in recent years.
Up to $16 million in tax credit reservations will be made sometime in September, said Hart.
Applicants requested a total of $30.5 million in tax credits from DCA. One of them is Jerry Braden of BC Holding, LLC, which is one of the largest rural housing developers here with a portfolio of 35 projects. He has five new construction projects applying for tax credits this year.
“Most developers [usually] don’t want to do projects under 100 units,” said Braden. “It’s harder to do small deals because the rents are less and so the [income] to operate on are less.”
As someone who grew up in rural areas and was a former employee of the Farmers Home Administration, Braden understands how to make rural housing work.
“It’s a niche that many people don’t want to fool with,” said Braden. “They’re smaller projects but there’s tremendous need for them. We enjoy dealing with smaller communities. They’re easier [to develop in] and we build and stay rented up. There’s less competition.”
Smaller communities are appreciative when you go there to develop, he added. “Many of them haven’t had new developments in the last 10 years. Most urban areas don’t want any more new developments.”
Since Hurricane Katrina struck, construction costs have soared, forcing Braden to apply for additional tax credits for some of his affordable housing projects that are under construction.
“We think construction costs have gone up about 10 percent to 12 percent,” he said. “It’s not impossible, but it’s a lot of work to compete for the additional credits.”
This year, 13 applicants applied for a total of $1.1 million in additional tax credits. According to Hart, no projects applied for additional credits in 2005, and only one did in 2004. She also said that some contractors were reporting construction cost increases of 20 percent to 30 percent, citing labor shortages and rising costs for materials like concrete, in addition to hurricane damage along the Gulf Coast.
The Shelter Group builds Park View
The Shelter Group is breaking ground on an affordable seniors housing community called Park View at Coventry Station in Atlanta. Shelter’s Park View developments are priced for those seniors who do not income-qualify for direct housing subsidies but cannot afford market-rate seniors housing.
The project will have 166 one- and two-bedroom units, a 25-car parking garage, a movie theater, a meditation area, a computer center, a fitness center, and a salon.
Florida Housing grapples with escalating housing costs
Tallahassee The Florida Housing Finance Corp. is formulating a plan to increase affordable housing funding in the state at a time when low-income housing tax credits are limited and construction costs are skyrocketing.
For the 2006 tax credit round, 72 of the 96 State Apartment Incentive Loan applicants requested a total of $110.5 million in tax credits. Florida Housing will allocate $33 million in tax credit reservations, which will be made July 28.
In 2005, tax credit deals were able to withstand escalating construction costs because the pricing of the tax credit was more than a dollar, said Stephen Auger, executive director. “But we’ve had to raise subsidy limits over the last couple of years,” he added. “Land costs and insurance costs have gone through the roof.”
And with eight major hurricanes predicted to hit the Gulf Coast this year, a lot of insurers are unwilling to insure these projects, he added.
As a result, applicants are building fewer units and setting aside fewer units for affordable housing. The average project size has dropped from 200 to 250 units down to 150 to 160 units, according to Vicki Robinson, deputy development officer for multifamily programs.
She also said a lot of developers are deferring their fees. Some developers are also building their projects with minimal insurance.
“They’re getting coverage for only the first few million dollars,” said Auger. “They’re self-insuring to some extent and hoping they’re not in the storm’s path.”
Florida Housing is thinking about possible solutions, including an insurance pool program, he added.
Because the tax credit program is oversubscribed by a 3-to-1 demand-to-supply ratio, many applicants are going back to local governments for gap financing, said Auger. In response to the last two destructive hurricane seasons, the state has also put in more money for housing.
To expedite construction in the highest cost-to-develop areas impacted by hurricanes (Broward, Miami Dade, and Palm Beach), Auger is considering forward allocating a portion of the 2007 tax credits and pairing it with the rental recovery loan program.
State prioritizes housing
Working closely with Gov. Jeb Bush, Florida Housing persuaded the state to significantly increase funding for its affordable housing programs for the next fiscal year, which starts Oct. 1.
The agency received an additional $245 million, a 27 percent increase from the funding it had gotten the last few years. Above that, it was given $93 million for its hurricane recovery program and $50 million for a workforce housing pilot program. The state also provided an extra $30 million to subsidize the production of extremely low income housing.
In addition, the state will provide local governments $83 million in Community Development Block Grants for Hurricane Wilma-damaged areas, as well as $250 million for hurricane mitigation and housing inspections. n
– Eric Wong