Here's the good news: Deals are moving again. Developers in South Central states are closing the financing and starting construction on scores of stalled affordable housing projects throughout the region.
At the same time, housing officials in several states have reserved low-income housing tax credits (LIHTCs) for 2009 and are looking ahead to 2010.
But tax credit prices are still low, and developers and officials worry about the latest round of tax credit reservations. “Without significant extra subsidy, deals are not going to get done at $0.60,” says Tom Tibbetts, principal with Oklahoma affordable housing developer Express Development Corp.
States restart stalled projects
In Missouri, nearly all of the 34 projects that won 9 percent tax credits in December 2008 have found LIHTC investors. That includes eight that have already closed and another eight with firm commitments from investors. Another 16 will receive federal tax credit exchange or Tax Credit Assistance Program (TCAP) funds. All but two of those have an investor to purchase some or all of the projects' LIHTCs.
But despite this revival, Missouri officials worry the LIHTC program may produce far fewer housing units in the future if prices stay as low $0.60 for each tax credit dollar and stimulus programs like the credit exchange and TCAP are allowed to expire.
“Instead of 30 deals, we might be funding 15,” says Pete Ramsel, executive director of Missouri Housing Development Commission.
Developers in Oklahoma are also closing deals. All but one of the 19 projects that received 9 percent LIHTCs in 2008 and all nine of the projects that received reservations of 9 percent LIHTCs in the first round of 2009 should close their construction financing by the end of the year.
Looking to the future, Oklahoma housing officials have already collected roughly $8 million in applications for the $4 million in competitive tax credits they have to hand out in the second half of 2009. For now, Oklahoma offi- cials don't plan to use federal TCAP or exchange funds to help these deals.
Low tax credit prices may also force Oklahoma to produce fewer housing units with these credits, with the state raising the maximum amount of tax credits a project can win.
New stalled deals for Texas
In Texas, like in other South Central states, stalled projects are fi- nally moving toward the closing table. Out of the 59 projects that received reservations of LIHTCs in 2008, 44 have applied for TCAP or exchange funds. Another 12 of the 60 projects that received reservations in 2007 have applied for the federal funds.
But some of the Texas projects that received LIHTCs earlier this summer are already lagging in the hunt for equity investors.
This July, another 80 projects won tax credit reservations. Texas had a whopping $92 million in 9 percent tax credits to reserve this year, including $30 million in disaster area tax credits from Hurricane Ike. Projects that receive disaster area tax credits will not be eligible for the exchange program, though they may receive TCAP funds. As officials expected, the developers of 59 projects immediately applied for exchange. But many of the remaining 21 deals are having more difficulty in finding investors than developers anticipated.
“Because of the disaster credits that can't be exchanged, I think it will take longer than the end of this year to clear out the overhang,” says Tom Gouris, deputy executive director of housing programs for the Texas Department of Housing and Community Affairs. “There's just a lot of deals out there.”
South Central Update
Express Development, Inc., has an investor's commitment in writing to buy the 9 percent low-income housing tax credits from Legends at Hickory Ridge II, an affordable housing development planned for McAlester, Okla., a rural town of about 18,000 people. Express won't name the investor, however, because two other tax credit syndicators are also interested in the $4.9 million project. All three are offering about $0.60 on the dollar for Legends' $5.2 million in tax credits.
In July, Kansas Housing Resources Corp. reserved 9 percent lowincome housing tax credits to fund six new affordable housing developments. By September, one of the deals had already found an investor: Guaranty State Bank and Trust Co. agreed to purchase the tax credits from Heritage Townhomes, a $538,900 deal that will create four two-bedroom townhomes in Jewell, Kan. The bank promised to pay $0.73 on the dollar for $60,123 in annual tax credits.
On Sept. 4, developer New Hope Housing closed the sale of $8.3 million in 9 percent low-income housing tax credits for the planned Sakowitz Apartments in Houston. National Equity Fund bought the credits for $5.8 million, or $0.69 on the dollar. The sustainable, 166-unit, supportive-housing development won the attention of a national investor in part because of the developers' experience and strong relationship with NEF.
In August, affordable developer Mc- Donald Cos. closed the sale of the 9 percent low-income housing tax credits for River Place, a 120-unit, $11.3 million seniors project planned for San Angelo, Texas. The credits sold for $8 million to Alliant Capital. McDonald has also applied for federal Tax Credit Assistance Program funds to make up for falling tax credit prices. Another McDonald Cos. seniors project in Kerrville, Texas, (pop. 25,000) has not found an investor and has applied for federal exchange funds.
This summer, Affordable Equity Partners, a local syndicator based in Columbus, Mo., closed on the purchase of a package of $4 million in federal 9 percent low-income housing tax credits and $4 million in Missouri state housing tax credits from Carriage Lofts, a 23-unit historic rehab planned for downtown Kansas City, Mo., developed by Dale Schulte. “They've been buying state tax credits for a long time,” says Pete Ramsel, executive director of Missouri Housing Development Commission, of the local syndicator.
Construction will hopefully start by the end of the year at Garden Walk, a 116-unit affordable housing community in the rural town of Stilwell, Okla. (pop. 3,276). Belmont Development Co. has returned all but a nominal amount of the $9.4 million project's reservation of federal low-income housing tax credits and now plans to buy and rehab Garden Walk with $4.9 million in Tax Credit Assistance Program funds, plus the assumption by the developer of the project's $4.3 million in existing Rural Development loans.