RALEIGH, N.C.—State officials here are done worrying about the credit crisis, which stranded hundreds of affordable housing developers without investors to buy their low-income housing tax credits (LIHTCs).

“We were able to clear out our pipeline of stranded projects through the federal Tax Credit Exchange Program,” says Mark Shelburne, counsel and policy coordinator for the North Carolina Housing Finance Agency (NCHFA).

Of the 36 North Carolina developments that received reservations in 2008 only to be stranded by the financial crisis, 30 have closed their financing and started construction. The last six are on their way to closing, says Shelburne.

That means officials like Shelburne can focus on the future. This August, 31 new North Carolina projects won reservations of 9 percent LIHTCs.

North Carolina is far from alone. Across the Southeast, housing finance agencies have largely cleared away the overhang of tax credit properties.

As tax credit prices stabilize and begin to recover across the region, affordable housing developers and state officials are beginning to close new deals underwritten to meet the new reality.

The view from Mississippi

Mississippi includes some deeply rural areas far from the territories where large banks need to invest to meet Community Reinvestment Act requirements.

Also, Mississippi had an unusually large hangover of stranded developments with unsold tax credits. That's in part because Congress gave the state more than $100 million in Gulf Opportunity Zone LIHTCs to distribute over three years after Hurricane Katrina ravaged the coast.

But even here, developers have largely been able to sell or exchange the backlog of once-unsold LIHTCs, and LIHTC prices have stabilized. New projects that won tax credits in 2009 and 2010 are now proceeding smoothly, if slowly, to the closing table.

“This is back to the old normal,” says Katina Pace, vice president of tax credits for Mississippi Home Corp.

Out of 33 applicants, 11 won reservations of 2010 9 percent LIHTCs. Officials expect the tax credits to sell to investors for an average $0.64 on the dollar.

That price is cheap compared with the boom years, when housing tax credits in Mississippi sold for $0.89 to $0.92 on the dollar, on average. But today's average price is still much better than they were about a year ago, when tax credits were difficult to sell at any price.

This year, an additional five developments returned 2008 tax credits in exchange for new 2010 LIHTCs. These projects have already found buyers for their tax credits and started construction, but they needed an extension on the deadline to be placed in service.

Mississippi also has good news on the 11 developments that won tax credits in 2009.

The properties are making steady progress to the closing table. Only one has returned its tax credits. Of the other 10, three are now close to closing and all seem confident they will sell their tax credits for prices between $0.60 and $0.70 on the dollar, says Pace.

For example, Lincoln Garden Apartments, a 100-unit development in Jackson, Miss., was expected to close its financing by the end of September.

The set of tax credit investors in Mississippi has also stabilized— Alliant Capital, Boston Capital Corp., Centerline Capital Group, Raymond James Tax Credit Funds, Regents Bank, and The Richman Group Affordable Housing Corp. are all putting money into deals, Pace says.

“It was shaky coming off of the credit crisis,” says Pace. “It's taking longer to get the deals closed, but those deals are moving toward closing.”