Texas and Ohio have created state housing credit programs to help meet the need for affordable housing.
They join about half of the nation’s states to have their own credit to augment the federal low-income housing tax credit (LIHTC).
In Texas, Gov. Greg Abbott recently signed legislation that creates a state housing credit with an annual cap of $25 million. The credit will be split evenly between properties receiving 9% and 4% LIHTCs, according to program stakeholders.
“We’re calling it a new tool in the toolbox because it’s something we have not had access to before,” says Roger Arriaga, executive director of the Texas Affiliation of Affordable Housing Providers (TAAHP), noting the state’s need for quality affordable housing as its population continues to grow.
In a state as large as Texas, $25 million may seem like a small amount, but supporters see it as starting point to prove out the concept and expand the program, according to Steve LeClere, a partner at Monarch Private Capital.
The Texas Department of Housing and Community Affairs, which is developing the program rules, is expected to reserve the new credits starting next year. The state credit program has a sunset date of Dec. 31, 2029.
In the first year, $5 million of the annual cap will go to projects that are in the works but may need additional resources, says LeClere.
This was the third legislative session in which supporters tried to pass a state housing credit bill.
“I think ultimately what might have been successful in our messaging is that everybody across the aisle understands this: There are people moving into Texas by the droves. The supply of housing is getting limited. Everyone is complaining about housing costs whether you’re renting or buying. And, markets that used to be attainable to even first-time home buyers are simply not there,” Arriaga says.
By the next legislative session, supporters hope to be able to demonstrate the beginnings of the program’s success and the returns on the state investments in order to further build on the program, according to Arriaga.
Ohio Approves Multifamily and Single-Family Housing Credit Programs
In Ohio, a 2024-25 budget bill signed by Gov. Mike DeWine establishes a new state housing tax credit.
Capped at $100 million a year, the state credit will be claimed over a 10-year period, says Shawn Smith, executive director of the Ohio Housing Finance Agency (OHFA). The program will sunset June 30, 2027.
Projects placed in service on or after July 1 are eligible for the new credit.
The statute calls for the state credit to be paired with a LIHTC award, so it can be thought of as important gap financing for tax credit projects that are coming to the agency.
“These tax credits will be leveraged against other programs that we have,” Smith says, citing state and national housing trust funds, HOME, and others. “The credits will help further extend our use of those dollars. … It will help create additional units across Ohio that we otherwise we would not be able to generate.”
He says the new credit will support a “substantial” number of housing units.
The creation of the credit comes at a time when the state is seeing notable economic and job development activity, including Intel building a large chip plant in central Ohio. While these projects are good news for the state, they add to the demand for housing, notes Smith.
OHFA leaders will be working with stakeholders on the program details in the months ahead. They expect the first reservations to be made in early 2024.
The agency also will have a lead role in administering a new homeownership credit for the construction of single-family homes. The credit has a $50 million annual cap for four years.
Under the program, officials want to see a government unit such as a municipality or a land bank come in with a project, says Smith. That unit will have a team that includes a developer, finance partners, and others.
The homeownership credit is expected to help cover the gap between the development costs and the estimated value of the completed home.
Program details still need to be determined just as they do for the state housing tax credit, according to officials.
