The Federal Housing Administration (FHA) is expanding its Low-Income Housing Tax Credit (LIHTC) Pilot Program to include new construction and substantial rehabilitation deals under the Secs. 221(d)(4) and 220 programs.

HUD secretary Ben Carson
U.S. Department of Housing and Urban Development HUD secretary Ben Carson

The move aims to ensure faster and more efficient processing for LIHTC transactions by eliminating redundant reviews. Average processing time for LIHTC deals is about 90 days. Under FHA’s pilot, processing times are reduced to 30 days under the expedited approval process track and 60 days under the standard approval process track, according to Department of Housing and Urban Development (HUD) leaders.

“Today, we take another important step to stimulate capital investment in affordable housing at a time when we need affordable housing more than ever,” said HUD secretary Ben Carson. “We’re also applying the lessons we’ve learned from our earlier pilot program to streamline our processing for new construction and substantial rehabilitation developments, so we can get these deals done quicker and more efficiently.”

FHA multifamily transactions that include LIHTCs account for approximately 30% of FHA’s total multifamily volume. By aligning FHA’s Secs. 221(d) and 220 programs with the housing credit, it’s expected FHA will support more production and preservation of critically needed affordable multifamily housing, according to HUD.

Details are included in the FHA notice.

Officials say the new pilot comes at an important time when the amount of LIHTC equity invest in many projects has been reduced due to the recent lowering of corporate tax rates. The somewhat higher leverage available to a LIHTC project with an FHA-insured mortgage can help fill the gap in the project’s sources of funds and make a project financially feasible to fund.

The expanded pilot will also encourage long-term investments in low-income urban and rural communities and supports development in Opportunity Zones, added HUD.

The LIHTC pilot was launched in 2012 and focused on projects under the Sec. 223(f) refinancing program.