The Texas Department of Housing and Community Affairs (TDHCA) has approved $23 million in low-income housing tax credits (LIHTCs) to rehabilitate 825 multifamily units in rural areas of the state.
The credits were awarded through TDHCA’s 4% LIHTC program and will ensure that a 22-property portfolio remains affordable for low-income families and individuals for the next 30 years. The applications will be pooled into one bond issuance totaling $39 million in private-activity bonds, according to officials.
The move allows Texas-based owner Hamilton Valley Management to rehabilitate and preserve the rural properties, which range in size from 23 to 74 units. The scope of work at each property will vary, but the rehab is expected to range from about $27,000 to $49,000 per unit, says TDHCA.
The transaction is notable because the 4% credit and bond program is more commonly used to finance the development or preservation of large affordable housing communities in urban areas of Texas. It’s often cost prohibitive for a small, rural property to use bond financing, says Teresa Morales, director of multifamily bonds and administrator of the 4% credit program at TDHCA.
However, pooling multiple small properties into one deal helps spread the costs across the entire portfolio. “It allows the 4% program to be able to be used to get these preservation deals done,” says Morales.
It was also an alternative to the highly competitive 9% LIHTC program, which is oversubscribed by at least 2 to 1 in Texas each year. It’s hard to say if the deals would have been competitive for the limited 9% credits, and it likely would take years to finance all 22 properties under the 9% program.
“As the development consultant, Greystone is thrilled to have cracked the code on how to preserve and recapitalize hundreds of affordable housing units in one LIHTC transaction," says Tanya Eastwood, head of Greystone Affordable Development. "We look forward to executing on this project from financing to rehabilitation in order to secure the home of thousands of individuals across Texas for the long-term.”
TDHCA approved a similar portfolio transaction involving approximately 380 units in 2018, according to Morales.
As properties age and need recapitalization, more developers may look at pooled transactions to address the needs of multiple developments at the same time, she says.
