RALEIGH, N.C.North Carolina’s qualified allocation plan (QAP) for 2006 includes a maximum federal tax credit award of $850,000 to any one project, or $8,500 per low-income unit. This is an effort to distribute credits to an ever greater number of projects in the state.

Other changes to the QAP include elimination of points for projects that plan to convert to project-based rental assistance, the addition of new disqualification criteria to weed out development risks and the addition of a new housing set-aside worth up to $500,000 in tax credits for new construction and rehabilitation projects with financing and rental assistance from the U.S. Department of Agriculture’s Rural Development Sec. 515 program.

The North Carolina Housing Finance Agency (NCHFA) is expected to have an estimated $16 million in federal low-income housing tax credit (LIHTC) authority in 2006 and $600 million in private-activity tax-exempt bond cap, with $75 million reserved for rental housing.

Because of the great need, a focus will be housing for those with extremely low incomes, particularly low-income persons with disabilities. NCHFA will try to meet this specific need in 2006 in three unique ways: by awarding points in the QAP to projects that will be built in counties with the highest needs; by encouraging developers to participate in the Key Program, which provides a state-funded operating subsidy until a Sec. 8 voucher becomes available for those properties housing persons with disabilities; and through the Preservation Loan Program, which provides loans to cover the cost of rehabilitation for affordable rental properties that are not able to use other subsidy sources.

Developers also have access to approximately $20 million in HOME funds, with the largest share of these funds going to below-market loans for tax credit deals in 2005. North Carolina developers can also access a new statewide Homeless Manage-ment Information System that collects demographic data on the state’s homeless population.

To help get the job done in 2006, developers can also look at two of North Carolina’s most significant affordable housing development tools: a revamped state housing tax credit and a strengthened housing trust fund, both designed to boost affordable developments particularly in smaller towns and rural areas across the state.

The state low-income housing tax credit, a program that was modeled after the federal housing credit to provide additional equity to new developments, was revised in 2002 and was converted into a refundable dollar-for-dollar direct credit refund that can be immediately reinvested in housing credit properties. Developments that receive federal housing credits are also eligible to receive state housing credits as long as they meet county income-targeting requirements.

Benefits include improvements in economic development, housing affordability and competitiveness for federal funds. According to NCHFA, the state housing credit allows private owners to charge lower rents, resulting in more affordable rental developments in rural areas and the development of additional units for individuals with very low incomes.

Since its inception in 1999, the state housing credit has helped finance 250 properties with a total of 12,000 units, leveraging $6 of affordable rental housing for every $1 of the refundable credit.

“The North Carolina state tax credit program has proven to be an efficient means of assisting in the development of affordable rental housing in the state,” said Chuck Newcomer, vice president of acquisitions and underwriting for the Community Affordable Housing Equity Corp. (CAHEC), a tax credit syndication firm in Raleigh. His firm has taken advantage of the program.

Affordable housing developers can also take advantage of the North Carolina Housing Trust Fund, which will have an additional $5 million in financing available in 2006. Affordable housing developers will now have access to $8 million in 2006, after an effort led by the Campaign for Housing Carolina.

Affordable housing advocates in North Carolina head into 2006 with major challenges in store, including falling household incomes, rising land prices, high property insurance costs and a fast-growing population that is making affordable housing even harder to find.

The year will also bring with it one particularly significant challenge: rising construction costs. Building material prices were increasing in many parts of the country, including North Carolina, and that trend is expected to continue into 2006, “particularly with so much of the Gulf rebuilding effort still pending,” said Scott Farmer, director of rental investment at NCHFA. “Costs were a growing concern prior to Hurricane Katrina, but the spikes in fuel and materials costs immediately after the hurricane have created even greater uncertainty.”

But there is good news for North Carolina, too. In addition to a healthy business climate, North Carolina developers are seeing increases in tax credit equity pricing and the resultant decrease in debt service, which has made it feasible to build projects that might otherwise not have been considered, said CAHEC’s Newcomer.

Expected development trends in 2006 include a continued emphasis on acquisition and rehabilitation projects, as well as new downtown infill developments. “We are interested in developing tax credit deals in downtowns that are undergoing revitalization in order to provide more income diversity,” said Gregg Warren, executive director of the Downtown Housing Improvement Corp. in Raleigh.n

SOUTHEAST

Housing advocates expect downtown infill projects to be an important development trend in 2006.

One such example is the Griffin Apartments, a new 50-unit downtown infill project in Asheville that is currently under construction and is expected to be completed in September 2006. Developed by Community Affordable Housing Equity Corp. (CAHEC), a low-income housing tax credit syndication (LIHTC) firm in Raleigh, the majority of these affordable studio, one- and two-bedroom units are targeted toward small families, with an additional 15 units set aside to serve the needs of the formerly homeless. The energy-efficient development was designed in part by Advanced Energy in Raleigh which used energy-saving materials, site placement and design to help reduce long-term costs.

As part of a larger neighborhood revitalization effort, the $5.4 million property was financed with $4 million in investor equity. The credits were syndicated by CAHEC. Other financing included a $1 million, 20-year fixed-rate nonamortizing loan from the North Carolina Housing Finance Agency (NCHFA); $246,000 in HOME funds from MHO, Inc.; a $140,000, 20-year fixed-rate loan from the Asheville Housing Trust Fund; and a $40,000 Community Development Block Grant from the city of Asheville.

Another development is being built in Southern Pines, where the Downtown Housing Improvement Corp. (DHIC) is building the second phase of the 48-unit Creston Commons. From the beginning, the property faced an uphill battle. “The town sought to stop us from building the community by amending the land-use ordinance [citing concerns with open space] and effectively prohibiting apartments in the community,” said Gregg Warren, executive director of DHIC. DHIC believed it had a right to obtain building permits and, after a court battle, was able to proceed with the development, Warren said. The project was financed with $1.8 million in federal tax credit equity from the National Equity Fund; a 20-year, $640,000 NCHFA rental production program loan; a $296,000, 20-year loan from NeighborWorks America; a $255,000, 20-year loan from the Federal Home Loan Bank of Atlanta; and $488,122 in state tax credits.n