Converting foreclosed single-family homes into affordable rental properties through the low-income housing tax credit (LIHTC) program is an idea that’s getting increasing attention inside the Obama administration.
With a few changes, the program could become another tool used to transform the vacant properties, said Carol Galante, acting assistant secretary for housing at the Department of Housing and Urban Development (HUD) and Federal Housing Administration (FHA) commissioner.
She noted that developers have been using LIHTCs to finance scattered-site developments for years.
“We’ve got people who are doing similar things but maybe haven’t taken those programs and skills and used it specifically on what I would call today’s problem,” said Galante, a former affordable housing developer.
Before joining the Obama administration, she headed BRIDGE Housing, a top affordable housing developer in California, so she’s well familiar with LIHTCs.
The housing tax credit program isn’t a perfect fit when it comes to foreclosed homes. However, with some minor changes, Galante thinks it could be made more compatible.
For example, exempting foreclosed properties from the 10-year holding rule would help. The Housing and Economic Recovery Act of 2008 provided some waivers to this rule.
Last year, federal officials also proposed the idea of creating an “income-averaging” option, which would allow properties to serve households whose average income is no greater than 60 percent of the area median income and with no individual household above 80 percent.
This change could be helpful in the single-family home discussion as well, said Galante.
The option hasn’t moved forward, but officials continue to work on the proposal, she added.
The conversion of real-estate owned (REO) properties is an ongoing conversation at FHA and HUD. Last September, FHA and the Federal Housing Finance Agency officials released a “request for information,” seeking input on new options for selling REO properties held by FHA, Fannie Mae, and Freddie Mac.
“We’ve gotten lots of good proposals on that and are in the process of sorting through them and hope to have some good models that we’re going to each or collectively work on soon,” Galante said.