The Wisconsin Housing and Economic Development Authority (WHEDA) estimates that it will be able to fund approximately 500 additional affordable housing units this year as a result of recent improvements to the 4% federal low-income housing tax credit (LIHTC) program.
“Wisconsin communities face a critical shortage of affordable rental housing, and every additional apartment helps,” said WHEDA CEO Joaquín Altoro. “WHEDA’s skilled staff identified the opportunity to use changes in the federal program to increase the impact of state housing tax credits and make more housing projects possible.”
Shreedhar Ranabhat, commercial lending manager for WHEDA, said the change will allow WHEDA to provide awards to approximately 70% of the applications it received for the 2021 funding round, up from nearly half of applications it previously projected. For the 2021 round of allocations, applicants submitted projects seeking $16 million in credits for the $7 million available.
The anticipated increase in awards is made possible by a federal COVID relief and spending package approved in late December 2020.
The federal legislation included a provision allowing for low- to moderate-income multifamily housing financed with tax-exempt bonds issued after Dec. 31, 2020, to use a 4% minimum federal credit rate. Previously, a credit rate of 3.09% was in place for the federal credits paired with state housing tax credits, and applicants for the 2021 round of awards submitted requests with this in mind, said WHEDA officials.
Because the federal credit rate is now at 4%, the credits provide a higher value when converted to equity by investors. To meet critical housing shortages throughout Wisconsin, WHEDA staff is using the new equity formula to recalculate the credits needed for each application.
With more equity available under the 4% federal tax credit program, WHEDA will award only the necessary amount of state tax credits needed to support the submitted project budgets. The result will be a reduced state tax credit award that corresponds to the increased value of federal tax credit equity, explained officials.
WHEDA has allocated the state housing tax credits since the program’s creation in 2018.
