B EST P RACTICES IN LIHTC
P OLICY
Brian Peters
Housing Policy Advocate, IndependenceFirst

A BOUT THE P RESENTER



Housing Policy Advocate at IndependenceFirst, a non-profit Center for
Independent Living serving people with disabilities in 4-county
Milwaukee metro area
Chair of National
Council on Independent
Living’s Housing subcommittee
An expert on LIHTC issues…NOT!

W
I
“B
P
”
?

A UDIENCE Q UESTIONS


How many are familiar with Low Income Housing Tax
Credit Program (Section 42)?
How many know what Qualified Allocation Plans are?

T HE B ASICS :
LIHTC: Low Income
Housing Tax Credit
Program

Federal tax credits allocated to states through
IRS

LIHTC allocations vary annually
–
–
In 2014, allocations were calculated at $2.30 per capita (per person)
Small states received a minimum of $2,635,000
– California received $88 million!
– Wisconsin received
$12,884,395
QAP: Qualified Allocation
Plans


How states say they will use the LIHTC funding
Public hearings required as part of process



Typically written with developers as audience

Can be confusing to newbies
Important information often are in appendices
Outlines the criteria by which proposals will be judged

L
I
H
T
C


“Section 42” of the
Internal Revenue
Code
Two types:


9% (new construction/ substantial rehab)
4% (acquisition/new construction/rehab)

Can be combined

LIHTC R EQUIREMENTS

Section 42 mandates a preference for:


Projects that serve the lowest income tenants
Projects that are obligated to serve qualified tenants for the longest period of time

Projects that are located in a qualified census tract
(as defined in subsection 42(d)(5)(C)) and the development of which contributes to a concentrated community revitalization plan

ONSIDERATIONS
S TATE H OUSING F INANCE A GENCIES HAVE TO GIVE
CONSIDERATION TO :


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Housing Needs
Characteristics
Sponsor Characteristics
Project Characteristics, including whether the project includes the use of existing housing as part of a community revitalization plan
Tenant populations of households with children




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Targeting of individuals on
Public Housing Waiting
Lists
Targeting of Populations with Special Housing
Needs
Project Location
Projects intended for eventual tenant ownership
The energy efficiency of the project
The historic character of the project
Some states add their own requirements and preferences

S TATE HFA


Low Income Housing
Tax Credits are administered by a
State Housing
Finance Agency
Wisconsin’s HFA is
Wisconsin Housing and Economic
Development
Authority (New logo!)

S TATES AND QAP S

Some states view
LIHTC program as purely a financial transaction



They do the bare minimum
Very short QAP & application
Not necessarily a blue state/red state thing!

Other states view
LIHTC as an opportunity to do some “social good”

Typically have more in-depth QAPs and applications

Many goals involve homelessness and other “special needs” populations as well as energy and sustainability

“S OCIAL E NGINEERING ”


Trying to do some
“social good” has been called “social engineering”
But the absence of those actions IS a form of social engineeringparticularly if there are countervailing incentives or pressures in community

Example:
Pleasantsville enacts zoning ordinances designed to drive up property values. This makes housing unaffordable to lowincome families

Is this not social engineering?

S TATE T OOLS
How do states use LIHTC as a tool for in communities?

Mandates

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“You must do this if you want money”
“You must do this if you want to qualify”
Sometimes developers have options- “You must do something on this list”
Example: Wisconsin has design requirements for buildings on accessibility and sustainability

M ORE T OOLS

Incentives


A popular way to encourage a goal
“If you do this, you’ll get x number of points”

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Sometimes additional financing is offered as incentive
Examples: Income targeting, increased accessibility, transportation linkages, family size

Set-asides

Done when state wants to guarantee a type of development
WILL happen even if it scores low

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“We’ll set aside this pot of money just for developers doing a specific kind of project”
Examples: Rural set-aside, supportive housing set-aside

W ISCONSIN QAP


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Wisconsin’s QAPs and other information can be found at www.wheda.com
.
Discussing 2013-2014
QAP, available on website
Note that nitty gritty details are in appendices
2015-2016 QAP finalized last week

QAP B EST P RACTICES

During this Workshop, we shall:


Look at some of the issues with LIHTC units
Look at specific sections of WHEDA’s QAP and compare with other QAPs


Discuss what we like/dislike
Discuss what we think
Best Practices should be

I NCOME T ARGETING


LIHTC Units generally are aimed at 50% or 60% of Area Median Income (AMI)
LIHTC has two income targeting options:

At least 40% of units must be targeted at people at or below 60% AMI (40/60 test) OR


At least 20% of units must be targeted at people at or below 50% AMI (20/50 test)
But typically because of fixed costs, developers will do
100% (or close to it) of units being LIHTC

LIHTC R ENTS

Rent usually is set at 30% of chosen AMI level


Rent is “fixed” and does not change with household’s income
Unit income limitation calculated as:


Studio=1 person
Each bedroom=1.5 individuals

W AUKESHA R ENT L IMITS AT 50% AMI
Bdrm # Rent
Efficiency: 616
One
Two
660
791
Three
Four
Five
Six
914
1,020
1,125
1,231
Source: Wisconsin Standard
Multifamily Tax Subsidy Project
- Estimated Maximum Income and Rent Limits, Effective
December 18, 2013
Extremely Low Income
Household

Wisconsin SSI (2013)



Combined Federal & State SSI payments:


Individual: $793.78
Couple: $1,198.05
A couple receiving SSI renting an efficiency would be paying
51% of their income-far beyond the 30% rule of thumb.
Many properties require certain threshold of income (3x rent)
Source: http://www.dhs.wisconsin.gov/ssi/benefits.h
tm

T HE I SSUE : U NAFFORDABLE TO ELI


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LIHTC developments at standard AMI targets are not affordable to ELI households
How can state HFAs reach this population?
What is needed to make it work?

A FFORDABILITY O PTIONS



30% AMI is extremely difficult to reach without rental subsidies; would it be better to have more units at 40%?
Some states offer additional financing to assist with deeper income targeting. But WI cannot use state funds for this. No state tax credits or tax revenue available.
What programs could be used with LIHTC for additional subsidies?

2014 WHEDA QAP-ELI T ARGETING

80 (out of 465) for serving Lowest
Income Residents

70 Points on sliding scale



10 bonus points if 6 or more units
Units with projectbased subsidies not eligible unless supportive housing
HOME funds OK

S AMPLE ELI T ARGETING : 58.50 POINTS
Total Units for
Development
44
CMI Set-Aside Number of
Percentage Units @ CMI
50%
40%
30% or Lower
9
3
6
Percentage of
Total, (Must equal or exceed
5%)
Multiply
Percent by
Factor
20.45
6.07%
X 1.00=
X 1.25=
Total Points
20.45
7.59
13.64
X 1.50=
20.46
B. 10 Bonus Points
Check
Box
Points
10
Description
The application includes 6 or more 30% CMI
Units.

ELI T ARGETING IN A LASKA


Alaska requires at least 5% of any projects with
20 or more units to serve populations with
“special needs” (of which ELI is a category)

Cannot be targeted by other funding (i.e. 811)
Offers discretionary basis boost (additional funding) for developers meeting certain conditions for ELI targeting

ELI T ARGETING IN M ASSACHUSETTS


ELI is one of 4 housing priorities developers must choose to qualify. 20% of units must be for ELI.
One of 13 mandatory thresholds


9% tax credit must have 10% of units for 30% AMI
4% tax credit and “primarily” affordable must have
10% of units for 30% AMI. IF mixed-income with
50% or more market-rate units, 15% of units must be for 30% AMI.

ELI IN I LLINOIS

Developers score points (up to 10 out of 100 possible points) for units at 30% AMI as percentage of total projects. Example is for projects with 41 or more units.

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1 pts for 1%-4.99%
2 pts for 5.0%-9.99%
4 pts for 10%-14.99%
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7 pts for 15%-19.99
10 pts for 20% or more

Projects 40 units or less starts at 4% minimum up to 25% or more, similar to above

ELI IN C ONNECTICUT

107 possible points in application;


Targeting units at 25% AMI earns up to 7 pts for 25% or more units (sliding scale)
6 pts for targeting units above 25% AMI to 50% AMI
(40% or more units needed for full number of points on a sliding scale)

ELI IN D ELAWARE


Delaware takes a balanced approach, encouraging developers to mix income target levels (30%, 40%, 50%, 60%) with higher points for targeting lower income levels
Interesting that the chart for 2014 is much less complicated than the one for 2013 (next 2 pages)

2013 B ALANCED I NCOME T ARGETING
Area Median Income Rents
40% 50% 60% Market Percent of
Units
30%
50.0 or more 1
42.5 to
49.99
1
35.0 to 42.4 2
30.0 to
34.99
3
5 25.0 to
29.99
20.0 to
24.99
5
15.0 to
19.99
10.0 to
14.99
4
3
1
2
2
4
5
5
4
3
2
2
3
4
5
5
4
2
2
2
2
3
5
5
4
2
0
0
0
0
0
0
5
4
5.0 to 9.99 2 2 2 1 3

2014 B ALANCED I NCOME T ARGETING

ELI IN I OWA
Category 1. Serves Lowest Income Residents 0 to 20 points

Projects that provide Units that are set aside and occupied by tenants with incomes at or below forty percent (40%)
AMGI and are rent restricted.

1 point for each full one percent (1%) of the total Project Units
(20 points maximum)
Category 2. Mixed Income Incentive 0 to 25 points

Projects that provide market rate Units (not eligible for
Tax Credits). On-site staff Units cannot be counted for points.

1 point for each full one percent (1%) of the Units (20 points maximum)

And Serve 30% AMGI qualified tenants.

1 point for each full one percent (1%) of the Units at 30%
AMGI (5 points maximum)
*Units assisted with vouchers cannot qualify for any of scoring points in this category.

ELI IN N ORTH C AROLINA
State law classifies counties as high, moderate, or low income.

If high income county:

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5 pts if at least 25% targeted at 30% AMI OR;
2 pts if at least 50% targeted at 40%

If moderate income county:

5 pts for at least 25% targeted at 40% AMI OR;

2 pts if at least 50% targeted at 50% AMI

ELI IN N ORTH C AROLINA

If in a low income county;

5 pts for at least 40% of units at 50% AMI

This scoring encourages ELI units in high-income counties, and does not incentivize them in lowincome counties

ELI B EST PRACTICES


How do we serve the ELI population?
….without using other federal subsidies?
Should ELI units be discouraged in high-poverty areas? Is that not where the “need” or demand is?

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Some (14) states have a state tax LIHTC.
Wisconsin doesn’t. Does this hurt WI efforts?
You could use market-rate units to subsidize ELI units. What are pros/cons of this?
What did you like/dislike?

A CCESSIBILITY

Section 42 is not considered federal funding, so…Section 504 of the Rehabilitation Act of 1973 does not apply.

In other words, no requirement for increased accessibility

Only Fair Housing Act would apply nation-wide.
Wisconsin also has Open Housing Law.

Similar to Fair Housing Act, but lowers unit threshold to 3 or above (FHA is 4 or above), and includes accessibility triggers for rehabs.

F AIR H OUSING IS … NOT SO FAIR
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
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Fair Housing Act’s construction standards have accessibility requirements
But they are the minimum requirements
….


Is not very accessible for many

Scooters


Bariatric wheelchairs
Non-mobility/non-sensory disabilities

A CCESSIBILITY S TANDARDS /G UIDELINES
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Common standards or guidelines used

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Section 504
Building code requirements (ICC/ANSI)
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Universal Design
Visitability
Aging in Place
Don’t forget features for non-mobility disabilities like environmental sensitivities

W ISCONSIN QAP A CCESSIBILITY
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WHEDA has two categories; New Construction/Adaptive
Reuse of non-housing structure (NC) and Rehab of existing housing (R)
Design Requirements are listed for both NC & R
WHEDA requires increased accessibility using
ICC/ANSI A117.1 and part of ADA Accessibility
Guidelines
But only 20% of single-family/duplex/ townhomes required to be Visitable
Offers points for increased accessibility features

M ANDATE E XAMPLES
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
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New Mexico-Mandatory Visitability for at least
50% of new multi-family housing units
Colorado has “Healthy Living Environment” with safe biodegradable materials, mold reduction, adequate ventilation, and isolation of garages
Missouri requires all 12+ units to have 5% wheelchair accessibility and 2% sensory accessibility

D ELAWARE A CCESSIBILITY I NCENTIVES

Awards additional points for developments that exceed 5% of total unit count being fully accessible units

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10% = 3 extra points
15% = 4 pts
20% = 5 pts

Also requires marketing & renting to households that need features. If household has no disability, lease addendum allows management to transfer them if someone else needs accessibility features

I LLINOIS A CCESSIBILITY

Offers points for increased accessibility under
ICC/ANSI 117.1-2003

1 pt for 10% or more of units for mobility disability,
AND 2% for sensory disabilities


2 pts for 10% mobility, 2% sensory, AND Universal
Design score of at least 50
3 pts for 10% mobility, 2% sensory, and Universal
Design score of at least 75

I NDIANA A CCESSIBILITY
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Aging in Place is a housing priority, and points are given for Aging-in-Place related services
Indiana minimum of Section 504 units or similar fully accessible units is 5% for rehab and 6% for new units.
Additional percentages are assigned additional points on sliding scale up to 9% to 11%
(depending on type of project)
Also offers incentives for Universal Designs on a sliding scale.

A CCESSIBILITY A PPROACHES


Do you think having accessibility mandates is a good idea? How much should be mandated?
What about incentives? Should we incentivize additional units using existing standards like
ADAAG, ICC/ANSI, or use newer approaches like
Universal Design?

What should best practices be?

I NTEGRATION



Integration means many things to different people
To fair housing & social justice advocates, it’s inclusion of minorities/economically disadvantaged groups, and access to opportunities
To advocates on disability issues, integration is inclusion of people with disabilities into community in a non-segregated way

I NTEGRATION E XAMPLES

Examples we discussed already includes:


North Carolina’s scoring requiring higher % of ELI units in high-income counties, but none in lowincome counties
Balanced Income approaches encouraging mixes of units (i.e. Delaware offering points for 20%-50% of units being market-rate)

Affirmatively Furthering Fair Housing, desegregation, etc. to avoid concentration of developments

A LASKA I NTEGRATION

Alaska has an unusual scoring system that encourages high # of LI units in high-income tracts, but does the reverse in census tracts with low income, giving scoring incentives for high number of market-rate units.

A LASKA P ROJECT M IX

C OLORADO S CORING I NCENTIVE
Colorado provides scoring incentives for mixedincome projects that have no more than 80% market-rate units (the max allowed under 20/50
Rule).

I NDIANA M ATRIX ( REALLY !)


Encourages a mix of units from 30%, 40%, 50%,
60%+ Market Rate (Similar to Delaware’s 2013
Balanced Scoring that we previously discussed)
Scoring incentive based on % of units in each category, ranging from 55% of units down to 3% of units.

Highest scoring opportunities is at range of 22% to 29.99% of units for each.

N EW H AMPSHIRE

Points for projects in towns with no other previously approved affordable family housing.
At least 20% of units must be affordable to low income households with no age designations.

I NTEGRATION B EST P RACTICES



Thoughts on best way to achieve integration of
LIHTC and tenants into communities?
Should we encourage mixed-income buildings in low-income areas, and higher % of LI units in high-income areas?
Should there be a limit on how many LIHTC developments there can be in an area? If so, what? How?

Urban density is different than rural or suburban density if using geographic distances

Wouldn’t this be a barrier for neighborhood revitalization efforts?

C OMMUNITY S UPPORT E XAMPLE

Many states require community support letters


Pro: Community support can smooth the way for development (zoning changes, variances, etc.). This way, the SHFA is assured development will happen.
Con: Isn’t this rewarding NIMBYism?



WHEDA provides 2 points for Local Notification, and 2 points for each support letter, up to 6 points. Letter must be from local big-wigs (my words, not theirs)
Other states have similar requirements
How much should support in the community impact the development?

S UPPORTIVE H OUSING


Many states use LIHTC as principal funding for developments with supportive housing, with some other additional funding for services and rental subsidies
Maryland offers incentives for developers that accept Section 811 Project Rental Assistance
Demonstration Program for non-elderly persons with disabilities

M ORE S UPPORTIVE H OUSING

Wisconsin offers two types of Supportive Housing scoring for new cycle

Integrated model with no more than 25% of units targeted at persons with disabilities

“Segregated” model with 50% or more units targeted at homelessness

Iowa has section in QAP that supports goals of
Olmstead (community living)


Scoring incentives for visitable or fully accessible units
Scoring incentives for management training on disability issues

S UPPORTIVE H OUSING B EST P RACTICES

Case managers like convenience of everyone in same location

But advocates believe scattered is best practices

Disability advocates don’t like housing and services being linked in anyway



Does the type of supportive services (i.e. for people with disabilities, elderly as opposed to homeless) make a difference?
Should services be on-site or off-site?
Your thoughts?

F INAL T HOUGHTS