Here is a brief overview of the Texas Credit Assistance Program and how it is shaping up in Texas.
Federal Program Highlights:
- Funding: 2.25 Billion
- Administering Agency: HUD
- Fund must be spent by 2/17/2012
Texas Program Highlights:
- Funding: 148 Million
- Administering Agency: TDHCA
- Awards expected by 12/17/2009
The 2009 Stimulus Bill (American Recovery and Reinvestment Act of 2009) contained additional funding for developments awarded tax credits under the Low-Income Housing Tax Credit (LIHTC) program in 2007, 2008, or 2009.
Under the LIHTC program, multi-year tax credits are available to multi-family housing construction or rehabilitation ventures that agree to provide housing for low- income tenants. These tax credits are generally sold and the proceeds used as upfront investment capital for the venture.
With the high-profile disruptions in the economy and credit markets over the last few years, the market price for these tax credits has fallen significantly. This has, in turn, disrupted the production of affordable multifamily housing under the program. Prior to the market collapse, the LIHTC program was estimated to support nearly 90 percent of all affordable rental housing created in the U.S. and 20% of multi-family construction in Texas. TCAP is intended to revive the production of affordable multifamily housing by replacing the gap in funding creased by the reduced value of the tax credits provided by the LIHTC program.
In Texas, the Texas Department of Housing and Community Affairs (TDHCA) is responsible for administering TCAP. TDHCA has adopted a policy document outlining how the agency intends to administer the program, and is currently evaluating applications.
Texas Program Details:
1. Applicants who previously returned their credits are not eligible for the program.
2. Applicants requesting funds must provide evidence of a Good Faith Effort to obtain equity commitments.
3. Priority scoring is offered to developers with higher-than-application equity commitments. (“Credit Pricing Incentive”)
4. Applicants can request a:
- 10-year zero percent Equity Bridge Loan,
- 15 to 40-year low interest Permanent Loan Replacement, or
- replacement of the granted Tax Credit at the price expected in the approved application price (capped at .85) in exchange for a forgivable zero percent loan and an at-parity cut of the equity cash flow.
5. 5% of the funding is reserved for developments funded by the Texas Rural Development Office of the United States Department of Agriculture (TRDO-USDA)
6. 15% of the funding is reserved for the “At-Risk Development Set-Aside” (i.e. properties nearing expiration on a requirement to maintain affordability and in danger of losing said affordability)
7. The funding is regionally allocated across the state according to the same formula as the LIHTC program.
Policy Question to Watch: Is the program having maximum impact (i.e. providing maximum benefit to low-income Texans?)
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