ax credits and rehabs: A perfect match?
By Jo Ikelheimer, MPA, RHM
Ask most well-versed practitioners of the Low-Income Housing Tax Credit (LIHTC) program what they think is the biggest challenge in the program and chances are they are going to say, “living through an acq/rehab.” This of course refers to the process by which an owner/developer acquires an existing property and rehabilitates it using funding through an LIHTC allocation from a state housing agency.
Preservation of our country’s aging affordable housing stock has been a significant issue in the housing industry for a number of years and many state agencies are prioritizing these ‘projects’ in their credit allocations to ensure its success. In theory it is a wonderful solution for a pressing problem and thousands of properties continue to thrive through these efforts. In reality, however, these well-meaning endeavors can quickly become a management for nightmare.
Why is that? Primarily because most of these properties have in-place tenants who may have been in residence for quite some time and who may already be receiving federally-subsidized rent. Many developers mistakenly assume that any family living at an affordable property will automatically qualify for LIHTC. What do you do when they don’t? And if the family is already receiving a federally-subsidized rent, then understanding how multiple housing program regulations blend with one another can become its own terrifying challenge.
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