Housing market, available financing options, and active development community cited as causes for high level of Low Income Housing Tax Credit (LIHTC) oversubscription.
This is the inaugural publication of Housing Think’s annual Most Oversubscribed LIHTC Programs. This list is not intended as a comprehensive study but rather a snapshot of the funding activity in the LIHTC program from state to state.
The list was compiled by taking a look at each state’s most recent and complete data for 9% competitive low income housing tax credits. Given the timing of this post, most states were only able to offer a complete set of data for 2009, with several exceptions (providing 2010 data). Furthermore, most states reported figures in dollars applied for and dollars allocated, however, several states had more complete information on number of applications and allocations. With this in mind, an initial round of data collection was conducted and the states were ranked from most oversubscribed to least. A subsequent round of fact checking followed by phone calls to both HFAs and developers resulted in the list and commentary below.
Oversubscription Rate: 509%
State: Rhode Island
Oversubscription Rate: 467%
Oversubscription Rate: 362%
Oversubscription Rate: 359%
Oversubscription Rate: 322%
Behind the Numbers:
HFA officials and developers in several states cited the headwinds faced by developers (both conventional and affordable) as a force driving higher than usual applications. In Rhode Island and New Hampshire (which came in at sixth most oversubscribed) state officials pointed to a difficult financing environment leading conventional developers to seek alternative and additional modes of funding. An official in Rhode Island revealed that application numbers are up from the previous two years (6 million in 2007 and 5.4 million in 2008): “as a result of market forces, people are looking for more funding for their projects”. A state official in NH noted that the number of applications compared to allocations is usually closer to two to one but that the “particularly competitive year” could be attributed in part to a glut of “stalled condo projects” seeking alternative sources of financing through the LIHTC program.
In Colorado Jan Hawn, CFO of Care Housing noted the same challenging financial conditions: “On the investor side, the pipeline has been narrow and projects have been slow to get off the ground”, but also cited high demand for affordable housing as a cause of the high oversubscription rate: “unmet needs [in Colorado] lead to a number of developers filing applications.” Rachel Basye, Director of Marketing and Strategic Development for the Colorado Housing Finance Authority offered a simpler explanation for the states historically high level of oversubscription, “ In Colorado the LIHTC program is currently the main source of funding for affordable housing”, pointing out other states have additional appropriations and funding programs.
Bob Palmer, Policy Director for Housing Action Illinois cites an active developer community in Illinois as driving the high level of competition “we have a very active developer community both in the non-profit and for profit sectors”. He went on to point out particularly strong constituencies for supportive housing communities, housing for persons with mental illnesses, and senior housing developments. He also cited Illinois’ historically poor record when it comes to providing “independent options” for mental health patients, and noted that a recent court ruling could spur further development of housing for mental health patients. A state official in Illinois also cited “a strong development community” as well as an “organized and objective process” drawing in developers from out of state.
Officials from Florida and Connecticut were unavailable for commentary at the time of writing.