Treasury, HUD Announced Housing Grants Funded Through Recovery Act
For the first time, state housing agencies will be provided with funds that they can use to assist developers of qualified affordable housing developments to fill the low-income housing tax credit (LIHTC) gap. The funds, which are coming from the American Recovery and Reinvestment Act (ARRA), will help to increase the supply of newly constructed or recently renovated affordable housing units for families.
The funding comes at a good time, as the economic and financial crises continue to present significant challenges for the construction industry, particularly residential construction. Falling housing starts and job losses in the residential building and specialty trades sector related to housing suggest that the need for affordable housing has risen markedly during the recession.
In addition to Treasury’s new program, HUD will be awarding $2.25 billion in grants to state housing credit agencies through the Tax Credit Assistance Program (TCAP) to complete construction of qualified housing developments between October 1, 2006 and September 30, 2009. The TCAP will ultimately provide affordable housing to an estimated 35,000 low-income households. States can provide TCAP funds to projects in the form of loans or grants. States may establish their own project selection criteria, except they must give priority to projects that are expected to be completed by February 16, 2012. Projects receiving only GO zone or disaster area credits are ineligible for TCAP aid, though projects with a combination of GO zone or disaster area credits and standard credits are eligible.
According to HUD Secretary Shaun Donovan, one of the by-products of the economic crisis has been the freezing of investment in LIHTC properties. As a result of tight credit, a number of traditional equity investors have left the market, and the value of tax credits has plummeted. The result is that nearly 1,000 projects containing nearly 150,000 units across the country have been put on hold. The new funding should help put LIHTC projects back on track.