We recently wrote about HDC’s advocacy work related to the draft 2016 Qualified Allocation Plan (QAP), out for public comment through February 10. The QAP is Oregon’s annually updated guidelines governing projects that use issuing low-income housing tax credits, or LIHTCs. Here’s a short primer on why LIHTCs are so important.
The impact of LIHTCs. Congress created the low-income housing tax credit in 1986 as tool to encourage private investment in the development of affordable housing. Since then, LIHTCs have become a hugely important source of funding for affordable housing, contributing to the development of an estimated 2.5 million rental units across the country, including more than 36,000 units in Oregon. Without the program, affordable housing construction “would quickly grind to a halt,” the New York Times has written.
How LIHTCs work. Every state gets an annual allocation of LIHTCs from the federal government. Each state, in turn, distributes the tax credits on a competitive basis to affordable housing projects. The sponsors of those projects partner with investors, who use the credits to reduce their tax liabilities and, in exchange, contribute equity—at least two-thirds of development costs in projects funded by 9% competitive LIHTCs—for affordable housing construction or rehabilitation.
LIHTCs in Oregon. In Oregon, Oregon Housing and Community Services (OHCS) is charged with distributing low-income housing tax credits—and, importantly, with setting project selection criteria and program rules matched to state housing policies. LIHTC funds bring essential equity to many of our clients’ projects, and enable these projects to provide quality affordable housing to low-income Oregonians. HDC has historically provided development services for about one-quarter of projects around the state that have received competitively awarded LIHTC funds.
LIHTCs and the future. Nine-percent competitive LIHTCs are kind of like barrels of oil. They're good to have, but you don’t want to get too dependent on them, because the supply is limited and insufficient to meet the entirety of our communities’ housing needs. HDC, like many of the industry partners we worked with on the QAP response, believe that four-percent LIHTCs, which are available in relatively large supply, offer great potential for expanding our region’s affordable housing production.