Cities and States Step Up in 2022 to Bolster Affordable Housing Stock
By Pamela Martineau
14 min read
A Trove of Innovative Initiatives
Cities and states throughout the nation launched—and in some cases implemented after years of preparation—a trove of innovative initiatives in 2022 to encourage the development of affordable housing. From matching Low Income Housing Tax Credits to unique approaches to workforce housing, local governments are pushing forward to help developers bolster the nation’s affordable housing stock.
“The states realize the problem and they want to do something about it,” explains Chris Hite, principal and CEO of Sugarcreek Capital. “And they are flush with cash right now.”
Patrick Bowen, president of Bowen National Research, a real estate research firm, says local governments are rolling out a broad range of programs and initiatives to strengthen affordable housing.
“Communities on a local level continue to introduce zoning policies to support things, like accessory dwelling units, tiny houses or increase density for projects that provide affordable housing,” says Bowen. “Then there is the traditional reduction of fees or tax abatements for projects that involve affordable housing. Many communities are rethinking their land use policies, with some considering the donation of or discount sale of publicly owned land to support affordable housing.”
Tax Credit Advisor has compiled a list of some unique affordable housing initiatives launched in cities and states throughout the nation. While not a comprehensive listing, it provides a flavor of some of the efforts being made to encourage and increase affordable housing.
State Tax Credits
Hite says one of the most “dynamic” programs he has encountered this year is Kansas’ state tax credit one-to-one match of the Federal LIHTC.
“It was a real shot in the arm,” says Hite. “We have a lot of developers proposing developments in the state of Kansas now and a lot of those developers weren’t interested in the state of Kansas prior to that.”
Other states have also recently developed LIHTC match programs, but not on the level of Kansas’ one-to-one match. LIHTC matches were recently offered by Indiana and Virginia, and by Washington, DC.
“About 95 percent of the affordable housing created in this country is created through the Federal LIHTC program,” says Hite. “These state tax credit programs are supplementing that.”
Virginia’s program is effective for tax years before Jan. 1, 2026, and has a $60 million annual cap. Indiana’s program has a $30 million cap.
Standouts
Bowen says Ashville, NC is particularly strong in developing a broad swath of initiatives to encourage more affordable housing.
“Some of the best examples of affordable housing initiatives we have seen are in Asheville, NC,” says Bowen. “These initiatives include stipends to landlords to join the Housing Choice Voucher program, a development fee rebate program for affordable housing projects, reduced sewer connection fees, a Land Use Incentive Grant (LUIG) program that offers rebates of city property taxes and several others that warrant consideration in other communities around the country.”
Bowen says it is important to note that “some of the best approaches to addressing housing aren’t simply limited to policies, but also include efforts to educate the public and elected officials on housing…”
General Obligation Bonds
Josh Haston, development manager for LDG Development, adds that many cities and states are offering general obligation bonds to help fill funding gaps on affordable housing projects.
“GO bonds are a good source that can fill the gaps and then get repaid to city and state governments,” says Haston.
Haston says that some of the bond issuances have been massive and in some cases as high as $100 million, which could help fund gaps in up to 25 projects if developers seek issuances of about $3 to $4 million depending on how the programs are structured.
Haston adds that many cities are using American Rescue Plan Act (ARPA) funds to help bring more affordable housing online. He says the city of Nashville recently issued a Request for Qualifications (RFQ) that would use ARPA funds as a grant to build housing for the homeless.
“A lot of cities are starting to figure out how to implement ARPA money for housing,” he says.
Haston stresses that every market is different and many of the local initiatives have requirements specific to the local government and region. He also adds that more GO funds are needed in cities and counties throughout the United States to help meet the need for new affordable housing projects.
“The four percent LIHTC and existing soft funds simply aren’t enough to meaningfully compete with existing market forces to meet our country’s desperate need for more affordable housing,” he says.
The city of Nashville launched a tax abatement initiative to incentivize developers who are building apartments in the city to include affordable units. The program offers tax abatement to qualifying developments that keep 20 to 40 percent of the developments as affordable for the long-term. The more affordable the rent, the higher the tax abatement that is offered. The effort, known as the Mixed Income Pilot, seeks to provide affordable housing to Nashvillians making 50 to 75 percent of the area median income.
Employers Work to Bolster Affordable Housing Bowen, of Bowen National Research, says employers in some communities are looking to become part of the solution in increasing affordable housing stock for workers.
“Many employers have indicated to us that they are having difficulty in attracting and retaining employees due to lack of affordable housing in their respective areas. This in turn has slowed production or services, added to their costs and ultimately deterred expansion or growth opportunities for many employers,” says Bowen. “It has reached a point of concern that it is becoming more frequent to hear from employers that they want to be part of the solution, whether it is providing down payment assistance to lower wage-earning employees or being directly involved in residential development. There are numerous examples of employers working with the development community and the public sector in public-private partnerships that can be found in places like Chicago, Illinois, Seattle, Washington or Columbus, OH. But it can also occur in smaller communities.”
Bowen describes instances of business owners and developers working together on projects. For example, officials with his firm recently spoke with an owner of a boat building company in coastal North Carolina who was struggling to find workers due to a lack of affordable local housing. The employer is now looking for sites and a development partner and wants to be directly involved with residential development in his community. A developer in northern Michigan says his firm approached one of the bigger employers in his region about providing the financing for construction costs for a residential project near the employer’s place of business with the understanding that the housing would be affordable to much of the of company’s lower wage-earning staff.
“The employer provided the financing, and the project is proceeding ahead as planned,” says Bowen. “I think these are examples of employer involvement that weren’t very common just a couple of years ago. So, whether you are a developer seeking additional resources or partners in your project or you are a government entity, local employers and economic development organizations should be considered as part of a potential solution to address affordable housing issues. I think there is a genuine opportunity for this type of collaboration.”
These initiatives are a response to information learned from Housing Needs Assessments.
Examples of New State Initiatives to Support Affordable Housing
New Mexico
Housing Innovation Program – New Mexico Mortgage Finance Authority offers funding to eligible applicants for housing projects that serve only low- or moderate-income households or individuals for which there is a lack of other funding sources. Eligible applicants include nonprofit and for-profit organizations, governmental and tribal entities, developers, builders and regional housing authorities. Program funding may be used in financing both capital and non-capital projects. Funds may be used only for reasonable and customary costs attributable to the awarded project. Capital projects include development, acquisition, construction, rehabilitation and/or preservation of affordable housing. Non-capital projects may include service delivery as an eligible expense.
(Source: MFA Housing New Mexico)
South Carolina State Housing Finance and Development Authority
Small Rental Housing Development Program – Funds from the HOME Investment Partnership Program ($10 million), National Housing Trust Fund Program ($8 million) and the South Carolina Housing Trust Fund Program ($15 million) are available to support development of smaller rental properties. Units of local government (cities, counties and towns), regional councils of government, public housing authorities, community housing development organizations and nonprofit and for‐profit entities are all eligible.
Up to $33 million of funding is available. Applications will be placed in one of four set‐asides. 1. General New Construction – $13.2 million, 40 percent of available funds. (Includes applications that contain eight to 39 units.) 2. Micro New Construction – $6.6 million, 20 percent of available funds. (Includes applications that contain four units submitted by nonprofit applicants.) 3. Rehabilitation – $6.6 million, 20 percent of available funds. (Includes rehabilitation applications that contain eight to 24 units.) 4. Supportive Housing – $6.6 million, 20 percent of available funds. (Includes permanent supportive housing developments of which 25 percent of the SRDP funded units are designed for persons needing supportive services.)
(Source: Bowen Research and SC Housing)
Examples of Local Initiatives and Incentives
(Source: Bowen Research)
Asheville/Buncombe County, NC
Housing Trust Fund – A program that assists in creating diverse and affordable housing choices. It enables the City of Asheville to repurpose city-owned land for development that supports housing affordability by providing low-cost financial assistance to incentivize the development and preservation of affordable housing within the city limits. The maximum loan amount available to each developer from the Housing Trust Fund is $20,000 per affordable unit, and the maximum loan per project is $1 million, unless otherwise approved by the city council due to unique features. The program is available to for-profit or nonprofit developers who plan to construct new affordable for-sale or rental housing, rehabilitate existing multifamily housing or convert property to affordable housing. A minimum of 20 percent of the total project units must be affordable for the proposed development to be eligible for financing. The loans available are repayable at a low interest rate of two percent.
Fee Rebate Program – A rebate of development fees is available for developers of affordable housing in the city of Asheville. To qualify, all development fees for a project must be paid in advance. Developers can qualify to receive fee rebates ranging from 50 to 100 percent based on specific criteria. For example, developers that offer at least 20 percent of units in a project to households with incomes below 80 percent AMI would qualify for a 50 percent fee rebate, while developers that build or offer units that are permanently affordable would qualify for a 100 percent fee rebate. The types of fees that qualify for rebates include site development fees, planning and zoning fees, and plan review/building permit fees.
Expedited Plan Review – The City of Asheville Development Services Department offers expedited plan review to affordable housing projects that meet certain terms and conditions. To qualify for expedited plan review, affordable rental and for-sale projects must offer at least 20 percent of units to households that earn at or below 80 percent of AMI. Rental projects must also remain affordable for a minimum of 20 years.
THRIVE Asheville Program (Landlord Tenant Partnership) – This program turns Coronavirus relief funds into landlord incentives. Landlords receive a $2,500 stipend to cover costs of joining the Housing Choice Voucher (HCV) program. The program provides landlords with tenant coaches for culturally competent resident experiences. THRIVE uses Housing Choice Vouchers to move public housing tenants into private rentals. HCV holders that move into private rentals as part of this program are also eligible for security deposit assistance.
Low Interest Construction Loan Program – Buncombe County Affordable Housing Services provides funding for construction loans. The loan term and rates vary for projects with multifamily rental units. Loan terms and interest rates range from a seven-year term at 2.50 percent for a standard loan agreement to a 20-year term at 4.25 percent for an interest-only loan with a balloon payment. The maximum loan amount available to borrowers is ten percent of the cost for each affordable unit developed or 20 percent of the cost for each affordable unit developed under the Low Income Housing Tax Credit program.
Land Use Incentive Grant (LUIG) – This is a point-based development incentive program. LUIG provides monetary incentives based on each developer’s points earned through several predetermined qualifications. Generally, projects with higher percentages of affordable units earn more points. The maximum points earned is 200, with every five points worth a rebate of one year of city property taxes above a property’s pre-developmental total. The project must be located within the City of Asheville and be considered to have convenient access to work, schools and services. The maximum amount granted to a project is $80,000 per affordable unit. Twenty percent of a development’s units must meet the city’s affordability standards for households earning 80 percent or less of AMI. At least ten percent of the units must accept rental assistance, including Housing Choice Vouchers. In addition, affordable units in this program must be rented to income-eligible households for at least 20 years. The final number granted is adjusted and approved by the city council.
Reduced Sewer Connection Fees – The Metropolitan Sewerage District (MSD) of Buncombe County refunds a portion of sewer connection fees for affordable housing projects in the county. According to the Facility Fee Price List published by MSD, residential connection fees paid by housing developers would be reduced to $670 per unit. Typical fees range from $1,900 for multifamily attached units to $2,836 for single-family detached units. Developers must pay the full connection fee before a partial refund is issued by MSD.
Wilmington/New Hanover County, NC
Workforce Housing Gap Rental Assistance – New Hanover County has developed a two-year pilot program intended to help close the gap between income and rent. This program provides direct payments to qualified, pre-selected property management companies and landlords to help residents earning 60 to 120 percent of AMI with a monthly subsidy of $200 per month for single-person households and $300 per month for multiple-person households. Guidelines for the program were amended to only include households earning 60 to 80 percent AMI. Income-qualified households will receive a $450 per month direct subsidy for rental costs.
Beaufort County, SC
Inclusionary Zone Ordinance – Beaufort County’s community development code offers incentives for the voluntary provision of affordable housing. In the county’s Regional Center Mixed Use District, the code waives maximum population density and minimum lot size requirements and offers reduced impact fees in exchange for the provision of 30 percent affordable units deed-restricted for 20 years, or 20 percent affordable units deed-restricted for 25 years. Rental units must be affordable to households at or below 80 percent of AMI. For-sale units must be affordable to households at or below 100 percent of AMI. Standards require affordable units to be comparable to and integrated with market-rate units within the development.
Density Bonuses – Below market density bonuses of 50 to 100 percent (depending on zoning district) are available for housing developments where at least 50 percent of units are built with a local, state or federal subsidy or a private nonprofit sponsor for households earning less than 80 percent of the countywide median income. Market density bonuses of ten percent for single-family cluster developments and 20 percent for planned community and multifamily developments are available where half the units are affordable.
Hilton Head Island Workforce Housing Program (WHP) – This is an amendment of the Land Management Ordinance. WHP’s purpose is to incentivize developers through regulations on density bonus, affordability period, income and employment eligible households, deed restrictions, sale prices and rental rates. To qualify, units must have at least one household member employed full-time in the Town of Hilton Head Island. Households must meet the income requirements of 60 to 80 percent of AMI for rental units and 80 to 100 percent of AMI for owner-occupied units. The maximum density developers can have under the proposal is 12 units per acre, with at least half being workforce housing units. New development that includes at least ten percent workforce housing units can receive a 20 percent bonus floor area ratio, can include up to 50 percent micro efficiency and studio units and reduce the minimum size of residential units by 20 percent. Conversion of existing commercial buildings to residential or mixed-use status is also permitted under the WHP if certain requirements are met.
