Making a Difference: Reports Underscore Huge Uplift to LIHTC Market from Stimulus Funds

By
3 min read

Tax Credit Advisor, August 2010: On June 25, at a Chicago conference, federal officials cited statistics showing the huge positive impact from stimulus funds in shoring up the low-income housing tax credit (LIHTC) market as they reported on activity to date under the Tax Credit Assistance Program (TCAP) and Section 1602 exchange program.

The two programs were established in February 2009 by the American Recovery and Reinvestment Act (ARRA), to provide federal funds to facilitate the construction or rehabilitation of proposed new LIHTC projects stalled by the shortage of tax credit equity. The act provided $2.25 billion in TCAP dollars through the U.S. Department of Housing and Urban Development (HUD) to 52 state housing credit agencies (HCAs), to make competitive funding award to projects that received housing credit allocations by 9/30/09. The 1602 program offered 56 HCAs the option to exchange a portion of certain unused housing credits to the U.S. Treasury for cash grants to make “sub-awards” of funds to stalled projects.

HUD and Treasury issued initial program guidance in May 2009; state HCAs subsequently designed and implemented their TCAP and 1602 programs and began committing funds to specific projects.

At the tax credit conference, sponsored by the National Council of State Housing Agencies, HUD and Treasury officials reported that as of 6/21/10, 794 projects containing 54,090 housing units had received commitments of TCAP funds, and 703 sub-awards of exchange dollars had been made for projects with 24,500 units as of 3/31/10.

By comparison, 91,911 units received allocations of 2008 housing tax credits, according to NCSHA statistics.

“There’s a phenomenal amount of [TCAP] money being committed,” said HUD official Marcia Sigal. As of 6/21/10, she noted:   

  • State HCAs had committed $2.1 billion in TCAP funds (93% of total).
  • 51 of 52 state HCAs met the requirement to commit at least 75% of their funds by 2/16/10. HCAs must disburse 75% by 2/16/11, and 100% by 2/16/12.
  • $563 million in TCAP funds had been expended, including more than $40 million during the week of June 14th. Arizona (70%) and Wisconsin (58%) led all states in expending the largest share of their allocated funds.
  • Average TCAP award per project: $2.6 million
  • Average project size: 69 units
  • 60%-40% split between new construction and rehab projects

According to a posted HUD spreadsheet, as of July 4, 106 projects nationwide had expended 100% of their TCAP award amount, though only 140 units (two projects) had been completed.

Under both the TCAP and exchange programs, funds can’t be expended or disbursed to projects earlier than three days before they are needed to pay for actual costs.

Sigal said that one state has indicated it will return TCAP funds to HUD because it doesn’t have enough projects to assist. “We will be reallocating some TCAP funds that have been unused,” she stated. HUD will post a Web notice, probably this summer, detailing the criteria that states must meet to be eligible to apply for extra funds.

1602 Exchange Program

Treasury official Jean Whaley reported that only two eligible jurisdictions – New York State and the Northern Marianas Islands – are not participating in the Section 1602 program.

She said that Treasury has awarded a total $5.47 billion in exchange funds to state HCAs to date, of which nearly $1.1 billion has been disbursed to projects. Current exchange fund disbursement rates by states range from 0% to 79%.

State HCAs can submit additional exchange fund requests to Treasury through year-end 2010.

As of 3/31/10, Whaley noted, 703 sub-awards had been made for projects with 24,500 housing units generating 28,000 jobs. By the end of the program, the estimated totals are 1,200 projects, 73,000 units, and 84,000 jobs.