Survey Finds No Flood of Returned Credits So Far; States Gear Up 2009 Programs

By &
5 min read

Responses to a recent survey of state housing credit agencies by the Tax Credit Advisor finds that in general states haven’t had many low-income housing tax credit awards returned so far.

In addition, states to date have only committed a small fraction of their available 2009 housing credit authority.

The survey, in early November, drew responses from 47 states and the city of Chicago. Not responding were Hawaii, Louisiana, and Maine. In addition to returned credits, the survey asked states about the status of their 2009 qualified allocation plan, 2009 credit application deadlines, and available and committed 2009 credits. (See pp. 16-17 for state-by-state survey responses.)

Returned Credits

For many months, there’s been concern and anticipation that many developers that have received reservations of low-income housing tax credits (LIHTC) will have to return their awards because of their inability to obtain tax credit equity and/or because of funding gaps they are unable to close that were triggered by the sharp decline in credit pricing.

The TCA survey results show that, in general, massive returns haven’t materialized so far. (For complete state-by-state responses about credit returns, go to http://www.housingonline.com/Documents/TCA Issues/survey1108.pdf)

The states were asked whether they have received any returns so far of 2006, 2007, or 2008 housing credit awards, and, if they have, the total number of projects and dollar amount of returned credits.

Twenty-three states indicated they’ve received a total of $43.9 million in returned credits for 82 projects. They gave a variety of reasons for these returns, although for a large chunk of them, states indicated it was because of an inability to get tax credit equity or – in a few cases – the loss of the equity source. Some states pointed out that they have already re-awarded much of these returned credits. Also, some states reported only that they haven’t yet had any credit returns because of the shortage of tax credit equity, but didn’t indicate whether they had any returns due to other reasons.

Nineteen states said they haven’t had any returned credits from 2006-2008. California didn’t provide information regarding returned credits.

The seven states among respondents with the most number of projects returning credits so far, and the total amount of returned credits, were: Texas, 21, $12.3 million; New York State Division of Housing and Community Renewal (DHCR), 9, $3.3 million; Kentucky, 8, $2.6 million; Mississippi, 5, $5.2 million; Iowa, 5, nearly $2 million; North Carolina, 5, $1.9 million; and West Virginia, 4, $1.0 million. Reporting three returns each were AL and MI; two each, Chicago, ID, NV, WI; and one each, AK, AZ, IN, MN, MT, NE, NH, ND, OK, PA, and WY.

Many states have been trying through various steps to save pending projects with credit awards that are no longer viable, including awarding them additional credits and permitting them to take advantage of certain beneficial LIHTC program amendments made by the Housing and Economic Recovery Act (HERA).

A few states have encouraged developers with struggling deals to return their credit awards this year under so-called “amnesty” offers.

In a related development, the Louisiana Housing Finance Agency on 11/12/08 announced the recapture and reallocation of more than $18 million in GO Zone and per capita housing credits. The agency said projects that had their tax credits recaptured can apply for credits in future funding rounds.

2009 Program Activity

Fifteen state agencies noted their 2009 qualified allocation plan (QAP) is final. Only three haven’t yet started drafting a plan. The remaining respondents were somewhere in between.

Many state agencies, however, previously had their 2009 QAPs finalized, but have gone back to amend them due to LIHTC program legislative amendments made by HERA, and due to the recent financial rescue law (H.R. 1424). HERA amended numerous LIHTC program rules and provided extra per capita credit authority to all states for 2008 and 2009. In addition, H.R. 1424 provided even more extra housing credits for 2008-2010 to 10 disaster-stricken states in the Midwest and to Texas and Louisiana. Extra tax-exempt bond authority was provided as well for most of these states. (For details on HERA, see Tax Credit Advisor, September 2008, p. 1; for details on H.R. 1424, see October 2008, p. 1.)

Of the responding states, only six (KY, MN, MO, PA, RI, UT) had one or more application deadlines for their 2009 credits that had already passed, as of the date of the agencies’ response to the survey. In addition, Vermont, as before, and Iowa, as the result of a switch, have an open application window.

Twenty states indicated they’ve already committed, by forward commitment or other means, some of their anticipated 2009 housing credit authority. Together these awards totaled about $82.9 million, or just 13%, of the total estimated 2009 authority reported by these states.

Twenty-three states plus Chicago indicated they haven’t committed any 2009 credits so far.

Vermont and the New York DHCR were the only respondents that have already committed all their 2009 credits. Five additional states were above 50%: MN (98%); MA (87%); KS (74%); SD (73%); and DE (53%).