Prestwick Development Company
Affordable Housing – Typically 60% of AMI or Less The Low Income Housing Tax Credit is a dollar-for-dollar tax credit in the United States for affordable housing investments. It was created under the Tax Reform Act of 1986 (TRA86) that gives incentives for the utilization of private equity in the development of affordable housing aimed at low-income Americans. Housing Bonds are a financing tool used by state Housing Finance Agencies to finance low interest mortgages for low income renters by providing investment opportunities that the interest earned is tax exempt and the proceeds are used to make low interest loans. HOPE VI & Choice Neighborhoods utilized by the United States Department of Housing and Urban Development to revitalize struggling neighborhoods with distressed public or HUD- assisted housing. Section 8 & Project Based Rental Assistance/HomeFlex are utilized by Public Housing Authorities to subsidize rents for families with the greatest needs.
Housing – Delivery Hurdles Cost to develop basic, 950 SF, surface parked rental unit: 2008: $93K Monthly rent required to finance unit: $875/month 2016 : $135K Monthly rent required to finance unit: $1,189/month 2018 : $142K Monthly rent required to finance unit: $1,259/month
Housing – Delivery Hurdles Reasons for Cost Increases: - Construction Increases ◦ $65-$70/RSF in 2008 ◦ 95-$100/RSF in 2016 ◦ $110/RSF in 2018 - Land Costs - Controllable Operational Costs - Tax Assessments
Solution – LIHTC What is a Low Income Housing Tax Credit (LIHTC): - Tax Credits Awarded to Qualifying Developments - Tax Credits Sold to Corporations and Banks - Proceeds Used to Development Housing Benefits of the Low Income Housing Tax Credit (LIHTC) Programs: - Pays for Significant Portion of Development Costs - Resulting Monthly Rent - $600+ instead of $1,200+/- - Income Restricted at 60% of the Metropolitan Area Median Income
60% Area Median Income (2016) – LIHTC Income 1 Person 2 Person 3 Person 4 Person 5 Person 6 Person 7 Person 8 Person 60% 28,680 32,760 36,840 40,920 44,220 47,520 50,760 54,060 Max Rents* 1 BR 2 BR 3 BR 60% $768 $921 $1064 *Deduct Utility Allowance for Actual Rent
Financing – 9% Tax Credits Total Cost- 15.3M Tax Credit Equity - 13.0M Debt - 2.3M Gap Financing - 0 94 units
Financing Tax Exempt Bonds Total Cost - 23.8M Tax Credit Equity - 14.0M Debt - 7.3M Gap Financing - 2.0M (HOPE VI, HOME, CDBG, AHP…) DDF - .5M 162 Units
Financing Tool Box – Mixed Finance LIHTC TIFF and TADs Tax Exempt Bonds CDBG Payment in lieu of taxes HOME Foundation Grants Sell Lease back Federal Grants Convention Debt and Equity Neighborhood Stabilization (NSP) Affordable Housing Program (FHLB) Georgia Power Rebates Green Funds
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Gateway Capitol View AFFORDABLE HOUSING CASE STUDY
Gateway Capitol View (4% Senior) TDC – 23.8M Equity - 14.0M Debt - 7.3M Gap Financing - 2.0M (HOME, CDBG, AHP…) DDF - .5M Rental Assistance from the Atlanta Housing Authority Assumptions: Credit Pricing - .49 and .95 162 Units
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