Whither LIHTC, Part 5 (Short hits edition)
Posted: January 9th, 2009 | Author: mfguide | Filed under: Investment, LIHTC, News | 3 Comments »The ‘Whither LIHTC’ has turned into a much bigger discussion than I initially anticipated as more and more participants take the full measure of the macro impacts on LIHTC. I’d like to thank Mary Levine of Parmenter Group for adding to the discussion and for providing a copy of their LIHTC stimulus proposal. Parmenter’s idea to return tax credits held by the GSEs to the states as an ‘additional incentive’ to future purchases is not one I’ve seen before. Because so many of the GSE credits are of recent vintage, this would give investors some additional credit capacity at a low price. Mary kindly responded to some questions in comments.
I’m also wading through Recap Advisors new report (number 72 on the right) delivered to Mass Housing. The report collates their various thoughts and recommendations for making it through the affordable housing crunch. David Smith, founder of for-profit Recap Advisors and non-profit Affordable Housing Institute, writes about LIHTC issues at his blog. He has unpacked the RA report and shares some hard-won insights in a three part series. Part 1 (Investment in Knowledge), Part 2 (Go try to borrow), and Part 3 (Drive thy business)
Some of the complexity issues identified by David in “Go try to borrow” are complemented in this piece for Novogradac by Boston Capital’s Bob Moss.
In the initial “Whither LIHTC”, we made mention of an Affordable Housing Finance roundtable entitled “Where does the LIHTC industry go?”. Several follow up articles and reports have since been issued such as this summary + YouTube interview, full summary, and 59-page (!) transcript. I just found the transcript today, so I haven’t looked at it yet.
I’m still developing my own solutions, and in the midst of a job hunt, may not get these fully fleshed. Nevertheless, I think we need to increase CRA lending requirements to encourage more debt issuance and equity investment by financial institutions, work with qualified, liquid investors with a useful track record, and adjust IRS rules to increase the amount of commercial income that can be generated. This last idea would be particularly beneficial to projects in urban or TOD areas.
Have you seen anything sanely written about HR 598 that provides a subaward grant allocation – I am looking for a good analysis.
Also, everybody seems to be a “twitter” about LIHTC stimulus in the bills running through congress, particularly lowering the credit period by 5 years from 10.
Any thoughts.
Great questions, I’ll have to start looking for commentary on HR 598. I’d need to have the original legislation in front of me to make a reasonable comparison but the big items seem to be the loss carries, grants, and the safe harbor provisions.
Had an interesting lunch last week with an originator. Postulated that we may be nearing the end of the LIHTC program as currently structured. Supposing that most programs have a 20 year lifespan, this 20-year veteran believes we may need to search for another model to privately fund affordable housing.
I’m not sure I’m there yet, but major changes are needed. I’m not sure at first glance that HR 598 does more than affect existing operators. If you’re committed to promoting private development and ownership, then owners have to be able to make money. Currently, with rising expenses, stagnant wages (and rents), and the removal of cable fee incentives (thanks, FCC!) owners need additional sources of revenue.
You can keep track of the legislation at Novo:
http://www.novoco.com/low_income_housing/legislation/index.php
And at Thomas:
http://www.thomas.gov/cgi-bin/query/F?c111:1:./temp/~c111esFSxZ:e95607:
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