Lotzar Law Firm, P.C. has comprehensive knowledge of low-income housing tax-credit programs, as well as Tax-Exempt and Taxable Bond financing for the construction of housing developments. Lotzar Law Firm, P.C. can help builders, developers and investors to understand financial incentives available for construction projects and to apply and qualify for programs to build low income housing. Call today to speak with a Scottsdale Arizona real estate development attorney to learn more about public housing vs. affordable housing and about the opportunities available for new construction and rehabilitation of housing units.
Public Housing vs. Affordable Housing
Public housing developments are overseen by the Department of Housing and Urban Development (“HUD”). They are administered by one of 3,100 local housing agencies. In most cases, the local housing agency both owns and manages the public housing development. When new public housing projects are to be built, governing agencies may go through a competitive bidding process and pay for the construction of new developments with public funds. The new developments will be owned by the housing authority.
There are exceptions. Sometimes, public housing projects are operated by private management companies. Sometimes, ownership is transferred to private subsidiaries or other entities responsible for operating the developments in accordance with public housing rules. A Public Housing Capital Fund also funds renovation of public housing developments while the Choice Neighborhoods Initiative (first funded in 2010) provides a limited number of annual grants to revitalize public housing developments that have become distressed.
Public housing is affordable to residents because rents are subsidized. However, there are differences between public housing vs. affordable housing.
Lower income individuals do not always live in public housing developments or in developments that accept Section 8 Vouchers to subsidize rent. The Low-Income Housing Tax-Credit Program (“LIHTC”) provides incentives for private developers and investors to build affordable rental housing within communities.
Developers and investors can qualify for LIHTCs to fund construction with a commitment to set aside a certain percentage of apartments in the development for low-income people. Tax-Credits are available if at least 20 percent of units in a development are occupied by people or families with income at or below 50 percent of the area median income (“AMI”). Credits are also available if at least 40 percent of units are occupied by people or families at or below 60 percent of AMI. These units must be rent-restricted. Dollar-for-dollar reductions in tax liability are available, so the LIHTC program provides a strong financial incentive for developers.
A state’s LIHTC allocations are too small to meet the demand for LIHTCs, so the application process is very competitive. Developers interested in providing affordable housing should speak with an attorney about the difference between public housing vs. affordable housing and should develop a plan for winning a Tax-Credit Award, or taking advantage of other special financing for new construction and rehabilitation of low-income developments. Contact Lotzar Law Firm, P.C. today to learn more.
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