Bill in Congress would boost affordable housing tax credit by 50%
August 30, 2019
Credit: By Janis L. Magin with the Pacific Business News
A bill introduced in Congress this year would increase the amount of low-income housing tax credits allocated to each state by 50% over the current levels, which could have meant another $8 million in equity financing for an affordable rental project that broke ground in Kapolei this week.
A collaboration of California-based affordable housing developer Highridge Costa and Honolulu-based developer Coastal Rim Properties broke ground Wednesday on the second phase of Kulana Hale, a 13-story tower with 143 units for families earning no more than 60% of the area median income.
The $71 million second phase is being financed by Citibank, which provided the construction loan and permanent financing, about $24 million in federal low-income tax credit equity financing from the Royal Bank of Canada’s RBC Capital Markets, about $8 million in state of Hawaii tax credit equity from Sugar Creek Capital and up to $17.9 million from the state’s rental housing revolving fund.
Moe Mohanna, president of Gardena, California-based Highridge Costa, noted that the project’s tax-credit financing through the Hawaii Housing Finance and Development Corp. means no government subsidies will be used for the life of the 60-year affordability.
“We’re proud this development will not rely on any operating subsidy or any rental subsidy,” Mohanna said at the groundbreaking. “It ensures residents can pay rent with their own money, which the market [in Hawaii] doesn’t allow.”
Bob Spangler, managing director and co-head of municipal finance at RBC Capital Markets, one of the largest syndicators of low-income housing tax credits in the United States, stressed the need for more equity financing of affordable housing through tax credits, noting that half of all renters in Hawaii are paying 30% of their gross income or more for rent, and that 27% are paying 50% or more.
The Affordable Housing Credit Improvement Act of 2019 introduced by a bipartisan coalition in the House and the Senate on June 4 would increase the amount of tax credits allocated to each state by 50% — 10% per year over five years, which would result in more than 384,000 new affordable homes across the U.S. over the next 10 years. The bill would also stabilize the value of the 4% LIHTC, and expand the tax credit legislation to allow the tax credit to be used to support housing for veterans and to target extremely low-income populations, according to a statement from bill sponsors Sen. Maria Cantwell and Rep. Suzan DelBene of Washington.
The bill has 73 co-sponsors in the House and 17 co-sponsors in the Senate; Spangler noted that Hawaii’s four-member delegation has yet to sign on.
Meanwhile, Hawaiian Dredging Construction Co., which is nearing completion of the Kulana Hale project’s first tower, 154 units for seniors making up to 60% AMI, expects to begin construction immediately on the second tower.