Affordable Housing 101

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What is Affordable Housing?

Affordable housing does not simply mean "housing that is affordable" as people think. National guidelines define affordability where no more than 30% of household income is spent on housing costs. However, for NYSAFAH and its members, affordable housing is further defined as housing that is developed and built with federal, state and local subsidy and that is set-aside for residents who meet certain income restrictions (based on the Area Median Income or AMI). This is different than public and homeless housing.

The city, state, and federal government provide subsidies that make housing more affordable for certain homeowners and renters. Housing assistance can be tenant based, project based or be public housing (owned and operated by the government). Various housing programs exist, but for the most part NYSAFAH members use project-based programs in order to build and finance housing developments all over New York State. Housing developments are built, owned and managed by our members for the benefit of income-qualified residents (based on AMI).

Housing assistance from the state is offered through a variety of programs including the State Low Income Housing Tax Credit Program (SLIHC), New York State HOME Program, and many others. Program awards are made by the state via New York State Homes & Community Renewal (NYS HCR).

Subsidy is also provided directly from New York City agencies including the New York City Housing Development Corporation (NYC HDC) and the New York City Department of Housing Preservation & Development (NYC HPD). Both are the administering agencies for tax credit and bond programs for projects built within the five boroughs of New York City.

What is LIHTC (pronounced LIE-TECH)?

The Low Income Housing Tax Credit (LIHTC) provides a dollar-for-dollar reduction in tax liability to building owners that develop housing for low income households. The amount of credit is directly linked to the number of low income households served.  Household income for residents is limited based on the area median income and residents must go through an application or lottery process in order to qualify. Most developers use other subsidy programs in conjunction with LIHTC in order to finance their projects which are used as a gap filler in development budgets.

Individuals, corporations, and partnerships are all eligible to receive allocations under the LIHTC program with the latter two being the most common.  Not-for-profits are encouraged via special application scoring to utilize the program.

The LIHTC is only available to owners for units that serve low income populations and not for market rate units in any development.  The dollar amount of allocation provided to the owner is based on the capital budget of the project, is exclusive of land acquisition costs, and is limited to meeting the project cost gap.

4% vs. 9%

The Low Income Housing Tax Credit is used to subsidize either 30% or 70% of the low-income unit costs in a project.  The 4% Credit (30% subsidy), also known as the As of Right credit, is used in conjunction with other federal subsidies in new construction or in the acquisition of existing buildings. The 70% subsidy (9%) is used without other federal subsidy programs but may be used in conjunction with other state and local programs for new construction.

Within general guidelines, state housing agencies administer Housing Tax Credit programs, review credit applications, and award allocations to developers. State plans must include provisions to award allocations to developments that will serve the largest number of low income residents and ensure affordability for the longest period.  

Once the developer receives a tax credit award, s/he must leverage the financial resources for the development. Typical LIHTC transactions include a conventional loan from a commercial lender or government agency, gap funding from a private or public source, and include the developer obtaining equity from a private investor in exchange for the credits. 

What do they Mean?

AHC       New York STATE Affordable Housing Corporation
AMI Area Median Income
Bond Deal 4% Tax Credit Deal
HDC New York CITY Housing Development Corporation
HFA New York STATE Housing Finance Agency
HPD New York CITY Department of Housing Preservation & Development
HUD UNITED STATES Department of Housing & Urban Development
LIHTC Low Income Housing Tax Credit Program
Moderate Income Household Households earning between 80% and 120% of AMI
Low Income Household Households earning between 50% and 80% of AMI
Very Low Income Household Households earning no more than 50% of AMI

Novogradac's Affordable Housing Resource Center

Novogradac & Co. Resources for Affordable Housing

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