If you ask anyone in the city, the two tools we have to create affordable housing are WHEDA tax credits and TIF. I disagree those are our only tools, but they are two major tools we have . . . and one of the two is in jeopardy . . .
Right before the holidays, this memo came out . . . it’s not looking too good! WSJ did an article on it here.
DATE: December 12, 2016
TO: Mayor Paul Soglin
FROM: Natalie Erdman
CC: Jim O’Keefe
Susan Morrison
Matt WachterSUBJECT: Uncertainty in Affordable Housing Tax Credit Market
The affordable housing developers are indicating that there is new instability and uncertainty
in the Affordable Housing Tax Credit market. The looming possibility of tax reform which would reduce the corporate income tax rate is causing tax credit investors to:(1) Suspend the purchase of Affordable Housing Tax Credits in support of new projects until the prospects for such reform are better understood,
(2) Reduce the price they are willing to pay for Affordable Housing Tax Credits,
(3) Seek to renegotiate the terms and conditions of current commitments, including the amount of investment, or, in some cases, to withdraw from those commitments.
The uncertainty in the Affordable Housing Tax Credit market is having multiple impacts on the City’s affordable housing initiatives including:
(1) As investors reduce the price they are willing to pay for the tax credits, financing gaps are being created. There are limited options available to fill such financing gaps.
(2) The introduction of uncertainties and potential delays in the start of construction for five affordable housing developments in Madison that have already been awarded tax credit allocations. For example, the City’s development of permanent supportive housing for families, proposed to be built on Tree Lane, was scheduled to close during the first quarter of 2017. That closing is now uncertain.
(3) Uncertainty regarding the viability of five additional affordable housing transactions proposed to be built with support from the City and which will compete for tax credits in WHEDA’s next application cycle scheduled for early 2017.
As you know, approximately half of the renters in Madison, 25,000 households, are housing cost burdened, forced to pay at more than 30% of their incomes for housing. Approximately 8,000 of that number are severely housing cost burdened; they pay more than 50% of their incomes for housing. One of the primary contributing factors in this situation is the lack of available affordable housing here. The City’s Affordable Housing Initiative, an effort that deploys local tax dollars in combination with federal tax credits, exists to expand the supply of affordable housing, including for those who are homeless. That partnership has proven very successful in Madison and it is crucial that the federal tax credit resource continues to be available.
