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Federal Housing Funds Could to Lead New Affordable Units

Portsmouth will receive stimulus funding
By Michael Mccord
business@seacoastonline.com

One of the casualties of the dramatic economic downturn and turmoil in the credit market has been a 20-year-old tax credit program designed to accelerate the creation of affordable housing projects.

The rapid decline in tax credit purchases by individual investors and larger institutions, which had helped finance millions of dollars for most of the affordable housing developments in the state, was immediately noticed by housing agency officials.
REAL ESTATE RISE

New Hampshire Association of Realtors said June numbers were up over June 2008.

Marty Chapman, executive director of Portsmouth-based Housing Partnership, said it became quickly apparent his agency would have difficulty selling more than $3 million in tax credits to investors to finance a 22-unit senior housing project in Rye.

"When the markets went down last fall we began to find fewer and fewer investors," said Dean Christon, executive director of the New Hampshire Housing Financing Authority. He said the large institutional and private investors either had no need to use the tax to offset other tax liabilities or were changing their investment options due to the economic climate.

Affordable housing had been a top issue for civic and business leaders for years — and in the recession its importance was magnified as more New Hampshire residents faced unemployment and the need to cut back on housing costs.

With dropping tax credit sales threatening to derail dozens of projects, Congress stepped in earlier this year and allowed some flexibility in affordable housing financing. Sen. Jeanne Shaheen, D-N.H., announced last week a second round of stimulus package funding for affordable housing development.

In all, more than $27 million has been targeted for the state, but the big change was a tax credit exchange program that allows housing agencies to trade in unused tax credits for cash.

On Friday, Shaheen announced four New Hampshire communities would receive a total of $853,212 in funding from the American Recovery and Reinvestment Act. Funding through the U.S. Department of Housing and Urban Development's Community Development Block Grant includes $175,606 for Portsmouth; $94,682 for Dover; $82,093 for Rochester and $500,831 for Manchester.

Shaheen said the funds are intended to allow municipalities to purchase, rehabilitate, expand and improve housing developments for low- and moderate-income homeowners and tenants, while also creating local construction jobs.

"In order to get our economy back on track, we need to give our local communities the resources they need to spur economic development while helping people who are feeling the strain of these tough economic times," Shaheen said. "This funding will help to ensure that unused housing tax credits will instead go toward the construction and rehabilitation of affordable housing projects across the state."

Both Chapman and Christon said the exchange program was a welcome and necessary step to fund dozens of projects across the state. Chapman said his nonprofit agency has overseen many tax-credit housing projects but the stimulus-backed exchange program for this year and possibly next will fund necessary development until the economy recovers.

"It was the right thing at the right time," said Chapman, whose Rye project through The Housing Partnership will go forward. "Whether or not it's the right thing in the long term, no one knows."

Chapman said over the years the tax credit program has worked well because it created multiple layers of public-private oversight and accountability.

Chapman said the Rye project, now with a green light with the tax credit exchange, "will be substantially the same and maybe a little less complicated. The quality and operation of the housing doesn't change at all."

The Housing Partnership was able to sell enough tax credits before the crash to finance a major project in Kennebunk, Maine, and is moving forward on a multiple-partner project to buy, rehabilitate and sell as many as 41 foreclosed homes in Rochester.

Christon said the $27 million in funding will immediately finance more than $14 million in affordable housing projects for more than 150 new units in the state. It's a small portion of what is needed but Christon said it is vital to keep adding new units.

"It's a very dynamic situation," he said.

The advantage of the exchange program for profit and nonprofit developers is that they won't have to sell tax credits to finance their projects. The money is essentially interest-free forgivable loans. To ensure the financing is used properly, Christon said the same restrictions for rent price and income availability remain in place, essentially for the entire life of the units.

The goal is not only to salvage affordable housing, but to create hundreds of construction jobs.

"One of the very significant goals in the exchange program is to push money rapidly," he said. "Based on some of the initial packages that we approved, we anticipate around 300 jobs will be created and we hope to approve another round of projects within 60 days."

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