LIHTC Process for Affordable Housing in Texas
Low Income Housing Tax Credits (LIHTC) are a key tool for financing affordable housing in Texas. The Texas Department of Housing and Community Affairs (TDHCA) administers the LIHTC program, thereby ensuring compliance with federal and state guidelines.
Steps in the LIHTC Process
- Application Submission
- Developers submit an application to TDHCA, detailing their affordable housing project. Applications typically open once a year.
- Application Review and Scoring
- TDHCA reviews and scores the applications based on specific criteria. And these criteria include project location, development type, and the degree of affordability provided.
- Allocation of Tax Credits
- TDHCA allocates tax credits to projects that score the highest and meet the program requirements. Additionally, there are two types of credits: 4% and 9%.
- Project Financing
- Developers sell the awarded tax credits to investors. As a result, this sale generates equity for the project, reducing the need for debt and allowing for lower rents.
- Development and Compliance
- Once financed, developers proceed with construction or rehabilitation. Additionally, they must comply with TDHCA regulations throughout the development and operational phases.
- Annual Reporting and Monitoring
- Developers submit annual reports to TDHCA to ensure ongoing compliance with LIHTC requirements. Additionally, TDHCA conducts regular inspections and monitoring.
Administration by TDHCA
The TDHCA is responsible for administering the LIHTC program in Texas. They ensure the fair allocation of credits, compliance with federal and state laws, and the promotion of quality affordable housing. More importantly, TDHCA provides guidance and support to developers throughout the application and compliance process.
Key Differences: 4% vs. 9% LIHTC Programs
- 4% LIHTC Program
- Covers approximately 30% of project costs.
- Less competitive and automatically available with tax-exempt bond financing.
- Ideal for larger projects with additional funding sources.
- 9% LIHTC Program
- Covers up to 70% of project costs.
- Highly competitive, with a limited number of credits allocated annually.
- Provides substantial funding for deep affordability in housing projects.
Conclusion
In conclusion, the LIHTC process in Texas, administered by TDHCA, provides vital funding for affordable housing development. Understanding the application, allocation, and compliance steps, as well as the differences between the 4% and 9% programs, is crucial for developers aiming to create sustainable and affordable housing solutions in Texas. EVstudio has completed numerous LIHTC funded affordable housing projects. Please reach out because we’re happy to help you with your next affordable housing project.
For additional information, visit the TDHCA website.
