If you are a housing director or local elected official battling to address the region’s top issue, be aware of some things on your flank – expiring LIHTC properties for one. While negotiating deals for new housing units, the potential for large numbers of existing affordable housing units to turn over can negate progress.
This lesser-known risk came to me when I was recently inquired on how to help “renew” a LIHTC property. I ended up getting an education from Kathryn Grosscup at CHFA. There are over 30 LIHTC properties across the NWCCOG region from Steamboat to Fraser to Summit and Eagle Counties to Glenwood to Aspen housing hundreds of essential workers. If we pull Mobile Home Parks into the discussion the stakes go even higher into the thousands of essential workers who may have housing with affordable rent that is at risk. For a map of LIHTC properties which may be in your jurisdiction, go here on CHFA’s webpage. Click on a green dot to see the name of the property, the number of units and at the bottom, the year of the issuance of the tax credit.
LIHTC is a program still very much in use. Grosscup notes “many tax credits date from the early 1990s and are expiring soon, which means the owner is then free to raise rent or condominium-ize the property and sell at free market rates. Many are coming to end-of-life in markets with a huge upside opportunity where the market has changed, such as FOCO, Denver, Colorado Springs” and mountain towns. She says that local leaders if they are aware of these terms expiring can contact the owner and “walk along side” them as they are exploring options. She went into detail about the complexity of business decisions involved with a property at this point of lifespan which I’ll skip here. Awareness of mobile home park turnover peaked recently with legislation in Colorado attempting to help residents purchase a park providing a 90 day hold before sale. Local housing agencies can assist residents in organizing to purchase MHPs and there are laws to slow the increases in rent with new ownership. For that, the state now has a program led by Sam Albrecht at DOLA which can be found here amid many other housing programs at DOLAs Division of Housing. LIHTC, though, is a finance tool so CHFA is the only game in town in Colorado. They don’t have any leverage either with properties going to the free market at the end of terms.
There are a few things you ought to know about this Low-Income Housing Tax Credit (LIHTC), usually pronounced LIE-TECH. It is a bit complicated as I’ll explain later, but LIHTC effectively has 30 to 40-year terms. LIHTC is managed through the U.S. Department of Treasury and the IRS and there is only one tax credit allocating entity per each state at a 9% per capita rate. Second, only so many credits are allocated per state each year, so tax credits are very competitive In Colorado where the only allocating entity is the Colorado Housing AND Finance Authority. For an investor, offsetting a half million dollars or more in taxes each year over a decade is extremely valuable, well worth the up-front investment made to a developer to build these properties, which is why LIHTC compliance is excellent, default is rare, and entry to the program is so competitive. Grosscup shared with me that LIHTC is a federal program for investors to work with developers/owners who make a 10-year* commitment to provide pricing at an affordable AMI range in exchange for tax credits. There is a 5 year “look back” on that decade which keeps the land use agreement for affordability in place, and the developer often remains in the program for an extended period, usually another 15 to 20 years. At core, the three-way deal is simple. The developer gets capital for the project, the investor gets tax credits, and the community gets affordable housing for a term. More than a few propertys financed with LIHTC as part of the capitol stack are under construction now in Gypsum and Summit County. There is no preference given to properties trying to “re-syndicate” at their end of term.
Of the more than 30 LIHTC properties in the NWCCOG region (by my count) housing many hundreds of essential workers, one example is the Eagle Villa’s project on Nogal Road which has over 200 units between two phases. Phase 1 is set to expire in December of 2024 which depending on the intent of the owner, could release 100 units that have been set aside at 50% and 60% AMI for the past 30 years, units that house many hundreds of essential workers, children and extended families.
Jason Dietz, Summit County Housing Director cites working with expiring LIHTC projects as “a mixed bag.” He has been tracking the Blue River Apartments project in Silverthorne which has 78 units and tax credits from 1992 expiring soon. The owner of that particular project “specialize I these projects in these housing constrained regions, and once it is market it is worth an absolute fortune; that is the business plan. We were only able to negotiate a two year hiatus paying the difference for that period.” His hope is for “all these other LIHTC properties coming on board” across Summit County that are in the pipeline that are opening before and during the expiration of the Blue River 60% AMI expiring. As one might imagine the owners, Tralee Affordable related to Tralee Captial Partners, “wouldn’t budge.” Dietz said that the municipality does have some regulatory options to implement prior to such situations coming to a head but that Silverthorne declined. Those include tying the ability to condominiumize to a local vacancy rate, in effect blocking an expiring LIHTC project from going market rate by preventing condominium-ization of affordable housing projects when vacancy rates are below 5 or 7%. He cited Mammoth Lakes California as an example of a place that had done that.
Dietz said that there was some silver lining to the Blue River project expiring, that Mountain Dreamers, a local NPO run by Peter Bakken who used to work at FIRC is focused on Hispanic issues. That group has taken on communications with the residents about the changes so they can make plans. He noted that the County’s participation provided “a shallower glide path” for the change for residents. Even in the rarified mountain housing markets, not all affordable housing is generated by local government regulation, negotiation or investment, and though you may not have a direct role in the fate of these properties, that doesn’t mean towns, counties, local non-profits and housing authorities have no role at all.
