In advance of their August 15, 2012 LIHTC application deadline, the Michigan State Housing Development Authority issued a memo to ensure that stakeholders are aware of the change in the credit rate available mandated by the Housing and Economic Recovery Act of 2008 (HERA). HERA provided a temporary provision which allowed LIHTC projects placed in service after July 30, 2008 and before December 30, 2013 to receive a credit rate equal to 9 percent for non-Federally subsidized newly constructed or substantially rehabilitated buildings. Projects being placed in service after December 30, 2013 will no longer be able to use the 9 percent credit rate, and will instead need to use the floating monthly credit rate published by the IRS. This can result in a significant decrease in credit and equity available for a project.
MSHDA’s 2013-2014 QAP indicates that it will use the greater of 3.4% (used for acquisition costs and for tax-exempt bond financing transactions) and/or a 7.6% credit rate (used for rehabilitation or new construction costs), or the floating monthly credit rate published at the of application submission in its determination of the amount of credit to award. These are intended to be used for the August 2012 funding cycle because they allow for more flexibility in underwriting and based on previous funding cycles, there have been very few projects that have been able to close on their financing to allow for construction completion by the end of 2013.
MSHDA will consider allowing applicants to use the 9% credit rate as part of their August funding round application submission, but warn that these applicants should be extremely cautious in conducting a realistic assessment of their project timeline and should be able to provide certain documentation. Applicants who wish to apply under the 9% credit rate should at a minimum plan to submit an equity provider confirmation, a realistic project timeline, and an alternative plan.
In addition, MSHDA announced in its memo that they received approximately $3,000,000 in returned credit from projects allocated in previous years and they have determined to include it in the upcoming August 15th funding round for 9% LIHTC. This will bring the total amount of credit available to approximately $14,000,000 for this current cycle.
To read the memo in its entirety, please click here. For questions regarding either the expiration of the 9% credit rate or the amount of credit available for the August 2012 funding round, please contact LIHTC staff at 517-373-6607.
