A Time for Invention

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3 min read

“Hell, there are no rules here — we’re trying to accomplish something.”

                                                                                         – Thomas Edison

            I would hate to live in a world without the low-income housing tax credit, which I hope will never occur. But ever since we ran David Smith’s article in June 2013 about what the world would look like without LIHTC, I have been pondering a question: Is this possible?

Some say there is no innovation without experimentation. Accordingly, I have been exploring alternative ideas and models for delivering, preserving, or recapitalizing affordable multifamily rental housing without heavy reliance on housing credits – mechanisms to complement, not replace, the LIHTC program.

Recently I caught up with Don Hinkle Brown, CEO of the Community Reinvestment Fund, who told me about a transaction of theirs in Baltimore. This scattered-site project is redeveloping four contiguous blocks of row houses into affordable rental housing, funded by a very unconventional capital stack. The mix includes Fannie Mae financing, historic tax credits, Capital Magnet Fund program dollars – and no housing credits.

In projects where preservation is the goal but tax credits are not an option, more and more NH&RA members are extending the life of their multifamily properties and creating operational savings by making energy efficiency improvements to the buildings. Members nationwide are utilizing new financing products from water and energy management companies, from community development financial institutions, and from utility company programs that finance the improvements and are repaid from the utility cost savings. NH&RA’s Preservation Through Energy Efficiency Initiative will feature five future regional forums to facilitate education and information-sharing among affordable multifamily professionals on these and other topics.        At NH&RA’s 2014 Annual Meeting this month, Neal Drobenare of The NHP Foundation will discuss how the Foundation and other like-minded members of the Housing Partnership Network have created and are using a social purpose real estate investment trust to acquire, redevelop, and preserve existing affordable housing properties without tax credits.

Another emerging model is HUD’s Rental Assistance Demonstration (RAD) program. As of mid-January nearly half of the awarded public housing conversion transactions (157 of 325), in which the properties will convert the subsidies to project-based Section 8 assistance, do not propose to use 4% or 9% housing tax credits. This demonstrates that even in the public housing world there are preservation opportunities beyond the tax credit.

Perhaps these are just niche solutions – opportunities for specific challenges and markets and not a replacement for LIHTC, which addresses a wide array of critical housing needs that cannot be met by other current tools and programs. Yet the alternative models and ideas I have just mentioned – as well as others – might just be able, if taken to scale, to help fill or reduce the huge current gap between the number of additional affordable rental housing units needed today and the amount that can be produced by the LIHTC program at present allocation levels.

Edison said, “I find out what the world needs. Then I go ahead and try to invent it.”

Well, the world needs more affordable housing – so let’s start inventing!

Thom Amdur is Associate Publisher of Tax Credit Advisor and Executive Director of National Housing & Rehabilitation Association