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Using Historic Tax Credits to Promote Affordable Housing in New York City.

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Presentation on theme: "Using Historic Tax Credits to Promote Affordable Housing in New York City."— Presentation transcript:

1 Using Historic Tax Credits to Promote Affordable Housing in New York City

2 HTC/LIHTC Tax Credit Fundamentals In both cases tax aspects administered by the IRS. HTC aspects jointly administered by NPS and State Historic Pres. Offices (SHPOs). LIHTC administered by state housing agencies – in NYC that means: HPD or DHCR or NYS HFA. HTC is the most important (in dollar volume) federal preservation program. LIHTC most important federal affordable housing program.

3 Challenges of using Historic Buildings for Affordable Housing Cost per unit can be higher (particularly as calculated in some QAPs). Application of 106 standards triggered if federal funds are used; Secretary of the Interiors standards if HTCs are used. Requirement to reduce eligible basis for the LIHTC by the amount of the HTCs (in a single entity structure).

4 Impact of HTC Basis Reduction on Equity Raised Sample Transaction Assumptions $1,000,000 Qualified Basis (Eligible Basis x Applicable Fraction) $950,000 Qualified Rehabilitation Expenditures (QREs) LIHTC Pricing: $.75 per $1 of LIHTC Historic Tax Credit Pricing: $.90 per $1 of HTC LIHTC Credit Percentage: 8% (in each of 10 years) HTC Credit Percentage: 20% (in year of placement in service)

5 Impact of HTC Basis Reduction on Equity Raised LIHTC–Only Transaction $1,000,000 x.08 x 10 x.75 = $600,000

6 Impact of HTC Basis Reduction on Equity Raised HTC–Only Transaction $950,000 x.20 x.90 = $171,000

7 Impact of HTC Basis Reduction on Equity Raised Twinned LIHTC/HTC Transaction HTC Equity: $950,000 x.20 = $190,000; $190,000 x.90 = $171,000 LIHTC Equity: $810,000 ($1,000,000 - $190,000 ) x.08 x 10 x.75 = 486,000; Aggregate Twinned LIHTC/HTC Equity = $486,000 + $171,000 = $657,000 (compare $600,000) Net gain to LIHTC from HTC = $57,000 (less than 6% of LIHTC basis)

8 Impact of HTC Basis Reduction on Equity Raised LIHTC-Only Transaction in QCT/DDA LIHTC Equity: $1,000,000 x 130% x.08 x 10 x.75 = $780,000

9 Impact of HTC Basis Reduction on Equity Raised Twinned LIHTC/HTC Transaction in QCT/DDA HTC Equity: $950,000 x.20 = $190,000; $190,000 x.90 = $171,000 LIHTC Equity: $810,000 ($1,000,000 - $190,000 ) x 130% x.08 x 10 x.75 = $631,800 Aggregate Twinned Equity = $631,800 + $171,000 = $802,800 (compare $780,000) Net Gain to LIHTC from HTC = $22,800 (2.3% of LIHTC basis)

10 Duel owner structure can avoid basis reduction Significant impact in LIHTC raise 631, , , ,000 = $951,000 More complicated


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